CIVEO CORPORATION 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. Reverse Share Split OnNovember 19, 2020 , we effected a reverse share split where each twelve issued and outstanding common shares were converted into one common share (Reverse Share Split). Our common shares began trading on a reverse share split adjusted basis onNovember 19, 2020 . All common share and per common share data included in this quarterly report have been retroactively adjusted to reflect the Reverse Share Split. See Note 1 - Description of Business and Basis of Presentation to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. Overview and Macroeconomic Environment We provide hospitality services to the natural resources industry inCanada ,Australia and theU.S. Demand for our services can be attributed to two phases of our customers' projects: (1) the development or construction phase; and (2) the operations or production phase. Historically, initial demand for our hospitality services has been driven by our customers' capital spending programs related to the construction and development of natural resource projects and associated infrastructure, as well as the exploration for oil and natural gas. Long-term demand for our services has been driven by natural resource production, maintenance and operation of those facilities as well as expansion of those sites. In general, industry capital spending programs are based on the outlook for commodity prices, economic growth, global commodity supply/demand dynamics and estimates of resource production. As a result, demand for our hospitality services is largely sensitive to expected commodity prices, principally related to oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore. Other factors that can affect our business and financial results include the general global economic environment and regulatory changes in 20 --------------------------------------------------------------------------------Canada ,Australia , theU.S. and other markets, including governmental measures introduced to fight climate change or to help slow the spread or mitigate the impact of COVID-19. Our business is predominantly located in northernAlberta, Canada ;British Columbia, Canada ;Queensland, Australia ; andWestern Australia . We derive most of our business from natural resource companies who are developing and producing oil sands, met coal, LNG and iron ore resources and, to a lesser extent, other hydrocarbon and mineral resources. Approximately 66% of our revenue is generated by our lodges inCanada and our villages inAustralia . Where traditional accommodations and infrastructure are insufficient, inaccessible or cost ineffective, our lodge and village facilities provide comprehensive hospitality services similar to those found in an urban hotel. We typically contract our facilities to our customers on a fee-per-person-per- day basis that covers lodging and meals and is based on the duration of customer needs, which can range from several weeks to several years. The remainder of our revenue is generated by our hospitality services at customer-owned locations inCanada andAustralia , mobile assets inCanada and theU.S and our lodges in theU.S. Generally, our core Canadian oil sands and Australian mining customers make significant capital investments to develop their prospects, which have estimated reserve lives ranging from ten years to in excess of 30 years. Consequently, these investments are primarily dependent on those customers' long-term views of commodity demand and prices. The spread of COVID-19 and the response thereto have negatively impacted the global economy. The actions taken by governments and the private-sector to mitigate the spread of COVID-19 and the risk of infection, including government-imposed or voluntary social distancing and quarantining, reduced travel and remote work policies, have evolved with the introduction of vaccination efforts, and may continue to evolve as the surfacing of virus variants has added a degree of uncertainty to the continuing global impact of COVID-19. Additionally, global oil prices dropped to historically low levels in March andApril 2020 due to severely reduced global oil demand, high global crude inventory levels, uncertainty around timing and slope of worldwide economic recovery after COVID-19 related economic shut-downs and effectiveness of production cuts by major oil producing countries, such asSaudi Arabia ,Russia and theU.S. Inmid-April 2020 , OPEC+ (the combination of historicalOPEC members and other significant oil producers, such asRussia ) announced production cuts of up to approximately 10 million barrels per day. However, oil prices remained at depressed levels throughout most of 2020, before modest improvement late in the year and into early 2021. Global oil demand has continued to recover throughout 2021 as COVID-19 lockdowns have begun to be lifted and other fossil fuels are experiencing supply shortages. Oil supply has not kept up with the increase in demand in 2021, exacerbated by the impacts of Hurricane Ida in theGulf of Mexico earlier this year, resulting in falling inventories and a significant increase in oil prices continuing intoOctober 2021 . InJuly 2021 , OPEC+ agreed to phase out 5.8 million barrels per day of oil production cuts bySeptember 2022 . InOctober 2021 , OPEC+ declined requests from the Biden administration to accelerate production to help mitigate the growing deficit between oil supply and demand and address short-term fluctuations in the market. We continue to closely monitor the COVID-19 situation and have taken measures to help ensure the health and well-being of our employees, guests and contractors, including screening of individuals that enter our facilities, social distancing practices, enhanced cleaning and deep sanitization, the suspension of nonessential employee travel and implementation of work-from-home policies, where applicable.Alberta, Canada . InCanada , Western Canadian Select (WCS) crude is the benchmark price for our oil sands customers. Pricing for WCS is driven by several factors, including the underlying price for West Texas Intermediate (WTI) crude, the availability of transportation infrastructure (consisting of pipelines and crude by railcar) 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 theU.S. Gulf Coast . The WCS Differential has varied depending on the extent of transportation capacity availability. Certain expansionary oil pipeline projects have the potential to both drive incremental demand for mobile assets and to improve take-away capacity for Canadian oil sands producers over the longer term. While these pipeline projects, including the Trans Mountain Pipeline (TMX), have recently received incremental regulatory approvals, it is still not certain if any of the proposed pipeline projects will ultimately be completed. Certain segments of the TMX pipeline have resumed construction without conflict at the present time. Recent legal issues with the Canadian government and First Nation groups have been resolved for the time being. The Canadian federal government acquired the TMX pipeline in 2018, approved the expansion of the project and is currently working through a revised construction timeline to adjust for recent delays related to legal hurdles, the COVID-19 pandemic and seasonal wildfires. WCS prices in the third quarter of 2021 averaged$57.58 per barrel compared to an average of$31.15 in the third quarter of 2020. The WCS Differential decreased from$15.35 per barrel at the end of the fourth quarter of 2020 to$11.62 at the end of 21 -------------------------------------------------------------------------------- the third quarter of 2021. In 2018, the Government ofAlberta announced it would mandate temporary curtailments of the province's oil production. However, monthly production limits were put on hold inDecember 2020 until further notice, allowing operators to produce freely at their discretion while the government monitors production and inventory levels. Should forecasts show storage inventories approaching maximum capacity, the government may reintroduce production limits. As ofOctober 25, 2021 , the WTI price was$84.26 and the WCS price was$67.80 , resulting in a WCS Differential of$16.46 . Together with the initial spread of COVID-19, the depressed price levels of both WTI and WCS materially impacted 2020 maintenance and production spending and activity by Canadian operators and, therefore, demand for our hospitality services. Customers began increasing production activity in the fourth quarter of 2020 and into the first nine months of 2021. Continued uncertainty, including about the impact of COVID-19, and commodity price volatility and regulatory complications could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets. Additionally, if oil prices do not stabilize, the resulting impact could continue to negatively affect the value of our long-lived assets.British Columbia, Canada . OurSitka Lodge supports the LNG Canada project and related pipeline projects (see discussion below). From a macroeconomic standpoint, LNG demand continued to grow despite the COVID-19 pandemic, 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. Accordingly, the current view is additional investment in LNG supply will be needed to meet the expected long-term LNG demand growth. Currently,Western Canada does not have any operational LNG export facilities. LNG Canada (LNGC), a joint venture amongShell Canada Energy , an affiliate of Royal Dutch Shell plc (40 percent), and affiliates ofPETRONAS , through its wholly-owned entity,North Montney LNG Limited Partnership (25 percent), PetroChina (15 percent), Mitsubishi Corporation (15 percent) and Korea Gas Corporation (5 percent), is currently constructing a liquefaction and export facility inKitimat, British Columbia (Kitimat LNG Facility).British Columbia LNG activity and related pipeline projects are a material driver of activity for ourSitka Lodge , as well as for our mobile assets, which are contracted to serve several portions of the related pipeline construction activity. The actual timing of when revenue is realized from the Coastal Gas Link pipeline andSitka Lodge contracts could be impacted by any delays in the construction of the Kitimat LNG Facility or the pipeline, such as protest blockades and the COVID-19 pandemic. In lateMarch 2020 , LNGC announced steps being taken to reduce the spread of COVID-19, including reduction of the workforce at the project site to essential personnel only. This resulted in a reduction in occupancy at ourSitka Lodge during the second quarter of 2020, before returning to expected levels in the second half of 2020. In lateDecember 2020 ,British Columbia's public health officer issued a health order limiting workforce size at all large industrial projects across the province, including LNGC. This order once again reduced occupancy at ourSitka Lodge in the first quarter of 2021. In the second quarter of 2021, this order was repealed. It was replaced with less restrictive requirements focused on monitoring, allowing workforces to return to their optimal sizes.Australia . InAustralia , 82% of our rooms are located in theBowen Basin ofQueensland, Australia and primarily serve met coal mines in that region. Met coal pricing and production growth in theBowen Basin region is predominantly influenced by the levels of global steel production, which increased by 7.8% during the first nine months of 2021 compared to the same period of 2020. As ofOctober 25, 2021 , met coal spot prices were$398 per metric tonne. Long-term demand for steel is expected to be driven by global infrastructure spending and increased steel consumption per capita in developing economies, such asChina andIndia , whose current consumption per capita is a fraction of developed countries. The Chinese embargo on Australian coal continues, without any resolution foreseeable in the near term. However, Australian met coal producers have found new markets, includingIndia andEurope , for their premium product. This has led to a rebalancing of the market globally, withChina relying on domestic production along with much higher imports ofU.S. and Canadian coal in 2021. With the backdrop of continuing strong steel demand and met coal supply constraints, the spot price for met coal has surged to record highs inOctober 2021 . Analysts expect elevated met coal prices to persist in the short-term, while steel demand and prices remain strong and until met coal supply issues are resolved. Additionally, if the trade impasse withChina remains unresolved, there remains a possibility of further volatility in the short-medium term.Civeo's activity inWestern Australia is driven primarily by iron ore production, which is a key steel-making ingredient. As ofOctober 22, 2021 , iron ore spot prices were$119.70 per metric tonne. Our integrated services business provides catering and managed services to the mining industry inWestern Australia . We have contracts to manage customer-owned villages inWestern Australia which primarily support iron ore mines in addition to 22 -------------------------------------------------------------------------------- gold, lithium and nickel mines. We believe iron ore prices are currently at a level that may contribute to increased activity over the long term if our customers view these price levels as sustainable.U.S. OurU.S. business supports oil shale drilling and completion activity and is primarily tied to WTI oil prices in theU.S. shale formations in thePermian Basin , the Mid-Continent, the Bakken and the Rockies. During 2019, theU.S. oil rig count and associated completion activity decreased due to the oil price decline in late 2018 and early 2019 coupled with other market dynamics negatively impacting exploration and production (E&P) spending, finishing the year at 677 rigs. In 2020, theU.S. oil rig count and associated completion activity further decreased due to the global oil price decline discussed above. Only 267 oil rigs were active at the end of 2020. As oil prices began to recover in 2021, oil rig count and drilling activity recovered somewhat, with 421 oil rigs active at the end of the third quarter 2021.The Permian Basin remains the most activeU.S. unconventional play, representing 62% of the oil rigs active in theU.S. at the end of the third quarter of 2021. The lowerU.S. rig count and decline in oil prices resulted in decreasedU.S. oil production from an average of 12.2 million barrels per day in 2019 to an average of 11.3 million barrels per day in 2020. For the first seven months of 2021, the average barrels per day stayed constant at 11.3 million. As ofOctober 25, 2021 , there were 443 active oil rigs in theU.S. (as measured by Bakerhughes.com). With the recent volatility in oil prices and a resulting reduction in spending by E&P companies, we exited the Bakken and reduced our presence in the Rockies regions for ourU.S. mobile assets. Those assets were either sold or transported to ourPermian Basin and Mid-Continent district locations.U.S. oil shale drilling and completion activity will continue to be dependent on sustained higher WTI oil prices, pipeline capacity and sufficient capital to support E&P drilling and completion plans. In addition, consolidation among our E&P customer base in theU.S. has historically created short-term spending and activity dislocations. Should the current trend of industry consolidation continue, we may see activity, utilization and occupancy declines in the near term.
Recent Commodity Prices. Recent WTI crude, WCS crude, met coal and iron ore pricing trends are as follows:
Average Price (1)
Hard
WTI WCS Coking Coal Iron
Quarter Crude Crude (Met Coal) Ore
ended (per bbl) (per bbl) (per tonne) (per tonne)
Fourth Quarter through
2021 $ 80.83 $ 66.82 $ 392.80 $ 124.27
9/30/2021 70.54 57.58 258.41 164.90
6/30/2021 66.19 53.27 136.44 195.97
3/31/2021 58.13 46.28 127.95 159.83
12/31/2020 42.63 31.34 109.37 128.24
9/30/2020 40.90 31.15 113.30 116.10
6/30/2020 27.95 19.73 120.27 89.53
3/31/2020 45.38 27.92 156.17 83.57
12/30/2019 56.85 37.94 141.39 85.13
9/30/2019 56.40 43.88 160.25 101.41
6/30/2019 59.89 47.39 204.78 94.62
3/31/2019 54.87 44.49 203.30 79.26
12/31/2018 59.32 25.66 223.02 70.13
9/30/2018 69.61 41.58 188.46 61.91
6/30/2018 67.97 49.93 189.41 62.58
(1)Source: WTI crude prices are from
Foreign Currency Exchange Rates. Exchange rates between theU.S. dollar and each of the Canadian dollar and the Australian dollar influence ourU.S. dollar reported financial results. Our business has historically derived the vast majority of its revenues and operating income (loss) inCanada andAustralia . These revenues and profits/losses are translated intoU.S. dollars forU.S. GAAP financial reporting purposes. The following tables summarize the fluctuations in the exchange rates between theU.S. dollar and each of the Canadian dollar and the Australian dollar: 23 --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change Percentage 2021 2020 Change Percentage
Average Canadian dollar
to U.S. dollar $0.794 $0.751 0.04 5.7% $0.799 $0.739 $0.06 8.1%
Average Australian
dollar to U.S. dollar $0.735 $0.716 0.02 2.6% $0.759 $0.677 $0.08 12.1%
As of
September 30, 2021 December 31, 2020 Change Percentage
Canadian dollar to U.S. dollar $0.785 $0.785 - -%
Australian dollar to U.S. dollar $0.719 $0.773 (0.05) (7.0)%
These fluctuations of the Canadian and Australian dollars have had and will continue to have an impact on the translation of earnings generated from our Canadian and Australian subsidiaries and, therefore, our financial results.
Capital Expenditures. We continue to monitor the COVID-19 global pandemic and the responses thereto, the global economy, the price of and demand for crude oil, met coal, LNG and iron ore and the resultant impact on the capital spending plans of our customers in order to plan our business activities. We currently expect that our 2021 capital expenditures, exclusive of any business acquisitions, will total approximately$20 million , compared to 2020 capital expenditures of$10.1 million . We may adjust our capital expenditure plans in the future as we continue to monitor customer activity and the impact of COVID-19. See "Liquidity and Capital Resources" below for further discussion of 2021 capital expenditures. 24 -------------------------------------------------------------------------------- Results of Operations Unless otherwise indicated, discussion of results for the three months endedSeptember 30, 2021 , is based on a comparison to the corresponding period of 2020. Results of Operations - Three Months EndedSeptember 30, 2021 Compared to Three Months EndedSeptember 30, 2020 Three Months Ended September 30, 2021 2020 Change ($ in thousands) Revenues Canada$ 84,057 $ 71,785 $ 12,272 Australia 65,118 64,685 433 U.S. and other 5,888 6,387 (499) Total revenues 155,063 142,857 12,206 Costs and expenses Cost of sales and services Canada 59,214 51,393 7,821 Australia 46,374 38,529 7,845 U.S. and other 5,842 7,512 (1,670) Total cost of sales and services 111,430 97,434 13,996 Selling, general and administrative expenses 17,320 13,462 3,858 Depreciation and amortization expense 20,282 24,820 (4,538) Impairment expense - - - Other operating expense 21 51 (30) Total costs and expenses 149,053 135,767 13,286 Operating income 6,010 7,090 (1,080) Interest expense, net (3,582) (4,029) 447 Other (expense) income 364 4,542 (4,178) Income before income taxes 2,792 7,603 (4,811) Income tax (expense) (1,770) (180) (1,590) Net income 1,022 7,423 (6,401) Less: Net income attributable to noncontrolling interest 478 434 44 Net income attributable to Civeo Corporation 544 6,989 (6,445) Less: Dividends attributable to preferred shares 482 472 10 Net income attributable toCiveo common shareholders $ 62$ 6,517 $ (6,455) We reported net income attributable toCiveo for the quarter endedSeptember 30, 2021 of$0.1 million , or$0.00 per diluted share compared to net income attributable toCiveo for the quarter endedSeptember 30, 2020 of$6.5 million , or$0.39 per diluted share. Revenues. Consolidated revenues increased$12.2 million , or 9%, in the third quarter of 2021 compared to the third quarter of 2020. This increase was primarily due to (i) higher billed rooms at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects inCanada , (iii) increased occupancy at our Australian integrated services villages, (iv) increased activity levels in certainU.S. markets and (v) a stronger Australian and Canadian dollar relative to theU.S. dollar in the third quarter of 2021 compared to the third quarter of 2020. These items were partially offset by (i) reduced food service activity inCanada , as an overflow site supporting a LNG-related project in 2020 is no longer required, (ii) decreased activity at ourBowen Basin villages andGunnedah Basin villages inAustralia and (iii) decreased activity at ourU.S. offshore fabrication business. See the discussion of segment results of operations below for further information. Cost of Sales and Services. Our consolidated cost of sales and services increased$14.0 million , or 14%, in the third quarter of 2021 compared to the third quarter of 2020. This increase was primarily due to (i) increased occupancy at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects inCanada , (iii) increased occupancy at our Australian integrated services villages and the increased cost of 25 -------------------------------------------------------------------------------- temporary labor due to ongoing labor shortages inAustralia , (iv) increased activity levels in certainU.S. markets and (v) a stronger Australian and Canadian dollar relative to theU.S. dollar in the third quarter of 2021 compared to the third quarter of 2020. These items were partially offset by (i) reduced food service activity inCanada , as an overflow site supporting a LNG-related project in 2020 is no longer required and (ii) decreased activity at ourU.S. offshore fabrication business. See the discussion of segment results of operations below for further information. Selling, General and Administrative Expenses. SG&A expense increased$3.9 million , or 29%, in the third quarter of 2021 compared to the third quarter of 2020. This increase was primarily due to higher share-based compensation expense, compensation expense and professional fees related to the Company's recent debt offering efforts. The increase in share-based compensation expense was due to an increase in our stock price during the third quarter of 2021 compared to the third quarter of 2020. Depreciation and Amortization Expense. Depreciation and amortization expense decreased$4.5 million , or 18%, in the third quarter of 2021 compared to the third quarter of 2020. The decrease was primarily due to certain assets and intangibles becoming fully depreciated during 2020, partially offset by a stronger Australian and Canadian dollar relative to theU.S. dollar in the third quarter of 2021 compared to the third quarter of 2020. Operating Income (Loss). Consolidated operating income decreased$1.1 million , or 15%, in the third quarter of 2021 compared to the third quarter of 2020, primarily due to lower occupancy levels inAustralia and higher SG&A expenses, partially offset by increased activity levels inCanada and lower depreciation and amortization expense in the third quarter of 2021 compared to the third quarter of 2020. Interest Expense, net. Net interest expense decreased by$0.4 million , or 11%, in the third quarter of 2021 compared to the third quarter of 2020, primarily related to lower average debt levels on credit facility borrowings during 2021 compared to 2020, partially offset by higher interest rates on credit facility borrowings.
Other Income. Consolidated other income decreased
Income Tax (Expense) Benefit. Our income tax expense for the three months endedSeptember 30, 2021 totaled$1.8 million , or 63.4% of pretax income, compared to an income tax expense of$0.2 million , or 2.4% of pretax income, for the three months endedSeptember 30, 2020 . Our effective tax rate for both the three months endedSeptember 30, 2021 and 2020 was impacted by consideringCanada and theU.S. loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Under ASC 740-270, "Accounting for Income Taxes," the quarterly tax provision is based on our current estimate of the annual effective tax rate less the prior quarter's year-to-date provision. Other Comprehensive (Loss) Income. Other comprehensive income decreased$23.3 million in the third quarter of 2021 compared to the third quarter of 2020, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to theU.S. dollar. The Canadian dollar exchange rate compared to theU.S. dollar decreased 3% in the third quarter of 2021 compared to a 2% increase in the third quarter of 2020. The Australian dollar exchange rate compared to theU.S. dollar decreased 4% in the third quarter of 2021 compared to a 4% increase in the third quarter of 2020. 26 --------------------------------------------------------------------------------
Segment Results of Operations - Canadian Segment
Three Months Ended
September 30,
2021 2020 Change
Revenues ($ in thousands)
Accommodation revenue (1) $ 60,511 $ 49,798 $ 10,713
Mobile facility rental revenue (2) 19,075 13,135 5,940
Food service and other services revenue (3) 4,471 8,852
(4,381) Total revenues$ 84,057 $ 71,785 $ 12,272 Cost of sales and services ($ in thousands) Accommodation cost$ 41,470 $ 32,490 $ 8,980 Mobile facility rental cost 11,144 8,557
2,587
Food service and other services cost 4,007 7,595
(3,588)
Indirect other costs 2,593 2,751
(158)
Total cost of sales and services$ 59,214 $ 51,393
Gross margin as a % of revenues 29.6 % 28.4 %
1.1 %
Average daily rate for lodges (4)$ 98 $ 96
Total billed rooms for lodges (5) 613,017 508,449
104,568
Average Canadian dollar to
(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 third quarter of 2021 that were$12.3 million , or 17%, higher than the third quarter of 2020. The strengthening of the average exchange rate for the Canadian dollar relative to theU.S. dollar by 6% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a$4.4 million period-over-period increase in revenues. Excluding the impact of the stronger Canadian exchange rate, the segment experienced an 11% increase in revenues. This increase was driven by higher billed rooms at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects. Partially offsetting these items, revenue was lower from food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required. Our Canadian segment cost of sales and services increased$7.8 million , or 15%, in the third quarter of 2021 compared to the third quarter of 2020. The strengthening of the average exchange rate for the Canadian dollar relative to theU.S. dollar by 6% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a$3.2 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Canadian exchange rate, the increased cost of sales and services was driven by increased occupancy at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects. Partially offsetting these items, cost of sales and services decreased from food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required. Our Canadian segment gross margin as a percentage of revenues increased from 28.4% in the third quarter of 2020 to 29.6% in the third quarter of 2021. This was primarily driven by increased mobile asset activity and related operating efficiencies. 27 --------------------------------------------------------------------------------
Segment Results of Operations - Australian Segment
Three Months Ended
September 30,
2021 2020 Change
Revenues ($ in thousands)
Accommodation revenue (1) $ 38,104 $ 39,470 $ (1,366)
Food service and other services revenue (2) 27,014 $ 25,215 $ 1,799
Total revenues $ 65,118 $ 64,685 Cost of sales and services ($ in thousands) Accommodation cost$ 18,351 $ 16,401 $ 1,950 Food service and other services cost 26,007 21,161
4,846
Indirect other cost 2,016 967
1,049
Total cost of sales and services$ 46,374 $ 38,529
Gross margin as a % of revenues 28.8 % 40.4 %
(11.7) %
Average daily rate for villages (3)$ 78 $ 77
Total billed rooms for villages (4) 491,218 513,587
(22,369)
Australian dollar to U.S. dollar$ 0.735 $ 0.716
(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 third quarter of 2021 that were$0.4 million , or 1%, higher than the third quarter of 2020. The strengthening of the average exchange rate for Australian dollars relative to theU.S. dollar by 3% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a$1.6 million period-over-period increase in revenues. Excluding the impact of the stronger Australian exchange rate, the Australian segment experienced decreased activity at ourBowen Basin villages andGunnedah Basin villages, partially offset by increased occupancy at our integrated services villages. Our Australian segment cost of sales and services increased$7.8 million , or 20%, in the third quarter of 2021 compared to the third quarter of 2020. The strengthening of the average exchange rate for Australian dollars relative to theU.S. dollar by 3% in the third quarter of 2021 compared to the third quarter of 2020 resulted in a$1.2 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Australian exchange rate, the increase in cost of sales and services was largely driven by increased occupancy at our integrated services villages and increased costs of temporary labor due to ongoing labor shortages. Our Australian segment gross margin as a percentage of revenues decreased to 28.8% in the third quarter of 2021 from 40.4% in the third quarter of 2020. This was primarily driven by our integrated services business, which has a service-only business model, and therefore results in lower overall gross margins than the accommodation business. The integrated services business gross margin decrease was further exacerbated as two key client contracts transferred from construction phase to operational phase with inherently lower margins. Reduced occupancy at theBowen Basin villages andWestern Australia villages further impacted gross margin as efficiencies were unable to be realized with a fixed cost structure at lower occupancy levels. Segment gross margin has also been negatively impacted by increased staff costs as a result of a hospitality labor shortage inAustralia which has been exacerbated by state and international border closures due to COVID-19. State and international border closures have affected the number of staff available which has subsequently led to an increased reliance on more expensive temporary labor hire resources and has placed upward pressure on wages for permanent staff as competitors compete for a small pool of labor. 28 --------------------------------------------------------------------------------
Segment Results of Operations -
Three Months Ended
September 30,
2021 2020 Change
Revenues ($ in thousands) $ 5,888 $ 6,387 $ (499)
Cost of sales and services ($ in thousands) $ 5,842 $ 7,512 $ (1,670)
Gross margin as a % of revenues 0.8 % (17.6) % 18.4 %
Our U.S. segment reported revenues in the third quarter of 2021 that were $0.5
million , or 8%, lower than the third quarter of 2020. This decrease was due to
reduced activity in our offshore fabrication business, as two fabrication
projects were completed in the third quarter of 2020, that did not recur to the
same extent in 2021. This decrease was partially offset by increased occupancy
at our West Permian, Killdeer and Acadian Acres lodges.
Our U.S. segment cost of sales and services decreased in the third quarter of
2021 compared to the third quarter of 2020. This decrease was due to reduced
activity in our offshore fabrication business, as two fabrication projects were
completed in the third quarter of 2020, that did not recur to the same extent in
2021.
Our U.S. segment gross margin as a percentage of revenues increased from (17.6)%
in the third quarter of 2020 to 0.8% in the third quarter of 2021 primarily due
to increased occupancy at our West Permian, Killdeer and Acadian Acres lodges
and related operating efficiencies.
29
--------------------------------------------------------------------------------
Results of Operations - Nine Months Ended
Nine Months Ended
September 30,
2021 2020 Change
($ in thousands)
Revenues
Canada $ 229,223 $ 204,119 $ 25,104
Australia 188,774 170,869 17,905
U.S. and other 16,672 21,363 (4,691)
Total revenues 434,669 396,351 38,318
Costs and expenses
Cost of sales and services
Canada 168,441 158,130 10,311
Australia 134,172 102,995 31,177
U.S. and other 16,629 22,755 (6,126)
Total cost of sales and services 319,242 283,880 35,362
Selling, general and administrative expenses 46,204 38,889 7,315
Depreciation and amortization expense 62,928 72,527 (9,599)
Impairment expense 7,935 144,120 (136,185)
Other operating expense 122 755 (633)
Total costs and expenses 436,431 540,171 (103,740)
Operating loss (1,762) (143,820) 142,058
Interest expense, net (10,343) (13,458) 3,115
Other income 6,066 17,209 (11,143)
Loss before income taxes (6,039) (140,069) 134,030
Income tax (expense) benefit (2,354) 8,509 (10,863)
Net loss (8,393) (131,560) 123,167
Less: Net income attributable to noncontrolling
interest 534 914 (380)
Net loss attributable to Civeo Corporation (8,927) (132,474) 123,547
Less: Dividends attributable to preferred shares 1,440 1,411 29
Net loss attributable to
(133,885)
We reported net loss attributable toCiveo for the nine months endedSeptember 30, 2021 of$10.4 million , or$0.73 per diluted share. As further discussed below, net loss included a$7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense. We reported net loss attributable toCiveo for the nine months endedSeptember 30, 2020 of$133.9 million , or$9.48 per diluted share. As further discussed below, net loss included (i) a$93.6 million pre-tax loss resulting from the impairment of goodwill in ourCanada segment included in Impairment expense, (ii) a$38.1 million pre-tax loss resulting from the impairment of long-lived assets in ourCanada segment included in Impairment expense and (iii) a$12.4 million pre-tax loss resulting from the impairment of long-lived assets in ourU.S. segment included in Impairment expense. Net loss was partially offset by$4.7 million of income associated with the settlement of a representations and warranties claim related to theNoralta acquisition included in Other income. Revenues. Consolidated revenues increased$38.3 million , or 10%, in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . This increase was primarily due to (i) higher billed rooms at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects inCanada , (iii) increased occupancy at our Australian integrated services villages and (iv) a stronger Australian and Canadian dollar relative to theU.S. dollar in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . These items were partially offset by (i) lower revenue at ourSitka Lodge related to the COVID-19 pandemic and theBritish Columbia health order affecting activity in the first half of the year, (ii) reduced food service activity inCanada , as an overflow site supporting a LNG-related project in 2020 is no longer required, (iii) decreased activity at ourBowen Basin villages andWestern Australia villages and (iv) decreased activity at ourU.S. wellsite and offshore businesses. See the discussion of segment results of operations below for further information. 30 -------------------------------------------------------------------------------- Cost of Sales and Services. Our consolidated cost of sales and services increased$35.4 million , or 12%, in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . This increase was primarily due to (i) greater activity at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from pipeline projects inCanada , (iii) increased occupancy at our Australian integrated services villages and increased cost of temporary labor due to ongoing labor shortages inAustralia and (iv) a stronger Australian and Canadian dollar relative to theU.S. dollar in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . These items were partially offset by (i) reduced activity at ourSitka Lodge related to the COVID-19 pandemic and theBritish Columbia health order affecting activity in the first half of the year, (ii) reduced food service activity inCanada , as an overflow site supporting a LNG-related project in 2020 is no longer required, (iii) decreased activity at ourBowen Basin villages andWestern Australia villages and (iv) lower activity at ourU.S. wellsite and offshore businesses. See the discussion of segment results of operations below for further information. Selling, General and Administrative Expenses. SG&A expense increased$7.3 million , or 19%, in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . This increase was primarily due to higher incentive compensation costs, share-based compensation expense and compensation expense, partially offset by lower professional fees. In addition, SG&A expense increased approximately$2.2 million due to a stronger Australian and Canadian dollar relative to theU.S. dollar in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . The increase in share-based compensation was due to an increase in our stock price during 2021 compared to 2020. Depreciation and Amortization Expense. Depreciation and amortization expense decreased$9.6 million , or 13%, in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . The decrease was primarily due to (i) certain assets and intangibles becoming fully depreciated during 2020, (ii) the impairment of certain long-lived assets inCanada and theU.S. during the first quarter of 2020 and (iii) the extension of the remaining life of certain long-lived assets in theU.S. during the third quarter of 2020. These items were partially offset by a stronger Australian and Canadian dollar relative to theU.S. dollar in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . Impairment Expense. We recorded pre-tax impairment expense of$7.9 million in the nine months endedSeptember 30, 2021 associated with long-lived assets in our Australian reporting unit. Impairment expense of$144.1 million in the nine months endedSeptember 30, 2020 included the following items: •Pre-tax impairment expense of$93.6 million related to the impairment of goodwill in our Canadian reporting unit. •Pre-tax impairment expense of$38.1 million associated with long-lived assets in our Canadian reporting unit. •Pre-tax impairment expense of$12.4 million associated with long-lived assets in ourU.S. reporting unit. See Note 6 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.
Operating Loss. Consolidated operating loss decreased
Interest Expense, net. Net interest expense decreased by$3.1 million , or 23%, in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 , primarily related to lower average debt levels on term loan and revolving credit facility borrowings during 2021 compared to 2020. Other Income. Consolidated other income decreased$11.1 million in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . The nine months endedSeptember 30, 2021 included$3.5 million of other income related to proceeds from the CEWS. The nine months endedSeptember 30, 2020 included$9.7 million of other income related to proceeds from the CEWS and$4.7 million of other income associated with the settlement of a representations and warranties claim related to theNoralta acquisition. In addition, 2020 included a higher gain on sale of assets compared to 2021. Income Tax (Expense) Benefit. Our income tax expense for the nine months endedSeptember 30, 2021 totaled$2.4 million , or (39.0)% of pretax loss, compared to an income tax benefit of$8.5 million , or 6.1% of pretax loss, for the nine months endedSeptember 30, 2020 . Our effective tax rate for both the nine months endedSeptember 30, 2021 and 2020 was 31 -------------------------------------------------------------------------------- impacted by consideringCanada and theU.S. loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Our effective tax rate for the nine months endedSeptember 30, 2021 was impacted by an increase in the valuation allowance related to the impairment of land inAustralia . Our effective tax rate for the nine months endedSeptember 30, 2020 was impacted by a deferred tax benefit of$9.0 million , offset by a valuation allowance of$0.1 million , against the Canadian net deferred tax assets. Other Comprehensive Loss. Other comprehensive loss increased$7.4 million in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 , primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to theU.S. dollar. The Canadian dollar exchange rate compared to theU.S. dollar was flat in the nine months endedSeptember 30, 2021 compared to a 3% decrease in the nine months endedSeptember 30, 2020 . The Australian dollar exchange rate compared to theU.S. dollar decreased 7% in the nine months endedSeptember 30, 2021 compared to a 2% increase in the nine months endedSeptember 30, 2020 .
Segment Results of Operations - Canadian Segment
Nine Months Ended
September 30,
2021 2020 Change
Revenues ($ in thousands)
Accommodation revenue (1) $ 176,800 $ 156,068 $ 20,732
Mobile facility rental revenue (2) 38,240 21,715 16,525
Food service and other services revenue (3) 14,183 26,336 (12,153) Total revenues$ 229,223 $ 204,119 $ 25,104 Cost of sales and services ($ in thousands) Accommodation cost$ 124,798 $ 109,143 $ 15,655 Mobile facility rental cost 23,562 17,099
6,463
Food service and other services cost 12,583 23,773
(11,190)
Indirect other costs 7,498 8,115
(617)
Total cost of sales and services$ 168,441 $ 158,130
Gross margin as a % of revenues 26.5 % 22.5
% 4.0 %
Average daily rate for lodges (4)$ 97 $ 95
Total billed rooms for lodges (5) 1,816,407 1,626,668
189,739
Average Canadian dollar to
(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 nine months endedSeptember 30, 2021 that were$25.1 million , or 12%, higher than the nine months endedSeptember 30, 2020 . The strengthening of the average exchange rate for the Canadian dollar relative to theU.S. dollar by 8% in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 resulted in a$17.7 million period-over-period increase in revenues. Excluding the impact of the stronger Canadian exchange rate, the revenue increase was due to higher billed rooms at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects. Partially offsetting these items, revenue was lower at ourSitka Lodge related to the COVID-19 pandemic and theBritish Columbia health order affecting activity in the first half of the year and from reduced food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required. Our Canadian segment cost of sales and services increased$10.3 million , or 7%, in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . The strengthening of the average exchange rate for the Canadian dollar relative to theU.S. dollar by 8% in the nine months endedSeptember 30, 2021 compared to the nine months ended 32 --------------------------------------------------------------------------------September 30, 2020 resulted in a$12.7 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Canadian exchange rate, the decreased cost of sales and services was driven by reduced activity at ourSitka Lodge related to the COVID-19 pandemic and reduced food services activity, as an overflow site supporting a LNG related project in 2020 is no longer required. Partially offsetting these items, cost of sales and services increased due to greater activity at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from pipeline projects. Our Canadian segment gross margin as a percentage of revenues increased from 22.5% in the nine months endedSeptember 30, 2020 to 26.5% in the nine months endedSeptember 30, 2021 . This was primarily driven by increased mobile asset activity and related operating efficiencies.
Segment Results of Operations - Australian Segment
Nine Months Ended
September 30,
2021 2020 Change
Revenues ($ in thousands)
Accommodation revenue (1) $ 109,559 $ 106,988 $ 2,571
Food service and other services revenue (2) 79,215 $ 63,881 $ 15,334
Total revenues $ 188,774 $ 170,869 Cost of sales and services ($ in thousands) Accommodation cost$ 53,538 $ 46,665 $ 6,873 Food service and other services cost 75,458 53,627
21,831
Indirect other cost 5,176 2,703
2,473
Total cost of sales and services$ 134,172 $ 102,995
Gross margin as a % of revenues 28.9 % 39.7
% (10.8) %
Average daily rate for villages (3)$ 79 $ 72
Total billed rooms for villages (4) 1,382,182 1,487,819
(105,637)
Australian dollar to U.S. dollar$ 0.759 $ 0.677
(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 nine months endedSeptember 30, 2021 that were$17.9 million , or 10%, higher than the nine months endedSeptember 30, 2020 . The strengthening of the average exchange rate for Australian dollars relative to theU.S. dollar by 12% in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 resulted in a$20.0 million period-over-period increase in revenues. Excluding the impact of the stronger Australian exchange rate, the Australian segment experienced reduced revenue due to decreased activity at ourBowen Basin villages andWestern Australia villages, partially offset by increased occupancy at our integrated services villages. Our Australian segment cost of sales and services increased$31.2 million , or 30%, in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . The strengthening of the average exchange rate for Australian dollars relative to theU.S. dollar by 12% in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 resulted in a$14.2 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Australian exchange rate, the increase in cost of sales and services was largely driven by increased occupancy at our integrated services villages and increased costs of temporary labor due to ongoing labor shortages. Our Australian segment gross margin as a percentage of revenues decreased to 28.9% in the nine months endedSeptember 30, 2021 from 39.7% in the nine months endedSeptember 30, 2020 . This decrease was primarily driven by our integrated services business, which has a service-only business model, and therefore results in lower overall gross margins than 33 -------------------------------------------------------------------------------- the accommodation business. The integrated services business gross margin decrease was further exacerbated as two key client contracts transferred from construction phase to operational phase with inherently lower margins. Reduced occupancy at theBowen Basin villages andWestern Australia villages, further impacted gross margin as efficiencies were unable to be realized with a fixed cost structure at lower occupancy levels. Segment gross margin has also been negatively impacted by increased staff costs as a result of a hospitality labor shortage inAustralia which has been exacerbated by state and international border closures due to COVID-19. State and international border closures have affected the number of staff available which has subsequently led to an increased reliance on more expensive temporary labor hire resources and has placed upward pressure on wages for permanent staff as competitors compete for a small pool of labor.
Segment Results of Operations -
Nine Months Ended
September 30,
2021 2020 Change
Revenues ($ in thousands) $ 16,672 $ 21,363 $ (4,691)
Cost of sales and services ($ in thousands) $ 16,629 $ 22,755 $ (6,126)
Gross margin as a % of revenues 0.3 % (6.5) % 6.8 %
Our U.S. segment reported revenues in the nine months ended September 30, 2021
that were $4.7 million , or 22%, lower than the nine months ended September 30,
2020 . This decrease was due to reduced U.S. drilling activity affecting our
wellsite business and reduced activity in our offshore fabrication business as a
number of projects were completed in 2020 that did not recur to the same extent
in 2021. These decreases were partially offset by increased activity at our West
Permian, Killdeer and Acadian Acres lodges.
Our U.S. segment cost of sales and services decreased $6.1 million , or 27%, in
the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020 . This decrease was due to reduced U.S. drilling activity
affecting our wellsite business, reduced activity in our offshore fabrication
business as a number of projects were completed in 2020 that did not recur to
the same extent in 2021 and reduced costs at our West Permian lodge under a new
customer contract.
Our U.S. segment gross margin as a percentage of revenues increased 6.8% from
the nine months ended September 30, 2020 to the nine months ended September 30,
2021 , primarily due to improved margins at our West Permian lodge under a new
customer contract and in our offshore business from product sales, partially
offset by reduced operating efficiencies at lower activity levels in our
wellsite business.
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, purchasing or leasing land, and for general working capital needs. In addition, capital has been used to repay debt and fund strategic business acquisitions. Historically, our primary sources of funds have been available cash, cash flow from operations, borrowings under our Credit Agreement and proceeds from equity issuances. In the future, we may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity, fund acquisitions, refinance debt or retire preferred shares.
The following table summarizes our consolidated liquidity position as of
September 30, 2021 December 31, 2020 Lender commitments $
200,000 $ 167,300
Borrowings against revolving credit capacity (124,595) (63,556)
Outstanding letters of credit (2,141) (4,487)
Unused availability 73,264 99,257
Cash and cash equivalents 4,948 6,155
Total available liquidity $ 78,212 $ 105,412
34-------------------------------------------------------------------------------- Cash totaling$63.2 million was provided by operations during the nine months endedSeptember 30, 2021 , compared to$80.7 million provided by operations during the nine months endedSeptember 30, 2020 . During the nine months endedSeptember 30, 2021 and 2020,$5.0 million was used in working capital and$4.6 million was provided by working capital, respectively. The decrease in cash provided by working capital in 2021 compared to 2020 is largely due to increased accounts receivable balances, partially offset by increased accounts payable and accrual balances. Cash was used in investing activities during the nine months endedSeptember 30, 2021 in the amount of$2.1 million , compared to cash provided by investing activities during the nine months endedSeptember 30, 2020 in the amount of$1.7 million . The decrease in cash provided by investing activities was primarily due to$4.7 million of other income associated with the settlement of a representations and warranties claim related to theNoralta acquisition and lower capital expenditures during the nine months endedSeptember 30, 2020 , partially offset by higher proceeds from the sale of our manufacturing facility and mobile assets inCanada during the nine months endedSeptember 30, 2021 . Capital expenditures totaled$9.6 million and$6.2 million during the nine months endedSeptember 30, 2021 and 2020, respectively. We expect our capital expenditures for 2021, exclusive of any business acquisitions or any growth capital expenditures, to be approximately$20 million , which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts. Whether planned expenditures will actually be spent in 2021 depends on industry conditions, project approvals and schedules, customer room commitments and project and construction timing. We expect to fund these capital expenditures with available cash, cash flow from operations and revolving credit borrowings under our Credit Agreement. The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the transaction economics be attractive enough to us compared to the current capital allocation priorities of debt reduction. We continue to monitor the COVID-19 global pandemic and the responses thereto, the global economy, the prices of and demand for crude oil, met coal and iron ore and the resultant impact on the capital spending plans of our customers in order to plan our business activities, and we may adjust our capital expenditure plans in the future. Net cash of$61.1 million was used in financing activities during the nine months endedSeptember 30, 2021 primarily due to repayments of term loan borrowings of$117.6 million ,$1.1 million used to settle tax obligations on vested shares under our share-based compensation plans, debt issuance costs of$4.4 million and$0.4 million used to repurchase our common shares, partially offset by net borrowings under our revolving credit facilities of$62.5 million . Net cash of$79.6 million was used in financing activities during the nine months endedSeptember 30, 2020 primarily due to net repayments under our revolving credit facilities of$44.5 million , repayments of term loan borrowings of$31.1 million ,$1.5 million used to settle tax obligations on vested shares under our share-based compensation plans and debt issuance costs of$2.6 million .
The following table summarizes the changes in debt outstanding during the nine
months ended
Balance at December 31, 2020 $ 251,086
Borrowings under revolving credit facilities 367,622
Repayments of borrowings under revolving credit facilities (305,148)
Repayments of term loans (117,595)
Translation (728)
Balance at September 30, 2021 $ 195,237
We believe that cash on hand and cash flow from operations will be sufficient to
meet our anticipated liquidity needs in the coming 12 months. If our plans or
assumptions change, including as a result of the impact of COVID-19 or the
decline in the price of and demand for oil, or are inaccurate, or if we make
acquisitions, we may need to raise additional capital. Acquisitions have been,
and our management believes acquisitions will continue to be, an element of our
long-term business strategy. The timing, size or success of any acquisition
effort and the associated potential capital commitments are unpredictable and
uncertain. We may seek to fund all or part of any such efforts with proceeds
from debt and/or equity issuances or may issue equity directly to the sellers.
Our ability to obtain capital for additional projects to implement our growth
strategy over the longer term will depend on our future operating performance,
financial condition and, more broadly, on the availability of equity and debt
financing. Capital availability will be affected by prevailing conditions in our
industry, the global economy, the global financial markets and other factors,
many of which are beyond our control. In addition, any additional debt service
requirements we take on could be based on higher interest rates and shorter
maturities and could impose a significant
35
--------------------------------------------------------------------------------burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders.
Amended and Restated Credit Agreement
As ofDecember 31, 2020 , our Amended and Restated Credit Agreement provided for: (i) a$167.3 million revolving credit facility scheduled to mature onMay 30, 2023 , allocated as follows: (A) a$10.0 million senior secured revolving credit facility in favor of certain of ourU.S. subsidiaries, as borrowers; (B) a$122.3 million senior secured revolving credit facility in favor ofCiveo and certain of our Canadian subsidiaries, as borrowers; (C) a$35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower; and (D) a$194.8 million term loan facility scheduled to mature onMay 30, 2023 for certain lenders in favor ofCiveo .
New Syndicated Facility Agreement
OnSeptember 8, 2021 , we entered into a new Syndicated Facility Agreement (Credit Agreement), which, among other things, as compared to the Amended and Restated Credit Agreement outstanding prior to the effectiveness of the Credit Agreement provided for: (i) a$200.0 million revolving credit facility scheduled to mature onSeptember 8, 2025 , allocated as follows: (A) a$10.0 million senior secured revolving credit facility in favor of one of ourU.S. subsidiaries, as borrower; (B) a$155.0 million senior secured revolving credit facility in favor ofCiveo , as borrower; and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower. In addition, it provided for aC$100.0 million term loan facility scheduled to be fully repaid onDecember 31, 2023 for certain lenders in favor ofCiveo . As ofSeptember 30, 2021 , we had outstanding letters of credit of$0.9 million under theU.S. facility, zero under the Australian facility and$1.2 million under the Canadian facility. We also had outstanding bank guarantees ofA$0.8 million under the Australian facility.
See Note 9 - Debt to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion.
Dividends
The declaration and amount of all potential future dividends will be at the discretion of our Board and will depend upon many factors, including our financial condition, results of operations, cash flows, prospects, industry conditions, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors the Board deems relevant. In addition, our ability to pay cash dividends on common or preferred 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 we elect to pay dividends in the future, the amount per share of our dividend payments may be changed, or dividends may be suspended, without advance notice. The likelihood that dividends will be reduced or suspended is increased during periods of market weakness. There can be no assurance that we will pay a dividend in the future. The preferred shares we issued in theNoralta acquisition are entitled to receive a 2% annual dividend on the liquidation preference (initially$10,000 per share), paid quarterly in cash or, at our option, by increasing the preferred shares' liquidation preference, or any combination thereof. Quarterly dividends were paid in-kind onSeptember 30, 2021 , thereby increasing the liquidation preference to$10,723 per share as ofSeptember 30, 2021 . We currently expect to pay dividends on the preferred shares for the foreseeable future through an increase in liquidation preference rather than cash.
Off-Balance Sheet Arrangements
As of
Contractual Obligations
For additional information about our contractual obligations, refer to "Liquidity and Capital Resources-Contractual Obligations" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . As ofSeptember 30, 2021 , except for 36 --------------------------------------------------------------------------------
net repayments under our revolving credit facilities, there were no material
changes to the disclosure regarding our contractual obligations made in our
Annual Report on Form 10-K for the year ended
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 endedDecember 31, 2020 . 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 of Directors. There have been no material changes to the judgments, assumptions and estimates upon which our critical accounting estimates are based. 37
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