CVEO - Earnings call transcript Q1 2018

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Operator

Good day and welcome to the Civeo First Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Regan Nielsen, Manager, Corporate Development and Investor Relations. Please go ahead.

Regan Nielsen

Thank you and welcome to Civeo's first quarter 2018 earnings conference call. be Officer, Bradley Vice and Chief Officer. will and Civeo's President call Financial Executive Chief Frank our led Dodson, by President and Today, Steininger, Senior

forward-looking would today afforded remarks information by business, Harbor are factors other including please be read disclosed caution in context Before relying that that information, contain law. like historical federal affect that begin, XX-K, the such many our extent we now turn Form listeners SEC we remarks should our protections regarding to the note statements. than on Any To other our Safe to call filings. we risks will of in the and over the XX-Q, Bradley. I the

Bradley J. Dodson

our and strengthens overview, in overview call Canadian significant start for Louisiana Oil call. for year region this begin by questions. Frank was well a strategic of before before regional conclude and Thanks, a segment facility Regan, offerings the and will highlights welcome the of punctuated offering offering of addition our Noralta completion The Coast as accommodation Civeo review. provide market. of as we guidance acquisitions. our the two Gulf Then to for on respective quarter The with some I'll first brief the everyone the an markets. open our Sands then today joining performance and the on quarter, by financial commentary earnings detailed I'll us U.S.

and competitive Both ability these to were significantly. are production best-in-class day quality we to operating transactions delevering providing continue flow, accelerate day to our immediately and service excited forward as position. we welcome customers our our cash focus going are we teams new one, these accretive Civeo will to We on of to on solidifying

We months credit November maturity our XX restated and by to facility, also our the date extending XXXX. amended

flexibility. and while another This pursuit capital those As from committed to our in optimizing our financial remain emerge maintaining important we milestone we strategic structure of amendment the downturn, objectives. is

substantial these lodges, the expected off with start a While a to softer Canadian extension lower our accomplishments, rates contract got quarter first location. Lake coupled McClelland we with are than with a at pleased in

by margins underperforming margins contract the lower than in first in impacted from was were In also holiday with an completed addition, which the mobile saw quarter Canada downtime revenue mix, quarter. first camp Australia, we expected. greater In in

very activity However, the the quarter occupancy end by up Australia business prices. current picked turnaround the as the encouraging lodges anticipate with Canadian first is April picture Noralta prognosis both big solid met both quarter at robust noticeably former outlook the Canada and Australia. exiting remains in we for May lodges. quarter coal and and and our also and improved well finished the

quarter, in in Gulf Coast highlighted to the U.S. Permian of and Lastly, addition the strengthen the location. robust continued activity drilling our Basin business by the new

$XX impairment quarter, first of dollar million $XX.X $XXX constant we roughly in generated impact quarter and per a million net during was resulting billed On million. by rooms flow free well were the due exchange first up million $XX.X year-over-year our quarter guidance in pre-tax cash Civeo currency gain the On stronger cash with to generated a associated Adjusted basis, which on camp $X.X Adjusted In million catering, increased to $XX asset Canadian as of revenues, Noralta revenues charge was $XX.X million million During revenue. million costs camp but revenues segment, and related to of offset of fourth below sale largely mobile increases range camp first offset of $XXX were quarter the reported loss EBITDA as from revenues $X.X the million essentially $X in with Canadian-U.S. $XXX.X revenues. share, EBITDA which guidance a a daily unused and rates, catering, a million, acquisition. $XX our to of $XX in which mobile due of decline of in units. in XXXX, operating flat a to were quarter $X.XX was as basis, from with open million; in our or modestly loss line million represents average million flat $X.X with flow first rate. open benefited the was of the reduction million, a

to resources contributed first for pricing action summer further during place prices the in turnaround will benchmark Chinese in the improvement in settling enhance to both up second got address demand, met from Although improvements by March. revenues and India quarter. year accelerating per operations-focused a a our the we during holiday occupancy work that subdued at well activities in With we Australian as with the to than pricing took import in Despite more and addition tonne turnaround Mining sea-borne were off break. noticeable In and January disruptions, seasonally, segment, portfolio start was fundamental the prices all per Oil and tonne, opportunities shipping activity activity extended in competition Canada which slower our strong $XXX are encouraged Noralta the ability upward our Sands. basis. averaged coal to $XXX of as on in backdrop, due than strong to Australian of Japan, QX quarter. sequential anticipated, ongoing The anticipate

occupancy start EBITDA rate segment the is robust second achieved a Charles, backdrop markets segment environment. steady furnace performance performance new the higher as quarter India major emerging our allocating projects month fully near as to of March, growth we our However, drilling coastal the run amidst as which and a weather. camps customers open location of the perspective, our during also and and quarter progresses oil to to the XXXX. capital for we strong continued continued and as prices made quarter are in achievable to during additional U.S. we based campaigns Modest progress demand and year of concentration such of Louisiana. a during off anticipate out their experienced quarter our expect start. accelerate second a contribution picture be continue growth The be result From first favorable to to regions. blast the improving our finish breakeven promising Chinese XXXX U.S. of completion in of Accordingly, U.S. appear is expectations on their pleased progresses. Australian pricing in one Lake maintenance a as improve the from exceptionally this improvements trend first increasingly from should we during the clients strong big of with segment we and Overall, a capacity

Our business despite one performance. mobile expectations importantly, camp more has we perhaps the in contract timing with performed some seasonal to impacts accordance of exception generally And operations the our with successfully I'll closed acquisitions turn detailed over and completed financial we to it review while amendment for meaningful of facility. to an our a With on two Frank performance. that, our credit

Frank C. Steininger

this of $XX.X thanks share total on first of loss Thank net and our you, review revenues or net loss. segments. across of us $XXX.X we Bradley, three GAAP results a for per first in a reported diluted I'll start with quarter quarter the basis morning. with million Today our million, a everyone a joining $X.XX

an EBITDA free flow prior will million, acquisition. segment camp previously camp modestly for the million. contract. segment Revenues lower-margin camp result $X.X Adjusted the $XX open begin was During The of I increase a results million million, operating decrease QX rooms, and impacted in costs quarter. These a from $X.X partially million, quarter, shift quarter, impairment our flow million. billed by roughly as million associated of million sequentially Company adjusted in were offset cash from revenue the as $XX.X with with in of down were Canadian $XX.X the a performance Canadian primarily in in generated charge well in mobile of million, review catering, revenues. in quarter and lodges' $XX.X Noralta closing $X the cash impacted segment mix and our mentioned by Canadian $XX.X to first $X.X EBITDA were segment fourth decrease as Revenues the our a an our revenue XXXX. Canadian compared catering of towards the underperforming mobile a was down from by

lodges the the for to the increase. During Canadian the our for but average X% stated earlier, was occupancy in and down look and second to noticeably the XX%, rooms Bradley date April first encouraged are turnaround activity of by in expected Oil Sands remainder as billed sequentially, quarter, we quarter experienced in

in contract the new $XX start average dollars rate versus segment McClelland the Canadian Our for January. largely quarter, $XX U.S. driven in the of by Ft. was Lake in Hills the fourth daily

Australia, million we of $X.X quarter slightly $XX.X inefficiencies sequentially this at million, $XX.X the was in million Turning million of changing villages. the labor $XX.X from revenues down from EBITDA to to the first last occupancy and quarter of during fourth due decreased from primarily year. levels Adjusted recorded

sequentially room year increased for punctuated throughout $XX holiday for was March a to Village in fourth $XX fourth to quarter at the I'm daily $XX the season, compared the quarter the We – to $XX rate the pickup villages with to performance. in the first see after occupancy fourth Australian compared average in quarter the to start increased pleased quarter XX%. associated are slower The the quarter strong by to Australian in sorry, flat quarter. the a

in well sequentially revenues from was Louisiana, increased on acquired improved of occupancy one fourth as quarter February. we Charles, for end million Lake revenue as the facility which the million. month the to near moving Now $X.X at to unconventional of new U.S. plays driven results the increase our by The U.S., $XX.X

loss by we experienced. the of primarily fourth revenue in adjusted quarter, quarter, in the U.S. During recorded the million EBITDA driven the $X.X an increase versus $XXX,XXX we

will and to current I our position. liquidity on expenditures capital Now move

maintenance and During million, to we from $X.X related related those million expenditures sequentially, capital, down the capital, were first invested maintenance quarter, capital. $X.X

$XX.X amount facility of In XX We XXXX, months fund first extend offset debt as amended also our as principal resulting total for the from debt aggregate by $XXX.X the for invested to credit to primarily the million on commitments also million was million. Noralta loan acquisition, cash and increased a million revolving $X.X $XX.X of In Louisiana quarter. maximum repayment by quarter of the facility borrowings for in the facility $XX.X April, credit million, our our to acquisition $XXX.X the first by to reducing million partial outstanding quarter. well in we

the XX, March Noralta million facility we of borrowings acquisition. in available includes million, $XXX.X cash in million, $XXX.X capacity of $XX million the of that As $XX cash and for of approximately XXXX, portion credit hand revolving late of credit fund a on of March our total our liquidity and cash facility from had on to consideration

focused our debt Looking forward I remain the to quarter balance flow second while our will acquisitions cash quality we for provide continuing will sheet, customers. two year. closed to Bradley, and into guidance we accelerate our to now and remainder XXXX, the reduce and service delevering levels. the generating on will over just call our The ability our best-in-class free turn Bradley? talk the about of who some for closing comments provide back

Bradley J. Dodson

a and now that questions. and outlook Thank year witnessed turnaround call make accelerate improvement for segments, outline up for second XXXX, full some provide of In the April during our we open brief March in in remarks, you, closing the May. business should work guidance before our we the quarter Frank. and for Canada I'll

in a full announced benefit underway well will The annual major with related from contracts occupancy producers. Noralta and million. solid C$XX with assets We two integration is Oil from operations-focused contribution the the we team Sands Noralta and investment-grade assets quarter's to the confident previously also of synergies are of

from from catering-only for synergies guidance increasing the impact December; as for increasing Our full-year transaction; the occupancy of expected from contributions the well Noralta April the Ft. project; increasing following; the sequentially Noralta Hills Canada mobile as period of the slowing impact revenues. includes through and assets the from activity expected camp

million segment between $XX million we of are the and assuming of anticipate are and segment on dollar Canadian adjusted $XXX revenues rooms. rentable $XX second the $XX from XX,XXX based EBITDA and million. million quarter of we rate exchange to a These For expectations X.XX

between X,XXX,XXX approximately We a expect rate room per night. of rooms to be with lodge X,XXX,XXX and C$XXX billed

per a night of and room adjusted of revenues million. the the of in of C$XXX lodge to rate rooms million rentable exchange of full we and million expect year the and and are XXXX. range are X.XX For to dollar $XX guiding approximately in to for assuming Canada Canadian This $XX million Canada, from we assumes year rate year full between XX,XXX rooms million to we $XXX and year of X.XXX X.XXX the billed million $XXX full EBITDA full be

to Australia, cautious for macroeconomic environment the continues to optimism. Moving justification provide

to Although rooms and in meaningful the as envision anticipate met until later gain short-term currently monitor coal of during highs, new are do on environmental but multi-year to traction projects judiciously occupancy near customers China. basis a We the capital stronger in prices fresh opportunity the allocating quarter, are they we second impact to year. not committing restrictions sequential pricing

night. lodge and XXX,XXX are For $XX rentable the second of XXX,XXX with rate X,XXX These we expectations billed AU$XXX adjusted $XX of room and and AU$XXX to EBITDA between assuming quarter are dollar million $XX guiding per million to we Australian million. and million we a segment rooms rate revenue expect X.XX to exchange rooms between are to $XX of be based on and

year X.XX million. we anticipate $XXX million are dollar full of the Australia, assuming rate in and to $XXX we an Australian For revenues of exchange

We range a X.XX million from in expect per with rentable million lodge for full of the full full rate year Australia year to rooms X,XXX room $XX and to with of of million. night billed adjusted rooms This AU$XXX million approximately X.XX year between $XX be XXXX. of EBITDA the assumes

$XXX in that all million. adjusted second together revenues the to range be for million to $XX the consolidated So, quarter, million range pulling expect EBITDA on $XX of basis a be in to million, $XXX of to the we

the price adjusted of persisted short that million For for is years to of as downturn positioned full prepared XXXX that guidance our much believe guidance of commodity was in of thrive $XXX million. four we emerged from the the $XXX past million stronger three and $XX we million firmly to company nothing year to year comments, it revenue any $XXX for but are To devastating, conclude EBITDA full the issuing of industry-wide have better a I environment. to that

business steadfastly the to of the us our continue to has remain strategy As improve, of worst we enabled the downturn. navigate fundamentals underlying that committed to successfully the

and customers, the organic cash with service allocate we'll goal growth prudently will pursue inorganic safely financial to that we will deliver and returns, efficiently, free reduce of and work flow We we'll debt. unmatched opportunities make capital will and continuing strong to our maximizing

global past workforce mention years. by be at I'd dedication to not Lastly, remiss Civeo the throughout the and exhibited professionalism few our

us of you about the of we customers the excited questions. as commitment the the the entire call our Louisiana road teams all turn With comfort unyielding that, Your to and thank over team, and for the welcome ahead Civeo safety gets Noralta that you is what most for do. behalf I'll to family. management On

Operator

[Operator first Instructions] Howard Weil. Hancock go Blake with to We'll

Blake Hancock

talk here, were not help Canada there pipelines with called and a Bradley, about think about of the that Can margins. from Noralta nicely, then maybe starting XQ looks progressing some kind back can the nation help be into turnaround us the further visibility first you in of drags but got some how to do And of obviously of top in just work? fit XQ we you half their only to also line out. relationships. you year, some the

Bradley J. Dodson

Sure.

as half in turnaround So, that been look at the are we the of there that has work awarded the currently year, additional yet is back market. not

in could turnaround work see some we So XQ. additional

and third in As quarters turnaround is you'll year. recall, work second the the Canadian done the of most of

serve – position me work Noralta, look we combined mobile out give does a As our customers. us side to – with that the let good on our camp very portfolio in turnaround it up back

force maximize more closer and we efficiency multitude customer a then and relationships projects us be our options therefore in Certainly our present Oil can the occupancy the nation their region to our first combined drive to that united optimize stakeholders Sands base. and have hopefully margins. own where of location We can serve help to a

In the mobile mostly terms to work, fleet. going done our pipeline of be that's by camp

on that. We with customers are active discussions in

we in work that was quarter. progressing camp some We our contracted been yet. the all will that much first put Not performance the be the it have expect better contract year. We had mobile on do has than throughout of

So, led see that, with there really how off being, Canadian results the going we sequentially of mark in should with third the to turnaround much be year out improving the we quarter. is question work business, throughout the as

Blake Hancock

I you really now half or actually there help That's or great. the you heard there here be Thank Is that accretive right you of you. in push and some right And so I actually the out on have projects could might more second in optimism opportunities think that then Australia saying, more year. back see that half can are pricing the XXXX?

Bradley J. Dodson

of a been combination It's things.

base I has a through on there done seeing we of calls a I And base downturn. this a think very committing and good and I on have – as preliminary again to on work projects. customer basis job then of some is now their to to ebb guess talked is shorter-term on of maintenance holding flow, engineering load are up a focused tied rooms the – we committing the needs it very think type team and flexing growth pricing feed what about the previous

carries two shorter-term of of up And to it having efficient. has it; react but higher be piece on that shorter-term it a can't one, occupancy shorter-term that is we and higher some the prices; has we negative so, are then, and flexing at cost to occupancy basis impacts because generally as

by expect magnitude, to of double-edged looking Rough the end the are the bit of of for maybe I of little forward. continue level year. pricing night a is order a a sword, we that it's dollars do what move base So, but per will of couple

Blake Hancock

That's great.

Bradley J. Dodson

sorry, – better for XXXX. better It up would I XXXX set mean, I'm a

Blake Hancock

guess somewhere pro now of expansion see of for the guidance comfortable, debt-to-EBITDA kind that Perfect. you, that like the I around to on to this just Xx, based net you would done forma is here? One where are Noralta year's Frank, you where has given migrate business

Frank C. Steininger

and as of at of is are Noralta said are to forma mean, we've last pro basis said at X.Xx, I total of kind agreement going a what just look be and it months release if think I right under kind I credit as of we market pro of Noralta, the on earnings were we through we we the transaction. it, allowed to in under the which March, the forma the we XX when mean we looked you end

doing as into Just close when and coming you we to under that, of that very down. got we you quickly want get nothing, Xx to levered, want periods room get that work said up difficult, EBITDA your to to se because you XXXX, X.X move have that to get go through are always so per we you've

we'll think do transaction I ability down, ratio that So, very really start gives quickly. it this driving really and the us to leverage

Blake Hancock

That's great. Thank you, guys.

Operator

to next Stephen go We'll with Gengaro Stifel.

Stephen Gengaro

done the on how look efficiency higher, cost and done side is, things the you next I to to go, can I and kind last get or how don't do at those business, of achieved guys them how sort you out was cost and we of as side I which the over your should one relative you couple mind; next of of for you quarters they about those couple the Two over numbers what about had the think quarters? and on curious, of this when think think kind plays you several the what of savings much cost-cutting legacy if the over years you had Noralta, have just size synergies realizing

Bradley J. Dodson

implement and quickly identified, operating are synergies additional think we but as synergies. that carefully into moving then I the obviously business, previously We to we get the

to working do So, that. we quickly are

an XQ obviously we'll benefit guidance, synergies is increasing of the QX that and While benefit that guidance, we million. some rate do in and QX there implicit of and baked some will annual be QX run increasing QX such the the in believe the C$XX guidance QX get has into then

the going under be – we – agreement, but $XX negotiate are that announced to the think higher Now, we through still of the agreeing we that agreed and we are – the optimistic working a are can bargaining as process is we we there have costs, offset to beat also the Noralta, labor are in are collective to union million the working we synergies, number. with that, we while are of

Frank C. Steininger

fund get in call this related to put cost with we the we Local escrow be we'll able that back that forget, don't to XX. increased And the agreement once negotiated

Stephen Gengaro

think Okay, the Sitka? been out at of some update have thank some on tell about you. that early-stage there could you early Coast could additional potential I us kind Canada, far what's for And we then, as thought occupancy West us there there, going by give as may what's customers you as also happening an sort of analysis the of

Bradley J. Dodson

I so, the that the been B.C. Kitimat. called a called pipeline to the new which Coastal project say across gas taking primarily would it's province LNG Northeastern in to is Canada related it's town – a the GasLink pipeline

delay the lodge were camps have the actively contractors the previously with the in for teams when the been, sponsor, we for before directly and with and that contractors have pipeline. We with Shell, then the projects engaged both bidding current the pipeline been bid Sitka EPC project their Kitimat our mobile has served have they

are that process. in We still

what at has the later that, this a which certainly position we by than public, is this different in but anything been to heard some have not point. comments speculate on year. FID speculation about not been their there out a have in others We There positive hopefully are

Stephen Gengaro

Okay. Thank you.

Operator

next We'll RBC Capital go with Ben to Owens Markets.

Benjamin Owens

up the XXXX So, to for slightly back of February to back EBITDA in go I year-over-year. gave initial want you to flat guidance

to changes layered the excluding in flat you baseline two know Charles EBITDA that Now to to you've acquisitions wanted just up made Noralta and the if your for that Lake assumption XXXX to have any guidance, acquisition?

Bradley J. Dodson

to of talked in it. One, QX. we we obviously Canada a underperformed are in couple there about, think I as pieces predominantly

labor thing that, our we with is than guidance guidance it to, I to the does of some that higher hadn't guess So, now given note largest is while any actuals. is bake that's I to Noralta, piece, QX in unionization, one relative the which their material. cost think the related Other in

to guidance done. negotiation get excluding that a standalone first it's acquisitions, have quarter on predominantly or would we predominantly, in the say So, the our But basis, weakness. Civeo I

Frank C. Steininger

That's right.

Benjamin Owens

how tell you Could that quarter? thanks. that contract first mobile Okay, much us in impacted underperformed EBITDA camp the

Frank C. Steininger

million. C$X About

Benjamin Owens

then of me, Okay, year question increase on the is just And last spend Lake any CapEx the for to helpful. that's any in facility? recently full Charles related the acquired guidance

Frank C. Steininger

No.

Bradley J. Dodson

No.

Benjamin Owens

Okay, got it.

Bradley J. Dodson

No, it's Lake be There just the really Noralta. be some it spending won't addition but on Charles, will of material.

Frank C. Steininger

We bought a tractor.

Benjamin Owens

All right, I appreciate that.

Bradley J. Dodson

And two golf carts.

Frank C. Steininger

golf carts, yes. two And

So, not significant. really

Operator

We'll Group. Mike go next to Malouf Craig-Hallum with Capital

Mike Malouf

If for when we start million give ramp results, of getting? obviously just bit on, we a doing color as were the look get I'm been if are look as XX while at to little a you of can you some your The quarter, you wondering have of attainable I back were and up us could margins XX up feedback XX% close those you to on now, of kind kind of a on if to prices doing were Australia, XX those just numbers. a you back million range, million margins, and to kind are

Bradley J. Dodson

good it's question. very Mike, a

expect to I think to we alluded to continue as last this on call as Australia we to well, and the improve. call have sequentially on alluded do

we integrated is model that service that are Now, customers' region where pursuing we one well our the assets. thing as operate in

lower margin. Now, business, that carry portion of that's does it market attack, we the good but a expands can it

there, regional improves. how integrated if at will them the be, as kind issue which I mix look margins. will, margins, of much The to may lodge do services expect work the you improve confuse, of you if is So, occupancy in

Mike Malouf

are be I'm area, just a there. sounds Okay, helpful. and of that's some then maybe the plans prices a of you the growth continue any robust plans like kind to us if over give or wondering can on from commentary And it expansion color feedback little getting you pretty on little

Bradley J. Dodson

good good I have locations. the we that assets high news think in is quality

need So, rooms I we a competitive as think in position. the very are good for increases,

case, additional expand that material just in we capital, selected business, than occupancy. expect, So with need additional I don't to one organically other capital, would improve it maybe the will

has say would been good. customers I So, feedback from

As additional we haven't trying comments, on interest to of amounts and some for we're rooms and in But quite the at term fruition basis. a is deals looking see that it yet. just now term mentioned greater longer maybe shorter come to

Frank C. Steininger

The attitude really start the and with which [indiscernible] rooms. good, is to active, clients to them and the interaction committing is really the very vibe is for

Mike Malouf

you get those And be will announceable commitments, those Okay. when events?

Bradley J. Dodson

Depending size. on

Frank C. Steininger

size. according to Yes,

Bradley J. Dodson

on size. Depending

Mike Malouf

Thanks great. Okay, Appreciate the help. it. for

Bradley J. Dodson

Certainly mentioned not independently but they unless may on our material. earnings call, are announced, be

Mike Malouf

it. Got

Okay, thanks.

Operator

And turn to answer this does remarks. conclude additional our any session. question over call or for Bradley back closing I'll the and

Bradley J. Dodson

your all we for call. to we'll earnings joining you quarter on and Thank us today appreciate second interest and Thank the to look you forward speaking you.

Operator

today's And your this you conclude thank does for call. participation. We

You disconnect. now may

Civeo (CVEO) 27 Apr 182018 Q1 Earnings call transcript