Civeo Corporation (Canada) (NYSE:CVEO) reported financial and operating results for the first quarter ended March 31, 2016 as well as subsequent operational and financial updates.
- Delivered revenues of $95 million — at the high end of management’s guidance
- Generated $8.1 million in free cash flow through ongoing cost containment and made $11 million of net debt repayments
- As previously announced, amended revolving bank credit facility to increase leverage ratios
“Energy markets have continued to soften in 2016, and our first quarter results reflect lower activity levels in both Canada and the U.S. and continued weakness in the Australian mining sector. Despite the challenging conditions, we continued to manage costs aggressively, generate positive free cash flow and tightly managed our liquidity,” said Bradley J. Dodson, President and Chief Executive Officer. “As a result, during the first quarter of 2016, we delivered revenues in the upper end of our guidance and Adjusted EBITDA in line with our expectations. We also generated more than $8 million of free cash flow.
“We are actively pursuing new business opportunities in Western Canada, both in the oil sands region of Alberta and longer-term LNG-related opportunities in British Columbia. We are also continuing to drive additional operating efficiencies and properly align the size of our business with market demand. In the U.S. Bakken Shale region, we further reduced capacity and operating expenses to reduce costs later this year.
“As we look across our global portfolio, our operational performance and outlook for the balance of 2016 is largely consistent with our prior guidance. The one exception is our U.S. segment, where market conditions continue to deteriorate with U.S. drilling activity. We believe that we are well-positioned to manage through a prolonged cyclical downturn, with a strong competitive position and an improving financial foundation. We will continue to pursue our current three-pronged strategy to drive free cash flow, reduce leverage and capture organic growth opportunities,” Mr. Dodson said.
FIRST QUARTER 2016 RESULTS
In the first quarter of 2016, the Company generated revenues of $95.0 million and Adjusted EBITDA of $16.8 million. Reported net loss was $26.8 million, or a loss of $0.25 per share, which included the impact of $8.4 million of pre-tax charges, or $0.05 per share after-tax, related to the impairment of our assets in the U.S. Bakken Shale region, and a $1.0 million pre-tax expense, or $0.01 per share, related to our redomiciliation toCanada in 2015. Excluding these charges, adjusted net loss was $20.7 million, or a loss of $0.19 per share.
(EBITDA is a non-GAAP financial measure that is defined as net income plus interest, taxes, depreciation and amortization, and Adjusted EBITDA is defined as EBITDA adjusted to exclude impairment charges and certain other costs. Free cash flow is a non-GAAP financial measure that is defined as net cash flows provided by operating activities less capital expenditures plus proceeds from asset sales. Please see a reconciliation to GAAP measures at the end of this news release.)
By comparison, in the first quarter of 2015, the Company generated revenues of $171.0 million and Adjusted EBITDA of $53.0 million. Net loss for the prior-year quarter included a $3.8 million pre-tax charge, or $0.02 per share, related to impairment of certain fixed assets and a $1.2 millionpre-tax expense, or $0.01 per share, in connection with the Company’s migration to Canada.
The year-over-year decline in revenues and Adjusted EBITDA was primarily due to lower occupancy levels caused by decreased customer activity in both the Canadian oil sands and Australian mining industries. Lower revenue was also compounded by the impact of a strengthening U.S. dollar during the first quarter, which appreciated 10% against the Canadian dollar and 8% against the Australian dollar.
BUSINESS SEGMENT RESULTS
(Unless otherwise noted, the following discussion compares the quarterly results for the first quarter of 2016 to the first quarter of 2015. The results discussed below exclude the fixed asset impairment expense and migration charges noted above.)
The Canadian segment generated revenues of $65.5 million and Adjusted EBITDA of $14.2 million in the first quarter of 2016 compared to revenues of $116.9 million and Adjusted EBITDA of $37.5 million in the first quarter of 2015. Results included the impact of a weaker Canadian dollar relative to the U.S. dollar when compared to the first quarter of 2015, which reduced revenues by $7.0 million and Adjusted EBITDA by $1.5 million. Excluding the year-over-year impact of exchange rate changes, revenues would have decreased $44.4 million and Adjusted EBITDA would have decreased $21.8 million.
On a constant currency basis, lodge revenues declined 31% due to reduced occupancy and lower room rates. These items were partially offset by incremental contributions from the ramping up of the Company’s Mariana Lake Lodge in the third quarter and the Sitka Lodge in fourth quarter of 2015.
The Australian segment generated revenues of $25.5 million and Adjusted EBITDA of $10.8 million in the first quarter of 2016, compared to revenues of $41.9 million and Adjusted EBITDA of $20.7 million in the first quarter of 2015. Results were impacted by a weaker Australian dollar relative to theU.S. dollar when compared to the first quarter of 2015, which decreased revenues by $2.3 million and Adjusted EBITDA by $0.9 million. Excluding the year-over-year impact of exchange rate changes, revenues would have decreased $14.1 million and Adjusted EBITDA would have decreased $9.0 million. On a constant currency basis, segment revenues declined 34% due to lower occupancy related to the continuing customer activity slowdown in the Australian mining industry, primarily in the Bowen Basin.
The U.S. segment generated revenues of $4.0 million and negative Adjusted EBITDA of $3.1 million in the first quarter of 2016, compared to revenues of $12.2 million and Adjusted EBITDA of $0.1 million in the first quarter of 2015. Results reflected lower U.S. drilling activity in the Bakken, Rockies and Texas markets along with decreased sales from Civeo’s offshore business.
The Company recognized an income tax benefit of $4.6 million, which reflected an effective tax rate of 14.6% in the first quarter of 2016. By comparison, during the first quarter 2015, the Company recognized income tax expense of $1.2 million, which resulted in an effective tax rate of 83.4%.
As of March 31, 2016, the Company had total available liquidity of approximately $69 million, comprising $66 million available under its amended credit facility and $3.0 million of cash on hand. While the Company made net repayments of debt totaling $11.0 million, total debt, exclusive of debt issuance costs, increased to $415.3 million at March 31, 2016 from $401.6 million at the end of 2015 due to the impact of the strengthening Canadian dollar at the end of the quarter.
As previously reported in the 2015 fourth quarter earnings release, Civeo completed an amendment to its revolving bank credit facility in February 2016 that provided additional flexibility to manage through the current cyclical downturn in oil and mining activity. Under the amended credit facility, Civeo’s leverage ratio (Adjusted EBITDA/debt) may reach a maximum of 5.5x in the third and fourth quarters of 2016 before decreasing by 25 basis points every six months thereafter to 4.75x by the first quarter of 2018. In conjunction with this amendment, Civeo repaid $25 million of itsU.S. Term Loan and reduced its Canadian revolver commitments by $25 million, thereby reducing total borrowing capacity going forward to $700 million from $750 million.
Capital expenditures totaled $4.8 million in the first quarter compared to $10.7 million spent in the same period last year.
SECOND QUARTER AND FULL YEAR 2016 GUIDANCE
For the second quarter of 2016, the Company expects revenues of $97 million to $101 million and Adjusted EBITDA of $17 million to $20 million. For the full year of 2016, the Company continues to expect revenues of $385 million to $415 million and EBITDA of $72 million to $82 million. (Original Source)
Shares of Civeo are up over 6% to $1.53 in after-hours trading. CVEO has a 1-year high of $4.95 and a 1-year low of $0.75. The stock’s 50-day moving average is $1.27 and its 200-day moving average is $1.42.
Civeo Corp. engages in the provision of remote site accommodations services for temporary and permanent workforce housing, offering customers a turn-key solution for workforce accommodations, food services, facility management and water and wastewater services. It operates through the following geographical segments: Canada, Australia and the United States of America. The company is headquartered in Houston, TX.