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There "Is" Blood: Energy Services Firm Civeo Cuts Headcount 45% & Guidance By 30%, Suspends Dividend

Tyler Durden's picture




 

In what we suspect will be the first of many, Houston-based Civeo (which provides workforce accomodation to the oil industry) has crashed over 20% after-hours (after being down over 65% since September already) following the total carnage of its earnings report.

  • CIVEO HAS CUT U.S., CANADA HEADCOUNT BY 45%, 30% FROM EARLY '14
  • CIVEO SEES 2015 REV $540M-$600M, EST. $817.3M

Apparently having not only (Jana) but two (Einhorn) activist hedge funds is not nearly sufficient to send a stock soaring to all time highs, especially when said stock can no longer afford to buy back its own stock.

And in what is likely the death knell for this irrational bubble, Civeo has suspended the dividend and will use excess cash flow to cut debt in 2015 (wait what).

 

 

Civeo Announces Initial 2015 Operating Guidance

HOUSTON, Dec. 29, 2014 (GLOBE NEWSWIRE) -- Civeo Corporation (NYSE:CVEO) today announced the company's initial 2015 guidance, which reflects decisions by major oil companies in North America to significantly reduce 2015 capital spending, particularly in Canada, continuing weakness in global commodity markets and the resulting impact on the company's business in Canada, Australia and the United States.

The acceleration in November of the decline in global crude oil prices and forecasts for a potentially protracted period of lower prices have resulted in major oil companies reducing their 2015 capital budgets from 2014 levels. This has had the effect of reducing the near-term allocation of capital to development or expansion projects in the oil sands, which is a major driver of demand for the company's services in Canada. It has also increased the difficulty of reliably estimating 2015 occupancy levels for the company's facilities. Likewise in Australia, persistently low metallurgical coal prices continue to negatively impact demand for accommodations in Civeo's primary markets. In addition to these operational factors, the company expects to be negatively impacted by the continuing weakness in the Canadian and Australian dollars, which are down 2% and 6%, respectively, over the past two months against the US dollar and down 8% and 9%, respectively, year-to-date in 2014.

Based on current information and expectations for demand, the company anticipates first quarter 2015 revenues will be in the range of $160 million to $175 million with EBITDA in the range of $45 million to $55 million. Management expects typical seasonality in 2015 in which second quarter earnings are sequentially lower with Canadian spring break up. Earnings in the second half of 2015 are expected to be sequentially weaker as certain contracts expire or are replaced with contracts with fewer committed rooms at lower rates, particularly in Australia, causing estimated occupancy and average daily rates to decline. For the full year 2015, revenues are expected to be in the range of $540 million to $600 million, with expected 2015 EBITDA in the range of $135 million to $160 million. In giving its initial 2015 guidance, the company also reiterates its fourth quarter 2014 guidance of $200 million to $210 million of revenues with an EBITDA margin of 32% to 34%.

Entering 2015, the company has approximately 35% to 40% of its lodge rooms contracted in Canada, down from over 75% contracted for 2014 at the beginning of 2014. The company expects Canadian occupancy of 44% to 47% with an average daily rate of approximately C$139 to C$145 for 2015. In Australia, the company has approximately 35% to 40% of its village rooms contracted, down from over 55% contracted for 2014 at the beginning of 2014. Civeo expects Australian occupancy of 55% to 57% with an average daily rate of A$88 to A$95 for 2015.

In reaction to softer markets, the company is pursuing additional revenue opportunities, adjusting its cost structure, limiting capital expenditures and suspending its quarterly dividend.

Management is actively seeking short term accommodations agreements to augment contracted room revenue and maintain market share and providing certain services to third parties for a fee. Partially offsetting the expected reduction in lodge revenues is Civeo's recently completed McClelland Lake Lodge. In 2015, the company expects to begin realizing the full-year benefits of this 1,997 room facility, which has the majority of its rooms under contract through the first quarter of 2017.

In addition, the company has reduced headcount in its Canadian and U.S. operations by 30% and 45%, respectively, from levels at the beginning of 2014. These efforts have included closing locations which were unprofitable at the expected low levels of occupancy, including the temporary closure of the Athabasca Lodge and the permanent closure of the Lakeside Lodge as well as the continued assessment of two U.S. locations. In terms of its manufacturing operations, the company closed its Australian manufacturing location due to projected limited demand for additional rooms over the next several years and is assessing the manufacturing capacity required to support the North American market. 2015 operating costs are expected to decrease by more than 35% in Canada and by more than 15% in Australia from 2014 levels. Management also expects 2015 SG&A expenses in Canada to be approximately 20% lower than 2014 and more than 10% lower in Australia year-over-year. Management will continue to focus on operating costs as clarity on market conditions improves.

The company expects 2015 capital expenditures to be in the range of $75 million to $85 million, a significant reduction compared to estimated 2014 capital expenditures of approximately $260 million to $280 million. The 2015 capital expenditures guidance excludes up to approximately $50 million of capital for unannounced and uncommitted projects, the spending for which will be contingent on securing customer contracts.

In addition, as a result of the company's current outlook and guidance described above, the company could be required to record impairment charges related to the carrying value of its assets and/or goodwill.

Civeo's board of directors, upon the unanimous recommendation of the value creation committee of the board, has unanimously determined to suspend the company's quarterly dividend in order to maintain the company's financial flexibility and best position Civeo for long-term success. Civeo's board regularly reviews the company's operations and capital allocation priorities. In light of the company's revised outlook and expected refinancing of its credit facility in connection with the previously announced migration, the company anticipates that excess cash flow and its existing cash balances may be used to reduce indebtedness in 2015. Until such time as industry conditions and the company's performance and outlook improve, Civeo's board of directors intends to take such actions with respect to the dividend and other forms of returning capital to shareholders as are prudent and necessary to assure the company's financial strength and competitive standing in each of its markets. 

The company continues to pursue its migration to Canada and, prior to year end, plans to file a Form S-4 related to the migration with the Securities and Exchange Commission. The anticipated timing of the migration remains the second or third quarter of 2015, subject to a number of conditions including, but not limited to, shareholder approval and the refinancing of the company's debt, as will be more fully described in the Form S-4.

President and Chief Executive Officer Bradley J. Dodson, stated, "As it became evident during the fourth quarter that capital spending budgets among the major oil companies were going to be cut, we began taking steps to reduce marketed room capacity, control costs and curtail discretionary capital expenditures. In Canada, we have since closed our Athabasca and Lakeside lodges and are evaluating similar actions in select other locations. We are limiting our discretionary capital spending in 2015 to those projects that are supported by customer contracts. From a revenue perspective, we are reassessing where in our regional markets we can profitably improve occupancy while maintaining the high safety and service levels for which our company is known. These efforts reflect our proactive approach to improving the company's structural efficiency, managing cash flow and maintaining our balance sheet."

 

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Mon, 12/29/2014 - 17:55 | 5602818 LawsofPhysics
LawsofPhysics's picture

Put those useless fucking paper-pushers to work actually recovering oil.  Problem solved.  What the fuck is this?  Another Eron-like "value-added" company?

Let me be clear, fuck em!

Mon, 12/29/2014 - 18:07 | 5602875 El Oregonian
El Oregonian's picture

You are witnessing the final act in "the systematic rape of the middle class" play.

Mon, 12/29/2014 - 18:18 | 5602902 kaiserhoff
kaiserhoff's picture

A tiny company I've never heard of, which provides "workplace accomadation", is having a bad year?

Enough of the hair-on-fire stuff already.

Mon, 12/29/2014 - 18:30 | 5602956 new game
new game's picture

last gasp of a true producing  based industry-earl, baby earl. earl has left the room(he will be back).

otherwise every industry is on a slow motion death kneel in the respect of robo replacement or cnc or equav digital brain rplcmnt for think'g. all parts sourced foreign with some final assmbly with 100/1 ration mex to job, ha facking ha...

Mon, 12/29/2014 - 18:47 | 5603045 Carpenter1
Carpenter1's picture

Profits in 2014 of 240 million doesn't sound like some little, meaningless company to me.
You're obviously an oil and gas employee or derive your income from that sector. At $54 oil, maybe it's time to admit there's a problem in the oil business.

Mon, 12/29/2014 - 18:58 | 5603084 kaiserhoff
kaiserhoff's picture

Had you ever heard of them?

They are not in the oil business.  They are a pricey housing shop.  Who couldn't do that?

Mon, 12/29/2014 - 18:52 | 5603056 Renewable Life
Renewable Life's picture

Hopefully JP Morgan gave them a 3.5 billion LOC that's maxed out, with fantasy yearly revenues of almost 900 million, that would be right on par!!!

Blow bitchez keep blowing!!

But wait until after Jan 20th, so we can see what this NEW GOP Congress has for balls:). (I suspect they have tiny little ones but let's see anyway)

Mon, 12/29/2014 - 18:09 | 5602883 Soul Glow
Soul Glow's picture

Yeah accounting fraud will have to be shown now that "future revenue" won't matter.

Mon, 12/29/2014 - 18:10 | 5602888 Rainman
Rainman's picture

They coulda saved themselfs if they hedged with some Tesla stawks .... hehehe

Mon, 12/29/2014 - 18:31 | 5602964 new game
new game's picture

or volts for company rides...

Mon, 12/29/2014 - 19:52 | 5603227 Bangin7GramRocks
Bangin7GramRocks's picture

Tough titty!

Mon, 12/29/2014 - 17:53 | 5602820 yogibear
yogibear's picture

Eventually bad oil bets blow up.

Mon, 12/29/2014 - 17:54 | 5602823 buzzsaw99
buzzsaw99's picture

Civeo has suspended the dividend and will use excess cash flow to cut debt in 2015...

and so it begins. take another bonus boyz.

Mon, 12/29/2014 - 18:06 | 5602867 magnumpk
magnumpk's picture

Excess cash flow to pay down debt - sounds like what consumers may do with lower gas prices.  Sounds deflationary.  I'm going to flip on some MSM channel and see if they agree...

Mon, 12/29/2014 - 18:11 | 5602890 buzzsaw99
buzzsaw99's picture

deflation's just another word

for nothing left to loot

nothing, that's all the maggots left me... [/janis]

Mon, 12/29/2014 - 18:13 | 5602891 angel_of_joy
angel_of_joy's picture

Can't wait for some oil patch guy to drop by and explain to us how that's only a "flesh wound", and that they still can make plenty of dough even with oil at 9.25 USD/brl

Mon, 12/29/2014 - 18:26 | 5602942 sun tzu
sun tzu's picture

In the end, somebody will be fucked. All that debt that was used to purchase the leases and capex had to be repaid along with interest. Making enough to pay the opex alone isn't going to be enough

Mon, 12/29/2014 - 18:47 | 5603039 DonutBoy
DonutBoy's picture

Are you in any doubt as to who will get fucked?  Profits are private, losses belong to taxpayers.  It's obvious - the oil industry is critical to national security, ergo, the losses must be absorbed by the public to save this industry that is too important to fall under critical capability (TIT-FUCC)

Mon, 12/29/2014 - 19:28 | 5603160 Jack Burton
Jack Burton's picture

See my post below! BAILOUTS! Bond Holders will be made whole. Who else but American tax payers can make them whole?

Mon, 12/29/2014 - 19:58 | 5603245 Sub MOA
Sub MOA's picture

Where oh where are the frack fucks cheering squad ...thats right making jokes on another thread where they're "safe" from fallout

 

Bottom line always was and always will be FRACKING is a SCHEME and now down it comes It's a miracle alright a miracle for thieves SUCKERS

Mon, 12/29/2014 - 19:25 | 5603155 Jack Burton
Jack Burton's picture

BINGO!  The tens of billions in Oil Patch Junk Bonds are fast proving to be junk in the real sense. We have had the yield chasers pile into Oil Patch junk bonds based of their research showing 90-110 dollars a barrel as far as the eye could see.

Listen, this stuff is now Bad Debt. The Cheer Leaders who hype Fracking never mention fracking is ine of the most costly oil extraction methods on earth. Only Tar Mining is more costly. The Cheer Leaders have come on ZH to claim Frackers were okay ar $80 a barrel, then they said $70 was fine, then $60 was profitable, and now we hear them say $50 is just fine. Even though we all know that the price quotes like these are market averages, NOT Shale Well Head prices. This prices are driven down by transport costs by truck and train. If market West Texas Crude or North Sea Crude is say as an example $70, Well-Head for Frackers maybe $55-$45 paid as the truck fill up.

All the usual chumps are stuck with Frackers Junk, and even Investment Grade Oil Patch bonds might be in danger by next year. So government is faced with more bailouts. $100 billion in free money to Bond Holders this Spring, by next Fall another $100+ billion.

When we called Fracking Ponzi, we meant it! Massive new money HAD to flow in every month to maintain production levels as wells run down rapidly. Leases are bought and rigs brought on site in a frenzy of drillings, all on borrowed money. Can't you see they were drilling based ONLY on the faith in $100 + oil prices from here to eternity. That is now over! Building the Ponzi on Junk bonds, now the bond holders will be exposed as the naked swimmers we expect to see when the tide rolls out.

Saudi is killing off the high cost oil producers. USA and CANADA! Russia is hurt, but Russia is not high cost or ponzi drilling. They have the large lakes of oil in formations that give it up for decades at a steady rate. Russia does not need to Frack.

Who gets fucked by Saudi. "America's Fracking Miracle." "Canada's Tar Sands Century" They are the ones getting fucked.

North Dakota was growing arrogant and fat, the easy big money jobs people bragged about, the growing economies fat on oil riches everyone bragged as AMerica's miracle. This all was based on $100 + oil for eternity. THEY WERE WRONG.

Mon, 12/29/2014 - 22:27 | 5603745 Wahooo
Wahooo's picture

Which of these companies has defaulted?

Mon, 12/29/2014 - 23:03 | 5603884 Jack Burton
Jack Burton's picture

Only one, in Australia. You do know that it takes time to go bankrupt. Oil prices have only just now passed the point of profitability. Do you want to ask me the same question in a years time? Please do. You do know how markets work, or not?

Tue, 12/30/2014 - 01:30 | 5604250 dreadnaught
dreadnaught's picture

pretty soon the fracking cheerleaders will be telling us that $10 a barrel is great with change leftover..

Mon, 12/29/2014 - 18:31 | 5602957 Id fight Gandhi
Id fight Gandhi's picture

I can give a second hand report of the spoon fed propaganda theyre feeding. Over the holiday I spoke with a college student graduating 2016 with petro nat gas engineering, hoping to land an internship this spring "somewhere." The school isn't worried, prices will shoot back up he tells me, his professors told him so.

I asked what he thought of the price drops and if he was up on any industry news about supply. Not. A. Clue.

Makes me wonder how much debt this guy is carrying, feel sorry for him. He did "what was best" taking the program and bam, the whole industry is getting gutted.

Mon, 12/29/2014 - 18:37 | 5603000 i_call_you_my_base
i_call_you_my_base's picture

"He did "what was best" taking the program and bam, the whole industry is getting gutted."

He can join the club called "everyone".

In any case, that's why no one is freaking out about it. It's just a "blip" and because it's oil it'll go back up. That's how everyone sees it, and it's probably a natural reaction. What people don't seem to understand though, is that if it is a contrivance, then there is an agenda, and if that agenda is to impair either Russia or the US gas sector, it'll have to stay down for a while to acheive either goal.

Mon, 12/29/2014 - 20:16 | 5603286 LooseLee
LooseLee's picture

CNBS & Bloomberg already had some retard on saying something like that...

Mon, 12/29/2014 - 17:55 | 5602824 jubber
jubber's picture

and ALL US Futures are rallying AH LOL

Mon, 12/29/2014 - 17:58 | 5602833 quasimodo
quasimodo's picture

Of course they are, WTF did you expect? The market to behave in a rational way on bad news?

 

Mon, 12/29/2014 - 18:01 | 5602852 Handful of Dust
Handful of Dust's picture

Take THAT, Putin !

 

How does THAT feel ?!

 

We know how to show that guy who's Boss.

Mon, 12/29/2014 - 18:12 | 5602887 McMolotov
McMolotov's picture

"Everything in the world is interdependent and once you try to punish someone, in the end you will cut off your nose to spite your face." —The Poot

I keep posting it, but I'm pretty sure the morons in DC aren't paying attention.

Mon, 12/29/2014 - 19:15 | 5603121 Woodrox
Woodrox's picture

so if they are not worried about this what are they really concerned about

 

Mon, 12/29/2014 - 21:35 | 5603562 lotsoffun
lotsoffun's picture

cancelled a wedding i am sure planned well in advance to play golf.  as if there weren't other courses.

he pays a lot of attention.  to what  i'm not sure. but something.

 

Mon, 12/29/2014 - 23:09 | 5603906 Jack Burton
Jack Burton's picture

Israeli farmers of specialty fruits and vegitables, are being smashed by sanctions on Russia and ruble collapse. Serious losses in their export trade, as Russia's prized the good quality fruits, nuts and other vegitables coming from the Israeli food industry. No more!

Tue, 12/30/2014 - 01:28 | 5604247 dreadnaught
dreadnaught's picture

HE is crying all the way to the bank...

Mon, 12/29/2014 - 17:56 | 5602825 Bunga Bunga
Bunga Bunga's picture

Self reinforcing downward cycle, bitchez.  I heard Colorado had a boom due to oil and gas drilling. That will turn into a bloodbath after layoffs starting there.

Mon, 12/29/2014 - 17:57 | 5602831 LawsofPhysics
LawsofPhysics's picture

Not at all.  But I do predict that the dope will get a lot cheaper.

Mon, 12/29/2014 - 19:15 | 5603127 ThroxxOfVron
ThroxxOfVron's picture

Decriminalize weed and the price will collapse to less than a quarter of present street...

Mon, 12/29/2014 - 18:10 | 5602871 quasimodo
quasimodo's picture

The CO boom bust back in early May of '82 would be a perfect example, left Grand Junction tits up overnight, literally from what I have read.

 

Here is one example of what happened.

http://www.centerwest.org/publications/oilshale/3engineering/6blacksunda...

Mon, 12/29/2014 - 18:55 | 5603070 Bunga Bunga
Bunga Bunga's picture

Thanks, great read.

Mon, 12/29/2014 - 18:32 | 5602972 sun tzu
sun tzu's picture

No worries. Social media will save everything. Web 2.0 is the new economic paradigm. Instead of producing tangible goods, we'll produce selfies and tweets.

Mon, 12/29/2014 - 18:48 | 5603055 847328_3527
847328_3527's picture

I just bid on two Tweets on Ebay; don't know if I'll win yet. I want them to decorate my Pet Rocks adn Cabbage Patch dolls.

Mon, 12/29/2014 - 17:56 | 5602827 goldhedge
goldhedge's picture

America Stronk.

Mon, 12/29/2014 - 17:59 | 5602836 sony1
sony1's picture

Wohoo:)

Mon, 12/29/2014 - 18:00 | 5602844 bnbdnb
bnbdnb's picture

One down...

Mon, 12/29/2014 - 18:05 | 5602869 847328_3527
847328_3527's picture

Hey, how about those Prius dealerships ?

Mon, 12/29/2014 - 22:26 | 5603736 Wahooo
Wahooo's picture

Too much smug.

Mon, 12/29/2014 - 18:08 | 5602877 Soul Glow
Soul Glow's picture

The great oil crisis has begun! 

Mon, 12/29/2014 - 18:19 | 5602916 Arius
Arius's picture

none is talking about derivatives ... reason being is only two parties aware of arrangements ... but soon will see, there is no way they have account for this one

Mon, 12/29/2014 - 19:22 | 5603145 ThroxxOfVron
ThroxxOfVron's picture

It is almost ALL hedged and backstopped -by the Taxpayers- via the FDIC.

kinda like these 'Folks": 

 

http://www.wsj.com/articles/fannie-med-implodes-1419812352

Wait -WHO are these people? Unh-huh: a bunch of Gunther-ites straight out of the Nebraska Education/Medical Establishment teamed up with Arts Center dilitantes and career Private-Public 'Venture Capital' "specialists" !

http://www.cooportunityhealth.com/governance/BoardofDirectors

Mon, 12/29/2014 - 18:14 | 5602900 kowalli
kowalli's picture

we cut some folks

I think this jobless guys can pay their credits in time, they just need to buy some assets

Mon, 12/29/2014 - 18:34 | 5602981 The Shape
The Shape's picture

So Canada pumped an extra 400k barrels in September?

http://peakoilbarrel.com/world-oil-production-september-numbers

Mon, 12/29/2014 - 18:52 | 5603065 Carpenter1
Carpenter1's picture

Producers have figured out what's going on and are all producing more than what they report, thus the price will continue to fall, making todays price the best they'll get for a long while.

They have every reason to overproduce, that's what I love about this crisis, the only way to make any money is to do what will surely make it far worse.

Mon, 12/29/2014 - 19:47 | 5603211 The Shape
The Shape's picture

US was up like 128k and Canada over 400k? I ain't buying that.

Strangely, it also accounts for the supply above the 900k glut estimate.

Mon, 12/29/2014 - 23:11 | 5603915 Jack Burton
Jack Burton's picture

Indeed! All prodcuers are pumping like mad, hoping volume will make up for losses on price. This, if it continues, will crash oil prices.

Mon, 12/29/2014 - 18:44 | 5603032 Hongcha
Hongcha's picture

Soooo grossed out for months on my gold miners and Gazprom ... might as well have a look at this other train wreck, for schadenfruedes's sake ...

Mon, 12/29/2014 - 18:44 | 5603033 kchrisc
kchrisc's picture

Will be purchased cheap by a Zionist "investment' firm in 3..2..

Blackrock?

The banksters need to repay us.

Mon, 12/29/2014 - 18:51 | 5603057 gatorengineer
gatorengineer's picture

And just think these earnings are with Mark to Unicorn accuonting..... Just think what it would look like under GAAP.

Mon, 12/29/2014 - 19:20 | 5603141 Chad_the_short_...
Chad_the_short_seller's picture

As excited as I get with any news like this(i am just DYING to short OAS and WLL again), before today's after hours news ........CVEO was a company worth less than a Billion dollars.

Mon, 12/29/2014 - 19:24 | 5603151 ThroxxOfVron
ThroxxOfVron's picture

Civeo looks an awful lot like a subcontracted logistics and support aka 'Company Store' outfit.

 

 

Mon, 12/29/2014 - 22:25 | 5603732 Wahooo
Wahooo's picture

Yep, this is nothing. It's a frggin' temporary housing builder. Guessing the balance sheet ia a bit out of whack as well. Of course the entire energy
complex will follow suit, because after all, this is ZH.

Mon, 12/29/2014 - 19:45 | 5603208 Schmuck Raker
Schmuck Raker's picture

Wait. What?! But, but, but Sucking Alpha just said:

http://seekingalpha.com/article/2781145-civeo-activist-involvement-and-upcoming-dividend-increase-to-close-excessive-discount?source=marketwatch

Mon, 12/29/2014 - 19:53 | 5603229 Chad_the_short_...
Chad_the_short_seller's picture

IRET and BNCC are next my friends. SHORT AT WILL!!!

Mon, 12/29/2014 - 20:11 | 5603270 29.5 hours
29.5 hours's picture

 

 

<<Civeo has suspended the dividend and will use excess cash flow to ...>>

I like that. The company is in a heap of financial trouble but it has excess cash flow! False alarm everyone.

 

 

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