CVEO - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Civeo Second Quarter 2019 Earnings Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Regan Nielsen, Director of Corporate Development and Investor Relations. Please go ahead, sir.

Regan Nielsen

Thank you, and welcome to Civeo’s second quarter 2019 earnings conference call. be Mr. will call our led by Today Bradley Frank Chief Steininger, President and Financial Officer; and Chief Executive Executive Dodson, Civeo’s Officer. Vice President and

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

will call I over the turn to now Bradley.

Bradley Dodson

before second then and a all updated second prepared commentary some with consolidated our will performance current conclude our portion segment quarterly you, and I’ll before guidance three a call. move on discussion Thank Frank our and business us our our detailed today and with I’ll for quarter of thank quarter the remarks earnings we provide on outlook our call. you offering to began Reagan, segments; question-and-answer of of joining financials summary financial

begin, we our call I’d takeaways highlight like today. few Before a from to

consolidated expectations quarter exceeded second EBITDA on each our adjusted and region a First, basis. in

have expansion EBITDA. meaningful the Columbia, XXXX LNGC will Lodge project from impact During and earnings half of in on second the completed quarter, a second to we location the this British Sitka our our serve the occupancy and

of cash to which behind use us, in we Sitka expansion to half significant debt. and With expect XXXX, reduce flow the generate operating the second we free will

are completion in performance second adjusted full-year decreasing the U.S. drilling our and and We EBITDA activity previously disclosed by are the acquisition Action offset as quarter largely guidance maintaining

future offering, strategic growth which Lastly, organic while acquisition commodity opportunities. up opening in service Australia, we and geographic completed footprint, exposure our expands a

increased progress the regions LNG we Australia. turnaround Our strong from performance improvement British in Columbia. also in activity, related also and Canada, second higher pleased Both in Canada on punctuated from was contracting from our benefited We benefited were recent front. sequential quarter and by occupancy occupancy with

second quarter, services existing from renewal four-year contract villages Australia. BHP rooms the Company’s During a Coppabella to we and and in provide announced Nebo hospitality the with

a our can and competitive provide demonstrate hospitality to confirm hospitality totaling major services that Canada services a today, customers. extension position Fort and locations strength we million. producer oil these at secured with as awards we Grey revenues two-year best-in-class in to contract believe We of And take-or-pay rooms McMurray Village to deliver Civeo’s approximately CADXX Wolf our the we sands

July our is the the end the in it’s quarter, delevering Australia. producers of expands This in of second Industrial presence strategic acquisition on transaction sheet. balance a our to After acquisition This offering with and forward strengthens great iron immediately ore Australia X, business. Action our step service Western Australian we and completed Catering for

EBITDA second generated Adjusted $XXX million, revenues, we the of in but the up year-over-year, $XXX modestly quarter from and quarter. second for at sharply a million up the revenue $XX.X sequential was million last $XX EBITDA first million During down which from basis. range the results grew from quarter, end year million was high Both XXXX. adjusted $XX.X $XXX of guidance our and on from million of of the were

limited volatility, price Canada each impacted to our by of takeaway let across oil capacity, and continue Now provincially production mandated in the through performance be a Market me minute to take the second in segments. curtailments walk quarter. conditions

the was in of sands oil maintenance and region quarter quarter the subdued second the turnaround activity in relatively XXXX compared expected, second of we As to XXXX.

earlier of this derive with the the from secured with LNG the renewal relationships strength continued Columbia. occupancy the contract our our customer persistent in of oil in the two-year offerings. emergence the month oil rooms build service the coupled in Despite and customers the increase headwinds in sands, sequential significant saw contracted we that underscores driven However, we region, our major producer value sands British

Moving to Australia.

Second particularly the Basin. to occupancy sufficiently in results sequentially higher with Bowen continue quarter improve

levels prices capacity and coal customer by activity activity. supported Chinese sustained in level improving were which are of Australian utilization to Our met steel conducive turn impressive

a critical of acquisition As – positive Western commodity with services Australian operations Industrial environment. I the operations managed oil providing and well in of exciting stated business, earlier, in iron Catering industry, the is as Civeo Australia an Action milestone in for substantial of as base a a ore mass

completion and solid Our U.S. operational ahead and of, and segment the regions. work. slightly our to execution Permian activity of steady business generated financial softer the continue on spite results winning expectations U.S. and we performance Mid-Con second drilling focus in in will quarter, in produced

And I’ll for turn over a detailed of our the review performance. with that, Frank financial to call

Frank Steininger

a Thank per GAAP $X.XX or revenues you, total basis the million $XXX.X reported Bradley, $XX.X for us morning. joining on in loss of and diluted million, net quarter thanks this we Today with a everyone share. second of

generated second the we cash and million. During flow adjusted of $XX.X EBITDA $X.X million, of operating quarter,

three resulted Sitka performance quarter the maintenance XXXX. from prior second Canada Revenue begin $XX.X throughout from our Revenue adjusted quarter. first million review occupancy to for of quarter with segment of Canadian and compared million LNG-related revenues to of of $XX.X the in in segments. and increasing an Turning the $XX.X our at the million, turnaround from XXXX. compared the the our second the and $XX.X improvement sequential quarter EBITDA increase results to cadence increase was increased quarter steadily EBITDA in primarily Lodge. I’ll first was million, Canadian Adjusted an the of segments

During XXX,XXX, sequentially Canadian to the XXX,XXX the which lodges due our rooms aforementioned from quarter, totaled up dynamics. in was build second

rate $XX reductions rate in the year. to higher Canadian segment compared occupancy in dollars based was to first in daily quarter related room to was the rate $XX the for sands. primarily The daily U.S. build Our in related this decrease oil of rooms

to Australia. now Turning

up U.S. and activity coal our across for $XX.X million, of villages. recorded Basin was our dollars was due up sequentially During Bowen flat from million million, million. The $XX which $XX in impacted $XX rate average Australian second in by Adjusted increased increased $X.X due customer in increased to rooms villages Bowen quarter, quarter negatively sequentially the Australian daily revenues first from the the second maintenance weakening the second the to XXX,XXX production EBITDA was quarter, XXX,XXX Basin. first dollar. from in the quarter, Build to we to at quarter activity the

million quarter million Moving slightly in million. for in Adjusted sequentially the to U.S. the $X.X $XX.X first the to $X.X U.S. the from now second million to to declined declined compared quarter. slightly $XX.X EBITDA Revenues

in flat in decline of count. U.S. a X% was light relatively While results were sequential rig sequentially, this

well XXXX, business year-over-year realized On site primarily – of and Mid-Continent well result adjusted in most the we out assets. moved U.S., of a expenses the XX% those when site as Permian basis, through a relocation we utilization of northern into regions year improvement this the EBITDA and lower assets for the markets increased of in relocated

expenditures On in a million consolidated $XX.X were capital and second year-to-date. $XX.X quarter million the basis,

As project Sitka Columbia. support Lodge expansion of the we Canada completed the to in British the Kitimat, LNG

related expansion adjustment a XXXX Sitka the XXXX. from Our since negative outstanding currency primarily expenditures of was of translation million $X.X increase March The of capital $XX.X $XXX.X increase million Lodge. the to a and debt resulted June XX, foreign million as XX,

of hand. revolving $XX.X XX, consisting million As on credit available under of $XX.X our million and June of of we $XX.X liquidity cash facilities XXXX approximately had million total

Bradley? some Looking increasing Bradley debt. cash ahead revenues, comments continue flow over contracted will the financially, for our generating and and closing to who our will now will about we to guidance focus turn on provide reducing our quarter. talk free third back I the call

Bradley Dodson

I comments full up our outlook call before Thank you, we make open brief year XXXX, the will for guidance for Frank. questions. closing third for quarter the provide now outline some segments, business of a our and

XXXX In stronger our quarter for outlook generally the to Our with oil sands we and turn ramp in activity consistent rooms sequentially articulated third what around Canada, quarter build customers call. we is up. continues earnings as first maintenance on anticipate

half is our project. rooms with Sitka from downtime occupancy expect in fourth LNG Overall, our build that XXXX to quarter. will the X,XXX the Canada before in complete, Lodge the the improve benefit Canadian sequentially to quarter moderating second increased we dedicated third from of rooms roughly Now holiday expansion

Australia, the capacity. very comfortable recent coal support for our leads BMC with solid our with a business of investments the backdrop. the met room constructive XXXX. our reaffirms environment us prices are in our position against operating competitive Healthy and recently beginning And in remainder customers region refurbished contract year Moving committed capital to the during price should commodity opportunistically and announced outlook more iron renewal that to ore redeploy view four

for Australian expand Western Service family our from are also include an Action our over Industrial Australia Catering managed well as managing years. to couple as excited our services on hospitality we serving the the welcome customer to opportunities as of business team in fit growth core footprint in significantly Action’s to competencies open and Group the is and next Civeo rooms. We significant organic excellent

regard the before rooms half during build to third modestly in XXXX, the anticipate Australian In softening improve to XXXX. in performance of the we downtime segment’s of second quarter in fourth holiday quarter

not EBITDA While be operations. acquisition positive integrate as XXXX strategically the contribution third important, the will material its we is of but quarter Action Catering their in

EBITDA good fourth do the we quarter reach a from However, to run in of business. rate expect that

to the our business lower quarter, Action’s including see in is room rental expect EBITDA that third equating margins margin similar lower service Action’s that with investment operations business deploys provides while from a are revenues capital business lodges. at Australian own in that low-to-no combined business business, we or a business Now model Civeo without Action’s our pure model service to into a very our margins. profile to the

last with the are our cash in flow. count to over on the months to steady improvement the operate pressure performance the U U.S. within trend in rig coupled seeing recent S, with U.S. Moving we E&P’s XX

completion decrease half drilling We of XXXX. second expect and U.S. in activity the to

soften site Acres at our quarter business budget the third exhaustion We are contract well service a have going our we into deals to business E&P and Acadian rolling-off. with as expecting

we to continue accordingly. market the activity completion will watch be this We business Coast in petrochemical drilling Gulf as manage

million year and the outlook Despite million. outperformance of second in consolidated $XX of the million expects of a activity expects basis of and third by revenues in $XXX adjusted a to not weaker our of addition delays Australia. quarter full as Civeo million, as guidance EBITDA Civeo basis, increase $XX $XXX full On million adjusted did year EBITDA second as to XXXX, revenues million, XXXX offset Catering of quarter we quarter, half, $XXX $XXX Action U.S. with of million. EBITDA project adjusted to are $XX.X well the to second for On million the for performance $XXX in the

in of full Action primarily increase revenue was year The acquisition guidance recent the Catering. to attributable

us, behind half largely the Sitka of LNGC, With of expect improve XXXX. expansion our to cash flow significantly free second we in for Lodge operating

of to well. we As serving we continue navigate strategy believe crosscurrents geographic markets, us that our is our key

debt continue maximizing remain opportunities enhance Although objectives, reduction primary position. to growth our make and returns identify to investments see our we financial flow competitive – will when free strong we and drive cash

without best, as what is evolving that critical our hospitality. believe great we also a success. We It providing company departing long-term do from to

our opportunities our markets our to stabilized, to is on continue our improve expand contract We and we offering already portfolio. best-in-class customers. service has and our our to As focused strategy this explore element team our recent renewals validate of end complement ways believe to

happy questions. we’re that, take to your With

Operator

Gengaro. [Operator you. sir. from question first Stephen ahead our Instructions] take Please Thank We’ll go

Stephen Gengaro

things I three Thank to wanted or on. you, touch Two gentlemen.

I when – your receivables rise the in to sheet, seem the being quarter. first lot at the look a balance The

of you was cash updates as mean, on that your where curious I generation. facility I at as could debt you going So sort levels add look to any you stand in color credit your to some if pertains it forward?

Frank Steininger

– Frank. of in yes, Canada. a Steve, The was the is this receivables really increase Yes, result

been That’s didn’t. That been largest. big the You to has or collected in large really was Most that. of There end increase what one that drove a in that of see we collect receivable quarter, that quarter. ramp here might but of Canada. the the up chunk revenue has thought was subsequent we before collected we the the

really related it’s increase, issue just timing again, there. unusual – revenue a nothing really just So to

the the In group situation extension banking nine of with dialogue in banks regards the and that credit we situation, bank to credit group. agreement. the an facility are as There’s to currently in

kicked been current with other a come discussions that banks Also could to the couple of has process into new that potentially agreement. banks, credit talking happening. So off

beginning process the off it in week hoping of and kick formally [ph] August, will extension the We September. entire [amendment] the so get here or next the by the banking of to with to the end group, complete

we’ll so, have the date. or the the hopefully, banks that. very well been a month to you a of and or gone constructive So to with a have guys – discussions month have But come back results

Stephen Gengaro

Great, Australian – you one as extension then that announced then thank during think expansion the at you. quarter I and the Canada. you today in And announced the look you was the

You of of what in to profile pricing? margin regions about the being respectively? sort think those disclosed similar the Should those we two we’ve extensions seen

Bradley Dodson

Yes. on to prior should agreements. margin contrast consistent. is the Yes. lower the work always with Obviously, would pricing side what trying on cost indicate The be in our structure, nothing but the were consistent margins. we’re Obviously,

Stephen Gengaro

US quarter it an really, of by – all [indiscernible] your what are about it in just quarter, when the final softer Is you’re the – kind alluded is it all? the is quarter – in saying, you raise one, a) third the a to talked expectations then is versus you’re one Is U.S. what really XQ cetera? this Great, sort know that of market in strong E&Ps prior but sort thank and you. expectation that it of but outlook. just I call, guidance. seeing And et guidance, guidance surpassed the the expectations, fourth you then were Brady, of just b) Is

Bradley Dodson

quarter, of movement couple a that say are does from look back soft see but we’re would subside I and then improvements that third the it, strong primarily level. Canadian to there the that this third second Well, third levels quarter to by going second U.S. in. pieces half closer Stephen. see to sequential to in The factor to be turnaround fourth we to then first quarter room year, build would the driven to activity,

on in nights second then for Canada, primary So of third are room drivers. movement, Australia, in just or fourth holiday Canada, the softness biggest seasonality the fourth XXX,XXX is activity, quarter quarter quarter in downtime. turnaround the the XXX,XXX see into to But going into you’ll Those fourth bit and quarter seeing the reverse a quarter, the driver. and then big the that that’s little

Stephen Gengaro

I you nights? And – room did about said you I’m missed – say XXX,XXX sorry; rooms the number.

Bradley Dodson

Room fourth XXX,XXX quarter, nights. nights we’re about room the in looking

Frank Steininger

For Canada.

Bradley Dodson

Canada. For

Stephen Gengaro

Canada? For

Bradley Dodson

Yes.

Stephen Gengaro

Okay. good. Thank you. Very

Operator

Please question our go We’ll you. sir. from from next Thank Malouf ahead take Mike Hallum. Craig

Mike Malouf

guys of bit XXXX? half of just CapEx you’ve Thanks my you and the Great. update us taking give little we gotten on the your the comments on behind would If on could just be helpful. into here start like It Can plans of for year us kind bulk off questions. back Sitka for a seems site some CapEx. that but the you,

Frank Steininger

Yes, with first I – comments in the in we $XX I – little CapEx to the normal the – West Coast We to to some associated really maintenance as project almost the million then million is which just A to guiding of Again, entire pipeline – do year, CapEx normal year. remaining months. there. million of project my said a – Sitka. lot CapEx, nothing $XX about unusual the LNG it’s think normal for related for type is spent and we’re at the six million $XX be have gasoline, the for the $XX the there cost expenditures more bit rest spent on

the into we’ve normal million number $XX to million so back fall see If $XX levels $XX or – you to that get XXXX, CapEx. off had go you million in or should by that

go XXXX, if anywhere XXXX, – you during million $XX million If periods. to XXXX, between look you’re those CapEx you of at back $XX from

CapEx. – but little coming be of down. the would normal pipeline have expenditure Coastal again So the the a it’ll bit project, GasLink normal more be LNG We’ll on kind maintenance level project, that

Mike Malouf

rate? as you still we to into then Okay, debt, look but going material of are any this on I it’s And the extension actual see great. on sort early, you change think, know the

Frank Steininger

I’m hoping a clear so what view yet called will to not, Michael. demands don’t I be. as the have

a but we’ve I’ve gotten the had I’m today. extension, discussions not material think the expecting of in I the rate that increase based with aspect the upon comfortable

Mike Malouf

of Okay, in you’re you more as final we of a the bit bit XXXX. question. that the I us know opportunity Action to at then impact – color you but sort great. both give little of the on And synergies get third just sort quarter, look of you ramp and top can Could of into look then a into as the sense be EBITDA little the a next a any line and as would and fourth, potential year, helpful? impact going

Bradley Dodson

good to continued job first work it’s their there the they’ve and that with then of I done of of and where all, increase. Well, the really a a our projects $XX But Action business, just million think managed win team they combination continue base year about Australian ability million and of we’re happy great our to revenues of, $X about will business, to optimistic win to, base EBITDA. expecting services next team, from we’re

Mike Malouf

synergies, Okay. can in you into And to look upside some bids guys obviously talk joint the then that, to the or about as you upside of all it’s us place you have there? there’s the

Bradley Dodson

drive alone it a to rough running, million business Australian and room we’ve you certainly we services. as a noted we’ve adds upside. the for do nights press think continue – what been if good numbers, XXX,XXX of that’s about that’s about We’ll year, about number nights in X.X release room in the managed for acquisition the Action XXXX. It’s

customer owned taking care of We’re in rooms. guests

for to in in amount it’s Australia. your particularly point, So material us, a buying power – of Western

is synergies from on continue will and there focus cost those to numbers. driving those So we I upside think

Frank Steininger

type service help integrated it, Bowen strengthen other in could some we acquisition doing of the we our the – management – as some and do resume. of projects the really that with on Action Australia of other been or side the side Basin, catering be on upside of Yes, there facility bidding have

been that attacking management increased management helps that see our markets, it, facility hoping resume we’re piece other we’ve those from really piece activity some and us core meaning where that facility of win there, catering give some So side eastern Australia of market, of catering – of of but this and work. our contracts the of type we’ll in that also some better to us villages have the on the we

Mike Malouf

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

Bradley Dodson

Thank you.

Operator

Thank you. Mr. the moment, [Operator There questions no at Instructions]. are Nielsen.

Regan Nielsen

forward earnings in interest appreciate day. thank Well, call all on the good the a Have call. today. for quarter you joining look on third you us speaking the and stock to We to

Operator

This today’s for your you Thank concludes call. participation.

now You may disconnect.

Civeo (CVEO) 29 Jul 192019 Q2 Earnings call transcript