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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from _________________________ to _________________________
Commission file number: 001-36246
Civeo Corporation
(Exact name of registrant as specified in its charter)
British Columbia, Canada 98-1253716
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
   
Three Allen Center, 333 Clay Street, Suite 4980,
77002
Houston, Texas
(Zip Code)
(Address of principal executive offices)  
(713) 510-2400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common Shares, no par value CVEO New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "accelerated filer," "large accelerated filer," "smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ Accelerated Filer
 ☒
Emerging Growth Company
 ☐
     
Non-Accelerated Filer ☐ Smaller Reporting Company
 ☒
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒

The Registrant had 170,582,021 common shares outstanding as of October 23, 2020.


CIVEO CORPORATION
INDEX
Page No.
Part I -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Financial Statements
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 
4
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019
5
Consolidated Balance Sheets – as of September 30, 2020 (unaudited) and December 31, 2019
6
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019
7
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 
8
Notes to Unaudited Consolidated Financial Statements
9
Cautionary Statement Regarding Forward-Looking Statements
20
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
Item 3.   Quantitative and Qualitative Disclosures About Market Risk
38
Item 4.   Controls and Procedures
38
Part II -- OTHER INFORMATION
Item 1.     Legal Proceedings
39
Item 1A.  Risk Factors
39
Item 6.     Exhibits
40
(a) Index of Exhibits
40
Signature Page
42

3

PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements

CIVEO CORPORATION
 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
 
Three Months Ended
September 30, 		Nine Months Ended
September 30,
  2020 2019 2020 2019
Revenues:        
Service and other $ 136,523  $ 140,349  $ 375,928  $ 353,147 
Rental 3,217  6,942  13,261  21,057 
Product 3,117  872  7,162  4,662 
  142,857  148,163  396,351  378,866 
Costs and expenses:
Service and other costs 92,147  93,642  267,051  243,945 
Rental costs 3,131  5,072  11,559  16,579 
Product costs 2,156  766  5,270  3,826 
Selling, general and administrative expenses 13,462  14,334  38,889  42,960 
Depreciation and amortization expense 24,820  31,196  72,527  92,974 
Impairment expense —  —  144,120  5,546 
Other operating expense 51  277  755  109 
135,767  145,287  540,171  405,939 
Operating income (loss) 7,090  2,876  (143,820) (27,073)
Interest expense (3,646) (7,315) (13,095) (20,670)
Loss on extinguishment of debt (383) —  (383) — 
Interest income —  17  20  66 
Other income 4,542  2,849  17,209  6,882 
Income (loss) before income taxes 7,603  (1,573) (140,069) (40,795)
Income tax (expense) benefit (180) 6,629  8,509  13,963 
Net income (loss) 7,423  5,056  (131,560) (26,832)
Less: Net income attributable to noncontrolling interest 434  60  914  60 
Net income (loss) attributable to Civeo Corporation 6,989  4,996  (132,474) (26,892)
Less: Dividends attributable to Class A preferred shares 472  464  1,411  1,384 
Net income (loss) attributable to Civeo common shareholders $ 6,517  $ 4,532  $ (133,885) $ (28,276)
Per Share Data (see Note 8)
Basic net income (loss) per share attributable to Civeo Corporation common shareholders $ 0.03  $ 0.02  $ (0.79) $ (0.17)
Diluted net income (loss) per share attributable to Civeo Corporation common shareholders $ 0.03  $ 0.02  $ (0.79) $ (0.17)
Weighted average number of common shares outstanding:
Basic 169,924  167,640  169,420  166,842 
Diluted 170,544  168,282  169,420  166,842 
The accompanying notes are an integral part of these financial statements.

4

CIVEO CORPORATION
 
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In Thousands)
 
Three Months Ended
September 30, 		Nine Months Ended
September 30,
  2020 2019 2020 2019
Net income (loss) $ 7,423  $ 5,056  $ (131,560) $ (26,832)
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment, net of zero taxes
11,131  (12,096) (8,025) (5,633)
Total other comprehensive income (loss), net of taxes 11,131  (12,096) (8,025) (5,633)
Comprehensive income (loss) 18,554  (7,040) (139,585) (32,465)
Less: Comprehensive income attributable to noncontrolling interest 462  60  928  60 
Comprehensive income (loss) attributable to Civeo Corporation
$ 18,092  $ (7,100) $ (140,513) $ (32,525)
The accompanying notes are an integral part of these financial statements.

5

CIVEO CORPORATION
 
CONSOLIDATED BALANCE SHEETS
(In Thousands, Excluding Share Amounts)
 
  September 30, 2020 December 31, 2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,938  $ 3,331 
Accounts receivable, net 92,754  99,493 
Inventories 5,775  5,877 
Prepaid expenses 9,369  7,247 
Other current assets 7,737  7,904 
Assets held for sale —  7,589 
Total current assets 122,573  131,441 
Property, plant and equipment, net 481,394  590,309 
Goodwill 8,086  110,173 
Other intangible assets, net 98,907  111,837 
Operating lease right-of-use assets 20,426  24,876 
Other noncurrent assets 1,550  1,276 
Total assets $ 732,936  $ 969,912 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 37,116  $ 36,971 
Accrued liabilities 22,229  21,755 
Income taxes 379  328 
Current portion of long-term debt 32,978  35,080 
Deferred revenue 7,801  7,165 
Other current liabilities 6,353  8,741 
Total current liabilities 106,856  110,040 
Long-term debt, less current maturities 236,876  321,792 
Deferred income taxes —  9,452 
Operating lease liabilities 18,035  21,231 
Other noncurrent liabilities 17,557  16,592 
Total liabilities 379,324  479,107 
Commitments and contingencies (Note 11)
Shareholders’ Equity:
Preferred shares (Class A Series 1, no par value; 50,000,000 shares authorized, 9,042, shares issued and outstanding, respectively; aggregate liquidation preference of $95,039 and $93,627 as of September 30, 2020 and December 31, 2019)
59,540  58,129 
Common shares (no par value; 550,000,000 shares authorized, 173,746,532 shares and 171,656,039 shares issued, respectively, and 170,582,021 shares and 169,556,403 shares outstanding, respectively)
—  — 
Additional paid-in capital 1,577,053  1,572,249 
Accumulated deficit (905,475) (771,590)
Common shares held in treasury at cost, 3,164,511 and 2,099,636 shares, respectively
(6,930) (5,472)
Accumulated other comprehensive loss (371,212) (363,173)
Total Civeo Corporation shareholders’ equity 352,976  490,143 
Noncontrolling interest 636  662 
Total shareholders’ equity 353,612  490,805 
Total liabilities and shareholders’ equity $ 732,936  $ 969,912 
The accompanying notes are an integral part of these financial statements.
6

CIVEO CORPORATION
 
UNAUDITED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
(In Thousands)
 
Attributable to Civeo
Preferred
Shares 		Common
Shares
Amount Par Value Additional
Paid-in
Capital 		Accumulated
Deficit 		Treasury
Shares 		Accumulated
Other
Comprehensive
Income (Loss) 		Noncontrolling
Interest 		Total
Shareholders’
Equity
Balance, June 30, 2019 $ 57,200  $ —  $ 1,567,162  $ (744,058) $ (5,472) $ (364,786) $ —  $ 510,046 
Net income (loss) —  —  —  4,996  —  —  60  5,056 
Currency translation adjustment —  —  —  —  —  (12,096) —  (12,096)
Dividends paid —  —  —  —  —  —  (60) (60)
Dividends attributable to Class A preferred shares 464  —  —  (464) —  —  —  — 
Share-based compensation —  —  2,572  —  —  —  —  2,572 
Balance, September 30, 2019 $ 57,664  $ —  $ 1,569,734  $ (739,526) $ (5,472) $ (376,882) $ —  $ 505,518 
Balance, June 30, 2020 $ 59,068  $ —  $ 1,575,788  $ (911,992) $ (6,930) $ (382,315) $ 624  $ 334,243 
Net income (loss) —  —  —  6,989  —  —  434  7,423 
Currency translation adjustment —  —  —  —  —  11,103  28  11,131 
Dividends paid —  —  —  —  —  —  (450) (450)
Dividends attributable to Class A preferred shares 472  —  —  (472) —  —  —  — 
Share-based compensation —  —  1,265  —  —  —  —  1,265 
Balance, September 30, 2020 $ 59,540  $ —  $ 1,577,053  $ (905,475) $ (6,930) $ (371,212) $ 636  $ 353,612 
Balance, December 31, 2018 $ 56,280  $ —  $ 1,562,133  $ (710,551) $ (1,189) $ (371,249) $ —  $ 535,424 
Net income (loss) —  —  —  (26,892) —  —  60  (26,832)
Currency translation adjustment —  —  —  —  —  (5,633) —  (5,633)
Dividends paid —  —  —  —  —  —  (60) (60)
Cumulative effect of implementation of ASU 2014-09
—  —  —  (699) —  —  —  (699)
Dividends attributable to Class A preferred shares 1,384  —  —  (1,384) —  —  —  — 
Share-based compensation —  —  7,601  —  (4,283) —  —  3,318 
Balance, September 30, 2019 $ 57,664  $ —  $ 1,569,734  $ (739,526) $ (5,472) $ (376,882) $ —  $ 505,518 
Balance, December 31, 2019 $ 58,129  $ —  $ 1,572,249  $ (771,590) $ (5,472) $ (363,173) $ 662  $ 490,805 
Net income (loss) —  —  —  (132,474) —  —  914  (131,560)
Currency translation adjustment —  —  —  —  —  (8,039) 14  (8,025)
Dividends paid —  —  —  —  —  —  (954) (954)
Dividends attributable to Class A preferred shares 1,411  —  —  (1,411) —  —  —  — 
Share-based compensation —  —  4,804  —  (1,458) —  —  3,346 
Balance, September 30, 2020 $ 59,540  $ —  $ 1,577,053  $ (905,475) $ (6,930) $ (371,212) $ 636  $ 353,612 
  Preferred
Shares (in
thousands) 		Common
Shares (in
thousands)
Balance, December 31, 2019 9,042  169,556 
Share-based compensation —  1,026 
Balance, September 30, 2020 9,042  170,582 
The accompanying notes are an integral part of these financial statements.
7

CIVEO CORPORATION
 
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 
Nine Months Ended
September 30,
  2020 2019
Cash flows from operating activities:    
Net loss $ (131,560) $ (26,832)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 72,527  92,974 
Impairment charges 144,120  5,546 
Loss on extinguishment of debt 383  — 
Deferred income tax benefit (8,941) (14,732)
Non-cash compensation charge 4,804  7,601 
Gains on disposals of assets (2,581) (4,095)
Provision (benefit) for loss on receivables, net of recoveries 45  (39)
Other, net (2,730) 2,530 
Changes in operating assets and liabilities:
Accounts receivable 5,355  (30,227)
Inventories 194  (1,175)
Accounts payable and accrued liabilities 1,247  4,958 
Taxes payable 51  345 
Other current and noncurrent assets and liabilities, net (2,239) (3,328)
Net cash flows provided by operating activities 80,675  33,526 
Cash flows from investing activities:
Capital expenditures (6,244) (25,517)
Payments related to acquisitions, net of cash acquired —  (16,439)
Proceeds from disposition of property, plant and equipment 3,336  5,482 
Other, net 4,619  1,762 
Net cash flows provided by (used in) investing activities 1,711  (34,712)
Cash flows from financing activities:
Revolving credit borrowings 324,611  340,494 
Revolving credit repayments (369,122) (310,946)
Term loan repayments (31,092) (26,085)
Debt issuance costs (2,583) (1,950)
Taxes paid on vested shares (1,458) (4,283)
Net cash flows used in financing activities (79,644) (2,770)
Effect of exchange rate changes on cash 865  (344)
Net change in cash and cash equivalents 3,607  (4,300)
Cash and cash equivalents, beginning of period 3,331  12,372 
Cash and cash equivalents, end of period $ 6,938  $ 8,072 
Non-cash financing activities:
Preferred dividends paid-in-kind $ 1,411  $ 1,384 
The accompanying notes are an integral part of these financial statements.

8
CIVEO CORPORATION
 
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS


1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 
Description of the Business
 
We are a hospitality company servicing the natural resources industry in Canada, Australia and the U.S. We provide a full suite of hospitality services for our guests, including lodging, food service, housekeeping and maintenance at accommodation facilities that we or our customers own. In many cases, we provide services that support the day-to-day operations of accommodation facilities, such as laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security and logistics. We also offer development activities for workforce accommodation facilities, including site selection, permitting, engineering and design, manufacturing management and site construction, along with providing hospitality services once the facility is constructed. We primarily operate in some of the world’s most active oil, metallurgical (met) coal and iron ore producing regions, and our customers include major and independent oil and gas companies, mining companies, engineering companies and oilfield and mining service companies. We operate in three principal reportable business segments – Canada, Australia and the U.S.
 
Basis of Presentation
 
Unless otherwise stated or the context otherwise indicates: (i) all references in these consolidated financial statements to “Civeo,” “us,” “our” or “we” refer to Civeo Corporation and its consolidated subsidiaries; and (ii) all references in this report to “dollars” or “$” are to U.S. dollars.
 
The accompanying unaudited consolidated financial statements of Civeo have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) pertaining to interim financial information. Certain information in footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) has been condensed or omitted pursuant to those rules and regulations. The unaudited financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which Civeo considers necessary for a fair presentation of the results of operations for the interim periods covered and for the financial condition of Civeo at the date of the interim balance sheet. Results for the interim periods are not necessarily indicative of results for the full year.
 
The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying consolidated financial statements.
 
The financial statements included in this report should be read in conjunction with our audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.

2.RECENT ACCOUNTING PRONOUNCEMENTS
 
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the FASB), which are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards or other guidance updates, which are not yet effective, will not have a material impact on our consolidated financial statements upon adoption. 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (ASU 2016-13). This new standard changes how companies measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 is effective for financial statements issued for reporting periods beginning after December 15, 2019 and interim periods within the reporting periods. We adopted ASU 2016-13 as of January 1, 2020. The adoption of this new standard did not have a material impact on our consolidated financial statements.

9
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)

3.REVENUE
 
The following table disaggregates our revenue by our three reportable segments: Canada, Australia and the U.S., and major categories for the periods indicated (in thousands):
Three Months Ended
September 30, 		Nine Months Ended
September 30,
  2020 2019 2020 2019
Canada        
Accommodation revenues $ 49,798  $ 79,939  $ 156,068  $ 203,774 
Mobile facility rental revenues 13,135  3,048  21,715  5,648 
Food service and other services revenues 8,852  8,084  26,336  25,507 
Manufacturing revenues —  —  —  1,014 
Total Canada revenues 71,785  91,071  204,119  235,943 
Australia
Accommodation revenues $ 39,470  $ 33,056  $ 106,988  $ 92,473 
Food service and other services revenues 25,215  14,687  63,881  14,687 
Total Australia revenues 64,685  47,743  170,869  107,160 
U.S.
Accommodation revenues $ 394  $ 1,655  $ 1,892  $ 11,354 
Mobile facility rental revenues 3,218  6,952  13,275  21,175 
Manufacturing revenues 2,772  714  6,159  3,116 
Food service and other services revenues 3  28  37  118 
Total U.S. revenues 6,387  9,349  21,363  35,763 
Total revenues $ 142,857  $ 148,163  $ 396,351  $ 378,866 
 
Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when our performance obligations are satisfied is not significant. Payment terms are generally within 30 days. We do not have significant financing components or significant payment terms.

As of September 30, 2020, for contracts that are greater than one year, the table below discloses the estimated revenues related to performance obligations that are unsatisfied (or partially unsatisfied) and when we expect to recognize the revenue (in thousands):
  For the years ending December 31,
  2020 2021 2022 Thereafter Total
Revenue expected to be recognized as of September 30, 2020 $ 33,002  $ 61,031  $ 29,120  $ 11,820  $ 134,973 

4.FAIR VALUE MEASUREMENTS
 
Our financial instruments consist of cash and cash equivalents, receivables, payables and debt instruments. We believe that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values.
 
As of September 30, 2020 and December 31, 2019, we believe the carrying value of our floating-rate debt outstanding under our term loans and revolving credit facilities approximates fair value because the terms include short-term interest rates and exclude penalties for prepayment. We estimated the fair value of our floating-rate term loan and revolving credit facilities using significant other observable inputs, representative of a Level 2 fair value measurement, including terms and credit spreads for these loans.
 
During the first quarter of 2020 and the second and fourth quarters of 2019, we wrote down certain long-lived assets to fair value. We also recorded goodwill impairment charges related to one of our reporting units during the first quarter of 2020 and one of our reporting units during the fourth quarter of 2019. Our estimates of fair value required us to use significant unobservable inputs, representative of Level 3 fair value measurements, including numerous assumptions with respect to future
10
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)

circumstances that might directly impact each of the relevant asset groups’ operations in the future and are therefore uncertain. We estimated the fair value when conducting the goodwill impairment and long-lived asset impairment tests primarily using an income approach. The discount rates used to value our reporting units for the interim goodwill impairment test, as well as the Canadian and U.S. segments long-lived asset impairment analysis ranged between 10.5% and 14.0%. These assumptions with respect to future circumstances included future cash flows, oil, met coal and natural gas prices, anticipated spending by our customers, the cost of capital, and industry and/or local market conditions. During the fourth quarter of 2019, our estimate of fair value of corporate office space in Canada and during the second quarter of 2019, our estimate of fair value of land in Australia, were based on appraisals from third parties. See Note 6 – Impairment Charges for further information.
 
During the third quarter of 2019, we acquired Action Industrial Catering (Action) and recorded the assets acquired and liabilities assumed at fair value. Determining the fair value of these assets and liabilities required the exercise of significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The cash flows employed in the valuation are based on our best estimates of future sales, earnings and cash flows after considering factors such as general market conditions, expected future customer orders, contracts with suppliers, labor costs, changes in working capital, long-term business plans and recent operating performance. See Note 7 – Acquisitions for further information.

5.DETAILS OF SELECTED BALANCE SHEET ACCOUNTS
 
Additional information regarding selected balance sheet accounts at September 30, 2020 and December 31, 2019 is presented below (in thousands):
 
  September 30, 2020 December 31, 2019
Accounts receivable, net:    
Trade $ 68,848  $ 76,370 
Unbilled revenue 21,819  23,041 
Other (1) 2,357  335 
Total accounts receivable 93,024  99,746 
Allowance for credit losses (270) (253)
Total accounts receivable, net $ 92,754  $ 99,493 

(1)As of September 30, 2020, Other accounts receivable includes a $2.4 million receivable related to the Canada Emergency Wage Subsidy (CEWS), a subsidy implemented by the Canadian government in response to the COVID-19 pandemic. Other income related to the CEWS during the three and nine months ended September 30, 2020 was $3.6 million and $9.7 million, respectively.
  September 30, 2020 December 31, 2019
Inventories:    
Finished goods and purchased products $ 4,538  $ 3,982 
Work in process 18  813 
Raw materials 1,219  1,082 
Total inventories $ 5,775  $ 5,877 

11
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)

  Estimated
Useful Life
(in years) 		September 30, 2020 December 31, 2019
Property, plant and equipment, net:          
Land       $ 47,049  $ 43,147 
Accommodations assets 3 — 15 1,651,178  1,696,425 
Buildings and leasehold improvements 7 — 20 33,714  26,108 
Machinery and equipment 4 — 15 12,110  12,060 
Office furniture and equipment 3 — 7 59,432  58,005 
Vehicles 3 — 5 14,711  14,604 
Construction in progress       5,551  4,286 
Total property, plant and equipment       1,823,745  1,854,635 
Accumulated depreciation       (1,342,351) (1,264,326)
Total property, plant and equipment, net       $ 481,394  $ 590,309 
 
During the second quarter of 2020, we reclassified $6.6 million of assets held for sale back into property, plant and equipment due to no longer meeting the accounting requirements of held for sale assets.

  September 30, 2020 December 31, 2019
Accrued liabilities:    
Accrued compensation $ 17,350  $ 17,169 
Accrued taxes, other than income taxes 3,113  3,152 
Other 1,766  1,434 
Total accrued liabilities $ 22,229  $ 21,755 
 
6.IMPAIRMENT CHARGES  
Quarter ended March 31, 2020. During the first quarter of 2020, we recorded impairment expense related to goodwill and long-lived assets.
The spread of the COVID-19 coronavirus (COVID-19) and the response thereto during the first quarter of 2020 negatively impacted the global economy. The resulting unprecedented decline in oil demand, coupled with disagreements between Saudi Arabia and Russia about production limits, resulted in a collapse of global oil prices in March 2020, thereby creating unprecedented downward pressure on stock prices in the energy industry, particularly small-cap companies with operations in the U.S. and Canada, such as Civeo. As a result, we experienced a sustained reduction of our share price during the first quarter of 2020. Our market capitalization implied an enterprise value which was significantly less than the sum of the estimated fair values of our reporting units, and we determined that an indicator of a goodwill impairment was present as of March 31, 2020. Accordingly, we performed an interim goodwill impairment test as of March 31, 2020, and the carrying amount of our Canadian reporting unit exceeded the reporting unit's fair value. Based on the results of the impairment test, we reduced the value of our goodwill in our Canadian reporting unit to zero and recognized impairment expense in the first quarter of 2020 of $93.6 million.
Furthermore, as a result of the decline in global oil prices and forecasts for a potentially protracted period of lower prices, as well as the goodwill impairment in our Canadian segment, we determined all asset groups within this segment had experienced a trigger that indicated that the carrying values might not be recoverable. Accordingly, we assessed the carrying value of each asset group to determine if it continued to be recoverable based on estimated future cash flows. Based on the assessment, the carrying values of certain asset groups were determined to not be fully recoverable, and we proceeded to compare the estimated fair value of these asset groups to their respective carrying values. As a result, certain asset groups were written down to their estimated fair values of $43.5 million and we recorded impairment expense of $38.1 million related to certain long-lived assets in our Canadian segment.
Also, as a result of the decline in global oil prices and forecasts for a potentially protracted period of lower prices, we reviewed all asset groups in our U.S. segment to determine if an indicator of impairment had occurred that would indicate that the carrying values of the asset groups in the segment might not be recoverable. We determined that certain asset groups within the segment had experienced an indicator of impairment, and thus we assessed the carrying values of our long-lived assets in
12
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
the U.S. to determine if they continued to be recoverable based on estimated future cash flows. Based on the assessment, the carrying values of certain of our U.S. asset groups were determined to not be recoverable, and we proceeded to compare the estimated fair values of the asset groups to their respective carrying values. Accordingly, these assets were written down to their estimated fair values of $12.5 million. We recorded impairment expense of $12.4 million during the first quarter of 2020 related to our U.S. segment.
Quarter ended June 30, 2019. During the second quarter of 2019, we identified indicators that certain long-lived assets in Australia may be impaired due to market developments, including the non-renewal of certain land development approval agreements. We assessed the carrying values of the related assets to determine if they continued to be recoverable based on estimated future cash flows. Based on the assessment, the carrying values were determined to not be fully recoverable, and we proceeded to compare the estimated fair value of the assets to their respective carrying values. Accordingly, the assets were written down to their estimated fair values of $0.5 million. As a result of the analysis described above, we recorded impairment expense of $4.5 million.

Additionally, during the second quarter of 2019, we identified a liability related to an asset retirement obligation (ARO) at one of our villages in Australia that should have been recorded in 2011. We determined that the error was not material to our previously issued financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, and therefore, corrected the error in the second quarter of 2019. Specifically, we recorded the following amounts in the second quarter 2019 unaudited consolidated statement of operations related to prior periods: (i) additional accretion expense related to the ARO of $0.9 million, (ii) additional depreciation and amortization expense of $0.5 million related to amortization of the related asset retirement cost and (iii) additional impairment expense related to the impairment of the asset retirement cost of $1.0 million offset by recognition of an ARO liability totaling $2.3 million as of June 30, 2019.

7.ACQUISITIONS
Action
On July 1, 2019, we acquired Action, a provider of catering and managed services to the mining industry in Western Australia. We funded the purchase price of $16.9 million in cash through a combination of cash on hand and borrowings under our revolving credit facility. Action's operations are reported as part of our Australia reporting business segment beginning on July 1, 2019, the date of acquisition.
This acquisition was accounted for in accordance with the acquisition method of accounting for business combinations, which required us to record the assets acquired and the liabilities assumed at their fair values at July 1, 2019. Our estimates of the fair value for such assets and liabilities required significant assumptions and judgment. Based on the final purchase price allocation, intangible assets acquired totaled $8.4 million and consisted primarily of customer contracts and a trade name. In addition, we recognized goodwill of $7.9 million.
Noralta
On April 2, 2018, we acquired Noralta Lodge Ltd. (Noralta). During the second quarter of 2020, $5.0 million in cash was released to us from escrow to cover certain agreed upon indemnification claims. As a result of this settlement, we recorded $4.7 million in Other income in the accompanying unaudited consolidated statements of operations for the nine months ended September 30, 2020.

13
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)

8.EARNINGS PER SHARE
 
We calculate basic and diluted earnings per share by applying the two-class method because we have participating securities in the form of Class A preferred shares. Participating securities are allocated a proportional share of net income determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities. We also apply the treasury stock method with respect to certain share-based awards in the calculation of diluted earnings per share, if dilutive.

The calculation of earnings per share attributable to Civeo common shareholders is presented below for the periods indicated (in thousands, except per share amounts):
Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
Numerator:
Net income (loss) attributable to Civeo common shareholders $ 6,517  $ 4,532  $ (133,885) $ (28,276)
Less: income allocated to participating securities (944) (653) —  — 
Basic net income (loss) attributable to Civeo Corporation common shareholders $ 5,573  $ 3,879  $ (133,885) $ (28,276)
Add: undistributed income attributable to participating securities 944  653  —  — 
Less: undistributed income reallocated to participating securities (942) (651) —  — 
Diluted net income (loss) attributable to Civeo Corporation common shareholders $ 5,575  $ 3,881  $ (133,885) $ (28,276)
Denominator:
Weighted average shares outstanding - basic 169,924  167,640  169,420  166,842 
Dilutive shares - share-based awards 620  642  —  — 
Weighted average shares outstanding - diluted 170,544  168,282  169,420  166,842 
Basic net income (loss) per share attributable to Civeo Corporation common shareholders (1) $ 0.03  $ 0.02  $ (0.79) $ (0.17)
Diluted net income (loss) per share attributable to Civeo Corporation common shareholders (1) $ 0.03  $ 0.02  $ (0.79) $ (0.17)
 
(1)Computations may reflect rounding adjustments.

For the three months ended September 30, 2020 and 2019, we excluded 2.4 million and 4.5 million share-based awards, respectively, from the computation of diluted earnings per share because their effect was anti-dilutive. When an entity has a net loss from continuing operations, it is prohibited from including potential common shares in the computation of diluted per share amounts. For the nine months ended September 30, 2020 and 2019, we excluded from the computation of diluted loss per share 4.9 million and 6.9 million share-based awards, respectively, since the effect would have been anti-dilutive. Additionally, for the three and nine months ended September 30, 2020 and 2019, we excluded from the computation the impact of converting the Preferred Shares into 28.8 million and 28.2 million common shares, respectively, since the effect would have been anti-dilutive.



14
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)

9. DEBT
 
As of September 30, 2020 and December 31, 2019, long-term debt consisted of the following (in thousands):
 
  September 30, 2020 December 31, 2019
Canadian term loan, which matures on May 30, 2023; 3.125% of aggregate principal repayable per quarter; weighted average interest rate of 4.0% for the nine month period ended September 30, 2020
$ 187,371  $ 224,963 
U.S. revolving credit facility, which matures on May 30, 2023, weighted average interest rate of 5.6% for the nine month period ended September 30, 2020
—  — 
Canadian revolving credit facility, which matures on May 30, 2023, weighted average interest rate of 4.2% for the nine month period ended September 30, 2020

55,478  134,117 
Australian revolving credit facility, which matures on May 30, 2023, weighted average interest rate of 3.6% for the nine month period ended September 30, 2020
29,697  — 
  272,546  359,080 
Less: Unamortized debt issuance costs 2,692  2,208 
Total debt 269,854  356,872 
Less: Current portion of long-term debt, including unamortized debt issuance costs, net 32,978  35,080 
Long-term debt, less current maturities $ 236,876  $ 321,792 
 
We did not have any capitalized interest to net against interest expense for the three and nine months ended September 30, 2020 or 2019.
 
Amended Credit Agreement
 
As of December 31, 2019, our Credit Agreement, as then amended, provided for: (i) a $263.5 million revolving credit facility scheduled to mature on November 30, 2021 for certain lenders, allocated as follows: (A) a $20.0 million senior secured revolving credit facility in favor of certain of our U.S. subsidiaries, as borrowers; (B) a $183.5 million senior secured revolving credit facility in favor of Civeo and certain of our Canadian subsidiaries, as borrowers; and (C) a $60.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower; and (ii) a $285.4 million term loan facility scheduled to mature on November 30, 2021 for certain lenders in favor of Civeo.

On September 3, 2020, the third amendment to the Credit Agreement (as so amended, the Amended Credit Agreement) became effective, which, among other things:

•Extended the maturity date by 18 months of the commitments and loans of each lender remaining a lender following the effectiveness of the Amended Credit Agreement to May 30, 2023. Certain lenders are not extending the maturity date of their commitments and loans; the loans of the non-extending lenders were paid in full primarily with borrowings under the facility, and their commitments terminated on the date the Amended Credit Agreement became effective.

•Increased the margin applicable to loans and the commitment fee payable on the commitments of the lenders. Prior to entering into the Amended Credit Agreement, (i) the margin applicable to Eurocurrency loans, BBSY rate loans and B/A loans ranged from 2.25% to 4.00%, (ii) the margin applicable to ABR loans, Canadian Prime rate loans and U.S. Base rate loans ranged from 1.25% to 3.00% and (iii) the commitment fee ranged from 0.51% to 0.90%, in each case increasing as the total leverage ratio of the parent borrower and its subsidiaries increased from less than 2.00 to 1.00 to greater than 4.00 to 1.00. Following entry into the Amended Credit Agreement, these ranges have increased to (i) 3.50% to 4.50%, (ii) 2.50% to 3.50% and (iii) 0.875% to 1.125%, respectively, in each case as the total leverage ratio increases from less than 2.50 to 1.00 to greater than 3.50 to 1.00.


15
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)

•Decreased (i) the U.S. revolving commitments from $20.0 million to $10.0 million, (ii) the maximum permitted amount of U.S. L/C exposure from $15.0 million to $10.0 million to match the reduction in the U.S. revolving commitments, (iii) the Canadian revolving commitments from $183.5 million to $122.3 million and (iv) the Australian revolving commitments from $60.0 million to $35.0 million.

We are required to maintain, if a qualified offering of indebtedness with gross proceeds in excess of $150 million has been consummated, a maximum leverage ratio of 4.00 to 1.00 and, if such qualified offering has not been consummated, a maximum leverage ratio not to exceed the ratios set forth in the following table:
Period Ended Maximum Leverage Ratio
September 30, 2020 3.75 : 1.00
December 31, 2020 and thereafter 3.50 : 1.00

U.S. dollar amounts outstanding under the facilities provided by the Amended Credit Agreement bear interest at a variable rate equal to the London Inter-Bank Offered Rate (LIBOR) plus a margin of 3.50% to 4.50%, or a base rate plus 2.50% to 3.50%, in each case based on a ratio of our total debt to consolidated EBITDA (as defined in the Amended Credit Agreement). Canadian dollar amounts outstanding bear interest at a variable rate equal to a B/A Discount Rate (as defined in the Amended Credit Agreement) based on the Canadian Dollar Offered Rate (CDOR) plus a margin of 3.50% to 4.50%, or a Canadian Prime rate plus a margin of 2.50% to 3.50%, in each case based on a ratio of our total debt to consolidated EBITDA. Australian dollar amounts outstanding under the Amended Credit Agreement bear interest at a variable rate equal to the Bank Bill Swap Bid Rate plus a margin of 3.50% to 4.50%, based on a ratio of our total debt to consolidated EBITDA. The future transitions from LIBOR and CDOR as interest rate benchmarks is addressed in the Amended Credit Agreement and at such time the transition from LIBOR or CDOR takes place, we will endeavor with the administrative agent to establish an alternate rate of interest to LIBOR or CDOR that gives due consideration to (1) the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time for the replacement of LIBOR and (2) any evolving or then existing convention for similar Canadian Dollar denominated syndicated credit facilities for the replacement of CDOR.
The Amended Credit Agreement contains customary affirmative and negative covenants that, among other things, limit or restrict: (i) indebtedness, liens and fundamental changes; (ii) asset sales; (iii) acquisitions of margin stock; (iv) specified acquisitions; (v) certain restrictive agreements; (vi) transactions with affiliates; and (vii) investments and other restricted payments, including dividends and other distributions. In addition, we must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.0 to 1.0 and our maximum leverage ratio, defined as the ratio of total debt to consolidated EBITDA, of no greater than 3.75 to 1.0 (as of September 30, 2020).  As noted above, the permitted maximum leverage ratio decreases to 3.5 to 1.0 beginning December 31, 2020.  Following a qualified offering of indebtedness with gross proceeds in excess of $150 million, we will be required to maintain a maximum senior secured ratio less than 2.50 to 1.0. Each of the factors considered in the calculations of these ratios are defined in the Amended Credit Agreement. EBITDA and consolidated interest, as defined, exclude goodwill and asset impairments, debt discount amortization, amortization of intangibles and other non-cash charges.  We were in compliance with our covenants as of September 30, 2020.
Borrowings under the Amended Credit Agreement are secured by a pledge of substantially all of our assets and the assets of our subsidiaries. The obligations under the Amended Credit Agreement are guaranteed by our significant subsidiaries. As of September 30, 2020, we had eight lenders that were parties to the Amended Credit Agreement, with total commitments (including both revolving commitments and term commitments) ranging from $22.4 million to $71.1 million. As of September 30, 2020, we had outstanding letters of credit of $0.3 million under the U.S. facility, $0.5 million under the Australian facility and $2.6 million under the Canadian facility. 

10.INCOME TAXES
Our operations are conducted through various subsidiaries in a number of countries throughout the world. We have provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned.
We operate in three jurisdictions, Canada, Australia and the U.S., where statutory tax rates range from 21% to 30%. Our effective tax rate will vary from period to period based on changes in earnings mix between these different jurisdictions. 
16
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)

We compute our quarterly taxes under the effective tax rate method by applying an anticipated annual effective rate to our year-to-date income, except for significant unusual or extraordinary transactions. Income taxes for any significant and unusual or extraordinary transactions are computed and recorded in the period in which the specific transaction occurs. As of September 30, 2020, Canada and the U.S. were considered loss jurisdictions for tax accounting purposes and were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. As of September 30, 2019, the U.S. was considered a loss jurisdiction for tax accounting purposes and was removed from the 2019 annual effective tax rate computation for purposes of computing the interim tax provision.
Our income tax expense for the three months ended September 30, 2020 totaled $0.2 million, or 2.4% of pretax loss, compared to a benefit of $6.6 million, or 421.4% of pretax income, for the three months ended September 30, 2019. For the three months ended September 30, 2020, we recorded a tax expense of $0.1 million related to foreign withholding and U.S. state income taxes. Additionally, the effective tax rate for the three months ended September 30, 2019 was impacted by a tax benefit of $3.0 million related to a reduction in the Alberta, Canada income tax rate, as well as a $2.1 million tax benefit related to the change in the valuation allowance in Australia resulting from the acquisition of Action. 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.

Our income tax benefit for the nine months ended September 30, 2020 totaled $8.5 million, or 6.1% of pretax loss, compared to a benefit of $14.0 million, or 34.2% of pretax loss, for the nine months ended September 30, 2019. Our effective tax rate for the nine months ended September 30, 2020 was impacted by considering Canada and the U.S. loss jurisdictions. Additionally, although Australia was not considered a loss jurisdiction for the nine months ended September 30, 2020, our effective tax rate was impacted by utilization of deferred tax assets and a release of the corresponding valuation allowance in Australia, resulting in no income tax expense for that jurisdiction. For the nine months ended September 30, 2020, we recorded a deferred tax benefit of $9.0 million, offset by a valuation allowance of $0.1 million, against the Canadian net deferred tax assets. Our effective tax rate for the nine months ended September 30, 2019 was impacted by a reduction in the Alberta, Canada income tax rate, as well as a change in the valuation allowance in Australia resulting from the acquisition of Action.

11.COMMITMENTS AND CONTINGENCIES
 
We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters, including warranty and product liability claims as a result of our products or operations. Although we can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on us, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. 

12.ACCUMULATED OTHER COMPREHENSIVE LOSS
 
Our accumulated other comprehensive loss increased $8.0 million from $363.2 million at December 31, 2019 to $371.2 million at September 30, 2020, as a result of foreign currency exchange rate fluctuations. Changes in other comprehensive loss during the nine months of 2020 were primarily driven by the Australian dollar increasing in value compared to the U.S. dollar, partially offset by the Canadian dollar decreasing in value compared to the U.S. dollar. Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets totaled approximately C$0.2 billion and A$0.3 billion, respectively, at September 30, 2020. 

17
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
13.GOODWILL

Changes in the carrying amount of goodwill from December 31, 2019 to September 30, 2020 are as follows (in thousands): 
  Canada Australia U.S. Total
Goodwill, net of $19.9 million accumulated impairment loss as of December 31, 2019
$ 102,238  $ 7,935  $ —  $ 110,173 
Foreign currency translation (8,632) 151  —  (8,481)
Goodwill impairment (1) (93,606) —  —  (93,606)
Goodwill, net of $113.5 million accumulated impairment loss as of September 30, 2020
$ —  $ 8,086  $ —  $ 8,086 

(1)See Note 6 – Impairment Charges for further information.

14.SHARE-BASED COMPENSATION
 
Certain key employees and non-employee directors participate in the Amended and Restated 2014 Equity Participation Plan of Civeo Corporation (the Civeo Plan). The Civeo Plan authorizes our Board of Directors and the Compensation Committee of our Board of Directors to approve grants of options, awards of restricted shares, performance awards, phantom share awards and dividend equivalents, awards of deferred shares, and share payments to our employees and non-employee directors. No more than 28.7 million Civeo common shares are authorized to be issued under the Civeo Plan.
 
Outstanding Awards
 
Restricted Share Awards / Restricted Share Units / Deferred Share Awards. Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the three months ended September 30, 2020 and 2019 totaled $0.7 million and $1.5 million, respectively. Compensation expense associated with restricted share awards, restricted share units and deferred share awards recognized in the nine months ended September 30, 2020 and 2019 totaled $2.7 million and $4.3 million, respectively. The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the three months ended September 30, 2020 and 2019 was less than $0.1 million. The total fair value of restricted share awards, restricted share units and deferred share awards that vested during the nine months ended September 30, 2020 and 2019 was $2.6 million and $4.0 million, respectively.
 
At September 30, 2020, unrecognized compensation cost related to restricted share awards, restricted share units and deferred share awards was $2.0 million, which is expected to be recognized over a weighted average period of 1.0 years.
 
Phantom Share Awards. On February 25, 2020, we granted 3,741,094 phantom share awards under the Civeo Plan, which vest in three equal annual installments beginning on February 25, 2021. We also granted 1,221,725 phantom share awards under the Canadian Long-Term Incentive Plan, which vest in three equal annual installments beginning on February 25, 2021.

During the three months ended September 30, 2020 and 2019, we recognized compensation expense associated with phantom shares totaling $0.5 million and $0.1 million, respectively. During the nine months ended September 30, 2020 and 2019, we recognized compensation expense associated with phantom shares totaling $1.2 million and $3.5 million, respectively. At September 30, 2020, unrecognized compensation cost related to phantom shares was $2.9 million, as remeasured at September 30, 2020, which is expected to be recognized over a weighted average period of 2.3 years.
 
Performance Awards. During the three months ended September 30, 2020 and 2019, we recognized compensation expense associated with performance awards totaling $0.6 million and $1.1 million, respectively. During the nine months ended September 30, 2020 and 2019, we recognized compensation expense associated with performance awards totaling $2.1 million and $3.3 million, respectively. The total fair value of performance share awards that vested during the three months ended September 30, 2020 and 2019 was zero. The total fair value of performance share awards that vested during the nine months ended September 30, 2020 and 2019 was $1.9 million and $10.1 million, respectively.
18
CIVEO CORPORATION
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)


At September 30, 2020, unrecognized compensation cost related to performance shares was $2.2 million, which is expected to be recognized over a weighted average period of 1.2 years. 

15.SEGMENT AND RELATED INFORMATION
 
In accordance with current accounting standards regarding disclosures about segments of an enterprise and related information, we have identified the following reportable segments: Canada, Australia and U.S., which represent our strategic focus on hospitality services and workforce accommodations.
 
Financial information by business segment for each of the three and nine months ended September 30, 2020 and 2019 is summarized in the following table (in thousands):
 
  Total
revenues 		Depreciation
and
amortization 		Operating
income
(loss) 		Capital
expenditures
 
Total assets
Three months ended September 30, 2020          
Canada $ 71,785  $ 13,266  $ 1,007  $ 362  $ 691,634 
Australia 64,685  10,739  9,890  1,825  266,591 
U.S. 6,387  747  (3,197) 84  27,017 
Corporate and eliminations —  68  (610) 126  (252,306)
Total $ 142,857  $ 24,820  $ 7,090  $ 2,397  $ 732,936 
Three months ended September 30, 2019
Canada $ 91,071  $ 18,219  $ 2,919  $ 2,851  $ 843,818 
Australia 47,743  9,576  4,662  675  279,386 
U.S. 9,349  1,611  (2,167) 576  51,376 
Corporate and eliminations —  1,790  (2,538) 207  (163,757)
Total $ 148,163  $ 31,196  $ 2,876  $ 4,309  $ 1,010,823 
Nine months ended September 30, 2020
Canada $ 204,119  $ 39,812  $ (142,343) $ 1,203  $ 691,634 
Australia 170,869  29,767  24,245  3,036  266,591 
United States 21,363  2,525  (19,954) 1,468  27,017 
Corporate and eliminations —  423  (5,768) 537  (252,306)
Total $ 396,351  $ 72,527  $ (143,820) $ 6,244  $ 732,936 
Nine months ended September 30, 2019
Canada $ 235,943  $ 50,574  $ (14,437) $ 19,294  $ 843,818 
Australia 107,160  29,401  (1,302) 2,508  279,386 
United States 35,763  7,713  (4,484) 2,870  51,376 
Corporate and eliminations —  5,286  (6,850) 845  (163,757)
Total $ 378,866  $ 92,974  $ (27,073) $ 25,517  $ 1,010,823 

19

Cautionary Statement Regarding Forward-Looking Statements
 
This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. The forward-looking statements can be identified by the use of forward-looking terminology including “may,” “expect,” “anticipate,” “estimate,” “continue,” “believe” or other similar words. The forward-looking statements in this report include, but are not limited to, the statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” relating to our expectations about the macroeconomic environment and industry conditions, including the impact of COVID-19 and the response thereto and the decline in the price of and demand for oil, as well as our expectations about capital expenditures in 2020 and beliefs with respect to liquidity needs, including our ability to remain in compliance with our financial covenants. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors. For a discussion of known material factors that could affect our results, please refer to "Risk Factors" included in Part II, Item 1A of this report, “Risk Factors,” “Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019 and our subsequent SEC filings. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may differ materially from those expected, estimated or projected. Our management believes these forward-looking statements are reasonable. However, you should not place undue reliance on these forward-looking statements, which are based only on our current expectations and are not guarantees of future performance. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any of them in light of new information, future events or otherwise, except to the extent required by applicable law.
 
In addition, in certain places in this quarterly report, we refer to reports published by third parties that purport to describe trends or developments in the energy industry. We do so for the convenience of our shareholders and in an effort to provide information available in the market that will assist our investors in a better understanding of the market environment in which we operate. However, we specifically disclaim any responsibility for the accuracy and completeness of such information and undertake no obligation to update such information.
 
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
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.
Overview and Macroeconomic Environment 
We provide hospitality services to the natural resources industry in Canada, Australia and the U.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. The majority of the demand for our services in our Canadian lodges and Australian villages is driven by on-going operations and maintenance of oil sands and mining facilities. In general, industry operating and maintenance 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 crude 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 Canada, Australia, the U.S. and other markets, including governmental measures introduced to help slow the spread or mitigate the impact of COVID-19.
Our business is predominantly located in northern Alberta, Canada, British Columbia, Canada, Queensland, Australia and Western Australia. We derive most of our business from natural resource companies who are developing and producing oil sands and met coal resources and, to a lesser extent, other hydrocarbon and mineral resources. Approximately 70% of our revenue is generated by our lodges and villages. 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-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.
20

Generally, our core oil sands and Australian mining customers are making multi-billion dollar investments to develop their prospects, which have estimated reserve lives ranging from ten years to in excess of 30 years. Consequently, these investments are dependent on those customers’ long-term views of commodity demand and prices.
The spread of COVID-19 and the response thereto during the first nine months of 2020 has negatively impacted the global economy. The actions taken to mitigate the spread of COVID-19 and the risk of infection have altered, and are expected to continue to alter, governmental and private-sector policies and behaviors in ways that have had a significant negative effect on oil consumption, such as government-imposed or voluntary social distancing and quarantining, reduced travel and remote work policies. Additionally, global oil prices dropped to historically low levels in March and April 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 as Saudi Arabia, Russia and the U.S. While in mid-April 2020, OPEC+ (the combination of historical OPEC members and other significant oil producers, such as Russia) announced potential production cuts of up to approximately 10 million barrels per day, oil prices have remained at depressed levels and prices are expected to remain at low levels for the remainder of 2020 and into 2021.
The economic disruption in 2020 caused by the decline in the price of and demand for oil has impacted the activity in the Canadian oil sands and we have seen a decrease in demand for rooms by our oil sands customers. A reduction in the occupancy at our Canadian oil sands lodges negatively impacted our business in the quarter ended September 30, 2020 and could continue to negatively impact our business if oil prices remain at the current lower levels. Due to lower oil prices and the economic disruption caused by COVID-19, we implemented certain cost containment initiatives, including salary and total compensation reductions of 20% for the Board and Chief Executive Officer for 2020 from March levels, headcount reduction in North America of approximately 25% in March through June 2020, and cutting expected 2020 capital spending by approximately 25%. 
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. In Canada, 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 recent actions by the Alberta provincial government to limit oil production from the province. 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 the U.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 accommodations assets and to improve take-away capacity for Canadian oil sands producers over the longer term. While these pipeline projects, including Kinder Morgan’s Trans Mountain Pipeline (TMX) and the Keystone XL Pipeline (KXL), 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 begun construction; however, the construction timeline continues to be delayed due to the lack of agreement between the Canadian federal government, which supports the pipeline projects, and the British Columbia provincial government. The Canadian federal government acquired Kinder Morgan’s Trans Mountain Pipeline in 2018, approved the expansion of the project and is currently working through the revised construction timeline. Regarding the KXL pipeline, the Alberta provincial government announced in April 2020 its intent to financially support the construction of the pipeline. The construction of this pipeline expansion is currently suspended due to the U.S. Supreme Court refusing to renew a water permit for the KXL pipeline in July 2020.
WCS prices in the third quarter of 2020 averaged $31.15 per barrel, and on September 30, 2020, the WCS price was $29.38 per barrel. The WCS Differential decreased from $15.40 per barrel at the end of the first quarter of 2020 to $10.84 per barrel at the end of the third quarter of 2020. As of October 23, 2020, the WTI price was $39.67 and the WCS price was $29.33, resulting in a WCS Differential of $10.34.  
The depressed price levels of both WTI and WCS are expected to materially impact exploration, development, maintenance and production spending and activity by Canadian operators and, therefore, demand for our hospitality services. For example, on March 23, 2020, the Fort Hills Energy LP project announced a reduction of activity from two trains to one
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train. Companies have significantly reduced spending year-to-date and announced further reductions to their spending forecasts for the remainder of the year. While some of our Canadian oil sands customers conducted maintenance projects in the third quarter, activity was negatively impacted by the current environment. Continued uncertainty, including about the impact of COVID-19, and commodity price volatility and regulatory complications are expected to cause our Canadian oil sands and pipeline customers to delay expansionary and maintenance spending and defer additional investments in their oil sands assets. Additionally, if oil prices do not improve, the resulting impact could continue to negatively affect the value of our long-lived assets.
British Columbia, Canada. Our Sitka Lodge supports the British Columbia LNG market and related pipeline projects. From a macroeconomic standpoint, global LNG imports continued to significantly increase in 2019, rising by 40 million tonnes and 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.
While Western Canada does not currently have any operational LNG export facilities, LNG Canada (LNGC), a joint venture between Shell Canada Energy, an affiliate of Royal Dutch Shell plc (40 percent), and affiliates of PETRONAS, 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 in Kitimat, British Columbia (Kitimat LNG Facility). As a result, British Columbia LNG activity and related pipeline projects have become a material driver of activity for our Sitka Lodge, as well as for our mobile fleet assets, which are contracted to serve several portions of the related pipeline construction activity. The actual timing of when revenue is realized from the CGL pipeline and Sitka Lodge contracts could be impacted by any delays in the construction of the Kitimat LNG Facility or the pipeline, including recent blockades that aim to delay pipeline construction. In late March 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 our Sitka Lodge during the second quarter of 2020. Occupancy at the Sitka Lodge returned to expected levels during July 2020 and has remained at expected levels thorough the third quarter of 2020.
Australia. In Australia, 82% of our rooms are located in the Bowen Basin and primarily serve met coal mines in that region. Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the levels of global steel production, which decreased by 3.2% during the first nine months of 2020 compared to the same period of 2019. As of October 23, 2020, met coal spot prices were $110 per metric tonne. Long-term demand for steel is expected to be driven by increased steel consumption per capita in developing economies, such as China and India, whose current consumption per capita is a fraction of developed countries. There is still a level of uncertainty for demand of iron ore and met coal. The impact on the demand for steel with the closure or curtailment of manufacturing in economies affected by COVID-19, which will only return to normal levels of consumption once jurisdictions lift quarantine requirements and manufacturing facilities are reopened, is also uncertain. However, a new round of stimulus in China and recovering steel production in other regions continues to support demand for raw materials particularly iron ore. We believe there is a high likelihood that many countries will use infrastructure spend as part of their economic recovery plan, which would have a positive impact on the demand for met coal and the spot price. To date, we have not seen an overall material decline in occupancy at our Australian villages resulting from COVID-19.
Activity in Western Australia is driven primarily by iron ore production, which is a key steel-making ingredient.  As of October 23, 2020, iron ore spot prices were $117.07 per metric tonne.
On July 1, 2019, we acquired Action Industrial Catering (Action), a provider of catering and managed services to the mining industry in Western Australia. Accordingly, we also have contracts in place for customer-owned villages in Western Australia which service primarily iron ore mines in addition to gold, lithium and nickel mines. We believe 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.
Met coal and iron ore prices to date have remained at levels that should support the current levels of occupancy in our Australia villages and the customer locations that we manage under Action. Accordingly, we plan to continue focusing on enhancing the quality of our operations, maintaining financial discipline, proactively managing our business as market conditions continue to evolve and integrating Action into our business.
U.S. Our U.S. business supports oil shale drilling and completion activity and is primarily tied to WTI oil prices in the U.S. shale formations in the Permian Basin, the Mid-Continent, the Bakken and the Rockies. The U.S. oil rig count and associated completion activity has been negatively impacted in the first nine months of 2020 due to the global oil price decline
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discussed above. Only 183 oil rigs were active at the end of the third quarter of 2020. The Permian Basin remains the most active U.S. unconventional play, representing 67% of the oil rigs in the U.S. market at the end of the third quarter of 2020. As of October 23, 2020, there were 211 active oil rigs in the U.S. (as measured by Bakerhughes.com). With the recent reduction in oil prices and a resulting reduction in spending by exploration and production (E&P) companies, we will be exiting the Bakken and Rockies markets for our mobile well site units. Those assets will either be sold or transported to our Texas and Oklahoma district locations. This process is underway and we expect it to be completed in a phased approach through 2020 and the first half of 2021. 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 the U.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 and met coal pricing trends are as follows:
 
  Average Price (1)
Quarter
ended 		WTI
Crude
(per bbl) 		WCS
Crude
(per bbl) 		Hard
Coking Coal
(Met Coal)
(per tonne)
Fourth Quarter through 10/23/2020 $ 40.13  $ 30.33  $ 125.16 
9/30/2020 40.90  31.15  113.30 
6/30/2020 27.95  19.73  120.27 
3/31/2020 45.38  27.92  156.17 
12/30/2019 56.85  37.94  141.39 
9/30/2019 56.40  43.88  160.25 
6/30/2019 59.89  47.39  204.78 
3/31/2019 54.87  44.49  203.30 
12/31/2018 59.32  25.66  223.02 
9/30/2018 69.61  41.58  188.46 
6/30/2018 67.97  49.93  189.41 
3/31/2018 62.89  37.09  228.82 
12/31/2017 55.28  38.65  202.33 
9/30/2017 48.16  37.72  187.89 

(1)Source: WTI crude prices are from U.S. Energy Information Administration (EIA), WCS crude prices are from Bloomberg and hard coking coal prices are from IHS Markit.

Foreign Currency Exchange Rates. Exchange rates between the U.S. dollar and each of the Canadian dollar and the Australian dollar influence our U.S. dollar reported financial results. Our business has historically derived the vast majority of its revenues and operating income in Canada and Australia. These revenues and profits/losses are translated into U.S. dollars for U.S. GAAP financial reporting purposes. The following tables summarize the fluctuations in the exchange rates between the U.S. dollar and each of the Canadian dollar and the Australian dollar:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2020 2019 Change Percentage 2020 2019 Change Percentage
Average Canadian dollar to U.S. dollar $0.751 $0.757 (0.01) (0.8)% $0.739 $0.752 ($0.01) (1.7)%
Average Australian dollar to U.S. dollar $0.716 $0.686 0.03 4.3% $0.677 $0.699 ($0.02) (3.1)%
As of
September 30, 2020 December 31, 2019 Change Percentage
Canadian dollar to U.S. dollar $0.750 $0.770 (0.02) (2.6)%
Australian dollar to U.S. dollar $0.716 $0.702 0.01 1.9%
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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 and iron ore and the resultant impact on the capital spending plans of our customers in order to plan our business activities. In April 2020, we revised downward our 2020 capital expenditure plans and we currently expect that our 2020 capital expenditures, exclusive of any expansionary spending, which is contingent on obtaining customer contracts, will total less than $15 million, compared to 2019 capital expenditures of $29.8 million. We may adjust our capital expenditure plans in the future as we continue to monitor the impact of COVID-19. See “Liquidity and Capital Resources” below for further discussion of 2020 capital expenditures.

Results of Operations 
Unless otherwise indicated, discussion of results for the three and nine months ended September 30, 2020, is based on a comparison to the corresponding period of 2019. 
Results of Operations – Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019
 
  Three Months Ended
September 30,
  2020 2019 Change
  ($ in thousands)
Revenues      
Canada $ 71,785  $ 91,071  $ (19,286)
Australia 64,685  47,743  16,942 
U.S. and other 6,387  9,349  (2,962)
Total revenues 142,857  148,163  (5,306)
Costs and expenses      
Cost of sales and services      
Canada 51,393  62,277  (10,884)
Australia 38,529  28,664  9,865 
U.S. and other 7,512  8,539  (1,027)
Total cost of sales and services 97,434  99,480  (2,046)
Selling, general and administrative expenses 13,462  14,334  (872)
Depreciation and amortization expense 24,820  31,196  (6,376)
Impairment expense —  —  — 
Other operating income 51  277  (226)
Total costs and expenses 135,767  145,287  (9,520)
Operating income 7,090  2,876  4,214 
Interest expense and income, net (4,029) (7,298) 3,269 
Other income 4,542  2,849  1,693 
Income (loss) before income taxes 7,603  (1,573) 9,176 
Income tax (expense) benefit (180) 6,629  (6,809)
Net income 7,423  5,056  2,367 
Less: Net income attributable to noncontrolling interest 434  60  374 
Net income attributable to Civeo Corporation 6,989  4,996  1,993 
Less: Dividends attributable to preferred shares 472  464  8 
Net income attributable to Civeo common shareholders $ 6,517  $ 4,532  $ 1,985 
 
We reported net income attributable to Civeo for the quarter ended September 30, 2020 of $6.5 million, or $0.03 per diluted share.
We reported net income attributable to Civeo for the quarter ended September 30, 2019 of $4.5 million, or $0.02 per diluted share. As further discussed below, net income included a gain on sale of assets related to the sale of a village in Australia and related $2.2 million release of an asset retirement obligation (ARO) liability assumed by the buyer.
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Revenues. Consolidated revenues decreased $5.3 million, or 4%, in the third quarter of 2020 compared to the third quarter of 2019. This decrease was primarily due to lower revenue in Canada resulting from lower occupancy at oil sands lodges related to the COVID-19 pandemic and lower oil prices. Additionally, lower activity levels in certain markets in the U.S. and a weaker Canadian dollar relative to the U.S. dollar in the third quarter of 2020 compared to the third quarter of 2019 contributed to decreased revenues. These items were partially offset by (i) higher revenues in Australia due to increased activity at the Action villages and increased occupancy at our Bowen Basin villages, (ii) higher revenue in Canada due to increased mobile camp activity from a pipeline project and an increase from food service activity, (iii) increased activity in our offshore rental business in the U.S. and (iv) a stronger Australian dollar relative to the U.S. dollar in the third quarter of 2020 compared to the third quarter of 2019. See the discussion of segment results of operations below for further information.
Cost of Sales and Services. Our consolidated cost of sales and services decreased $2.0 million, or 2%, in the third quarter of 2020 compared to the third quarter of 2019. This decrease was primarily due to lower cost of sales and services in Canada resulting from lower occupancy at oil sands lodges related to the COVID-19 pandemic and lower oil prices. Additionally, lower activity levels in certain markets in the U.S. and a weaker Canadian dollar relative to the U.S. dollar in the third quarter of 2020 compared to the third quarter of 2019 contributed to decreased cost of sales and services. These items were partially offset by increased cost of sales and services due to (i) increased activity at the Action villages and increased occupancy at our Bowen Basin villages in Australia, (ii) increased mobile camp activity and the implementation of enhanced COVID-19 measures in Canada, (iii) increased activity in our offshore rental business in the U.S. and (iv) a stronger Australian dollar relative to the U.S. dollar in the third quarter of 2020 compared to the third quarter of 2019. See the discussion of segment results of operations below for further information. 
Selling, General and Administrative Expenses. SG&A expense decreased $0.9 million, or 6%, in the third quarter of 2020 compared to the third quarter of 2019. This decrease was primarily due to reduced compensation as a result of workforce reductions, lower share-based compensation expense, lower professional fees and lower travel and entertainment expenses, partially offset by higher incentive compensation costs. The decrease in share-based compensation was due to a reduction in the amount of restricted share and performance share awards outstanding and the reduction in our stock price associated with phantom share awards during the third quarter of 2020 compared to the third quarter of 2019. 
Depreciation and Amortization Expense. Depreciation and amortization expense decreased $6.4 million, or 20%, in the third quarter of 2020 compared to the third quarter of 2019. The decrease was primarily due to (i) certain assets becoming fully depreciated during 2019, (ii) the extension of the remaining life of certain long-lived accommodation assets in Canada during the fourth quarter of 2019 and (iii) the impairment of certain long-lived assets in Canada and the U.S. during the first quarter of 2020. These items were partially offset by additional intangible amortization expense related to the acceleration of the Action trade name in Australia.
Operating Income. Consolidated operating income increased $4.2 million, or 147%, in the third quarter of 2020 compared to the third quarter of 2019, primarily due to lower depreciation and amortization expense, lower SG&A expense and increased activity levels in Australia, partially offset by decreased activity levels in Canada and U.S. markets.
 
Interest Expense and Income, net. Net interest expense decreased by $3.3 million, or 45%, in the third quarter of 2020 compared to the third quarter of 2019, primarily related to lower average debt levels and lower interest rates on term loan and revolving credit facility borrowings during 2020 compared to 2019, partially offset by increases from the 2020 write-off of debt issuance costs associated with the Amended Credit Agreement.

Other Income. Consolidated other income increased $1.7 million, or 59%, in the third quarter of 2020 compared to the third quarter of 2019, primarily due to $3.6 million of other income related to proceeds from the CEWS, partially offset by a lower gain on sale of assets in 2020 compared to 2019. The third quarter of 2019 included a gain on sale of assets related to the sale of a village in Australia and related $2.2 million release of an asset retirement obligation (ARO) liability assumed by the buyer.
 
Income Tax (Expense) Benefit. Our income tax expense for the three months ended September 30, 2020 totaled $0.2 million, or 2.4% of pretax income, compared to a income tax benefit of $6.6 million, or 421.4% of pretax loss, for the three months ended September 30, 2019. Our effective tax rate for the three months ended September 30, 2020 was impacted by tax expense of $0.1 million related to foreign withholding and U.S. state income taxes. Our effective tax rate for the three months ended September 30, 2019 was impacted by a tax benefit of $3.0 million related to a reduction in the Alberta, Canada income tax rate as well as a $2.1 million tax benefit related to the change in the valuation allowance in Australia resulting from the acquisition of Action. 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.
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Other Comprehensive Income (Loss). Other comprehensive income increased $23.2 million in the third quarter of 2020 compared to the third quarter of 2019, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar increased 2% in the third quarter of 2020 compared to a 1% decrease in the third quarter of 2019. The Australian dollar exchange rate compared to the U.S. dollar increased 4% in the third quarter of 2020 compared to a 4% decrease in the third quarter of 2019.

Segment Results of Operations – Canadian Segment
  Three Months Ended
September 30,
  2020 2019 Change
Revenues ($ in thousands)      
Accommodation revenue (1) $ 49,798  $ 79,939  $ (30,141)
Mobile facility rental revenue (2) 13,135  3,048  10,087 
Food service and other services revenue (3) 8,852  8,084  768 
Manufacturing revenue (4) —  —  — 
Total revenues $ 71,785  $ 91,071  $ (19,286)
Cost of sales and services ($ in thousands)      
Accommodation cost $ 32,490  $ 49,377  $ (16,887)
Mobile facility rental cost 8,557  2,059  6,498 
Food service and other services cost 7,595  7,319  276 
Manufacturing cost 164  150  14 
Indirect other costs 2,587  3,372  (785)
Total cost of sales and services $ 51,393  $ 62,277  $ (10,884)
Gross margin as a % of revenues 28.4  % 31.6  % (3.2) %
Average daily rate for lodges (5) $ 96  $ 91  $ 5 
Total billed rooms for lodges (6) 508,449  875,891  (367,442)
Average Canadian dollar to U.S. dollar $ 0.751  $ 0.757  $ (0.01)

(1)Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to mobile camps for the periods presented.
(3)Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented.
(4)Includes revenues related to modular construction and manufacturing services for the periods presented.
(5)Average daily rate is based on billed rooms and accommodation revenue.
(6)Billed rooms represent total billed days for the periods presented.

Our Canadian segment reported revenues in the third quarter of 2020 that were $19.3 million, or 21%, lower than the third quarter of 2019. The weakening of the average exchange rates for the Canadian dollar relative to the U.S. dollar by 1% in the third quarter of 2020 compared to the third quarter of 2019 resulted in a $0.8 million period-over-period decrease in revenues. Excluding the impact of the weaker Canadian exchange rates, the segment experienced a 21% decrease in revenues. This decrease was driven by lower occupancy at oil sands lodges, where billed rooms were down 42% year-over-year. This decrease was related to the COVID-19 pandemic and lower oil prices. Partially offsetting this was increased mobile camp activity from a pipeline project.

Our Canadian segment cost of sales and services decreased $10.9 million, or 17%, in the third quarter of 2020 compared to the third quarter of 2019. The weakening of the average exchange rates for the Canadian dollar relative to the U.S. dollar by 1% in the third quarter of 2020 compared to the third quarter of 2019 resulted in a $0.5 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Canadian exchange rates, the decreased cost of sales and services was driven by lower occupancy at our oil sands lodges. This decrease was related to the COVID-19 pandemic and lower oil prices. Additionally, lower costs resulted from reduced indirect other costs due to a continued focus on cost containment and
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operational efficiencies, partially offset by increased costs related to the implementation of enhanced measures during the COVID-19 pandemic and increased mobile camp activity.
 
Our Canadian segment gross margin as a percentage of revenues decreased from 31.6% in the third quarter of 2019 to 28.4% in the third quarter of 2020. This was primarily driven by increased costs related to the implementation of enhanced measures during the COVID-19 pandemic, as well as reduced operating efficiencies due to lower occupancy.

Segment Results of Operations – Australian Segment
  Three Months Ended
September 30,
  2020 2019 Change
Revenues ($ in thousands)
Accommodation revenue (1) $ 39,470  $ 33,056  $ 6,414 
Food service and other services revenue (2) 25,215  $ 14,687  $ 10,528 
Total revenues $ 64,685  $ 47,743  $ 16,942 
Cost of sales ($ in thousands)
Accommodation cost $ 16,401  $ 14,954  $ 1,447 
Food service and other services cost 21,161  12,807  8,354 
Indirect other cost 967  903  64 
Total cost of sales and services $ 38,529  $ 28,664  $ 9,865 
Gross margin as a % of revenues 40.4  % 40.0  % 0.5  %
Average daily rate for villages (3) $ 77  $ 73  $ 4 
Total billed rooms for villages (4) 513,587  454,859  58,728 
Australian dollar to U.S. dollar $ 0.716  $ 0.686  $ 0.03 

(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 the periods presented.

Our Australian segment reported revenues in the third quarter of 2020 that were $16.9 million, or 35%, higher than the third quarter of 2019. The strengthening of the average exchange rates for Australian dollars relative to the U.S. dollar by 4% in the third quarter of 2020 compared to the third quarter of 2019 resulted in a $2.8 million period-over-period increase in revenues and a $4 increase in the average daily rate. Excluding the impact of the stronger Australian exchange rates, the Australian segment experienced a 30% increase in revenues largely due to increased activity at the Action villages and increased occupancy at our Bowen Basin villages.
 
Our Australian segment cost of sales increased $9.9 million, or 34%, in the third quarter of 2020 compared to the third quarter of 2019. The increase was largely driven by increased activity at the Action villages, increased occupancy at our Bowen Basin villages and the strengthening of the Australian dollar.

Our Australian segment gross margin as a percentage of revenues increased to 40.4% in the third quarter of 2020 from 40.0% in the third quarter of 2019. This was primarily driven by improved margins at our Bowen Basin villages as a result of increased occupancy.

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Segment Results of Operations – U.S. Segment
  Three Months Ended
September 30,
  2020 2019 Change
Revenues ($ in thousands) $ 6,387  $ 9,349  $ (2,962)
Cost of sales ($ in thousands) $ 7,512  $ 8,539  $ (1,027)
Gross margin as a % of revenues (17.6) % 8.7  % (26.3) %
 
Our U.S. segment reported revenues in the third quarter of 2020 that were $3.0 million, or 32%, lower than the third quarter of 2019. This was primarily due to reduced occupancy at our West Permian and Killdeer lodges and reduced U.S. drilling activity affecting our wellsite business. These decreases were partially offset by increased activity in our offshore rental business, as two fabrication projects were completed in the third quarter.
 
Our U.S. segment cost of sales decreased $1.0 million, or 12%, in the third quarter of 2020 compared to the third quarter of 2019. The decrease was driven by reduced occupancy at our West Permian and Killdeer lodges and reduced U.S. drilling activity affecting our wellsite business. These decreases were partially offset by increased activity in our offshore rental business.

Our U.S. segment gross margin as a percentage of revenues decreased from 8.7% in the third quarter of 2019 to (17.6)% in the third quarter of 2020 primarily due to reduced activity in most areas of the business and reduced operating efficiencies at lower activity levels.


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Results of Operations – Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
 
Nine Months Ended
September 30,
2020 2019 Change
($ in thousands)
Revenues
Canada $ 204,119  $ 235,943  $ (31,824)
Australia 170,869  107,160  63,709 
U.S. and other 21,363  35,763  (14,400)
Total revenues 396,351  378,866  17,485 
Costs and expenses
Cost of sales and services
Canada 158,130  176,200  (18,070)
Australia 102,995  59,718  43,277 
U.S. and other 22,755  28,432  (5,677)
Total cost of sales and services 283,880  264,350  19,530 
Selling, general and administrative expenses 38,889  42,960  (4,071)
Depreciation and amortization expense 72,527  92,974  (20,447)
Impairment expense 144,120  5,546  138,574 
Other operating expense (income) 755  109  646 
Total costs and expenses 540,171  405,939  134,232 
Operating loss (143,820) (27,073) (116,747)
Interest expense and income, net (13,458) (20,604) 7,146 
Other income 17,209  6,882  10,327 
Loss before income taxes (140,069) (40,795) (99,274)
Income tax benefit 8,509  13,963  (5,454)
Net loss (131,560) (26,832) (104,728)
Less: Net income attributable to noncontrolling interest 914  60  854 
Net loss attributable to Civeo Corporation (132,474) (26,892) (105,582)
Less: Dividends attributable to preferred shares 1,411  1,384  27 
Net loss attributable to Civeo common shareholders $ (133,885) $ (28,276) $ (105,609)
 
We reported net loss attributable to Civeo for the nine months ended September 30, 2020 of $133.9 million, or $0.79 per diluted share. As further discussed below, net loss included (i) a $93.6 million pre-tax loss ($93.6 million after-tax, or $0.55 per diluted share) resulting from the impairment of goodwill in our Canadian reporting unit included in Impairment expense, (ii) a $38.1 million pre-tax loss ($38.1 million after-tax, or $0.22 per diluted share) resulting from the impairment of long-lived assets in our Canadian reporting unit included in Impairment expense and (iii) a $12.4 million pre-tax loss ($12.4 million after-tax, or $0.07 per diluted share) resulting from the impairment of long-lived assets in our U.S. reporting unit included in Impairment expense. Net loss was partially offset by $4.7 million ($4.7 million after-tax, or $0.03 per diluted share) of income associated with the settlement of a representations and warranties claim related to the Noralta acquisition included in Other income.
We reported net loss attributable to Civeo for the nine months ended September 30, 2019 of $28.3 million, or $0.17 per diluted share. As further discussed below, net loss included (i) a $5.5 million pre-tax loss ($5.5 million after-tax, or $0.03 per diluted share) resulting from the impairment of fixed assets included in Impairment expense and (ii) a gain on sale of assets related to the sale of a village in Australia and related $2.2 million release of an ARO liability assumed by the buyer.
Revenues. Consolidated revenues increased $17.5 million, or 5%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. This increase was primarily due to higher revenues in Australia due to the Action acquisition completed on July 1, 2019, increased occupancy at our Bowen Basin villages and higher mobile camp revenues in Canada related to a pipeline project. These items were partially offset by lower revenue from reduced occupancy at our north oil sands lodges in Canada resulting from the COVID-19 pandemic and lower oil prices. Additionally, lower activity levels in certain markets in the U.S. and weaker Canadian and Australian dollars relative to the U.S. dollar in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 also offset the increased revenues. See the discussion of segment results of operations below for further information.
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Cost of Sales and Services. Our consolidated cost of sales and services increased $19.5 million, or 7%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to the Action acquisition and increased occupancy at our Bowen Basin villages in Australia and higher cost of sales and services in Canada due to increased mobile camp activity from a pipeline project. These items were partially offset by decreased cost of sales and services due to reduced occupancy at our north oil sands lodges in Canada resulting from the COVID-19 pandemic and lower oil prices. Additionally, lower activity levels in certain markets in the U.S. and weaker Canadian and Australian dollars relative to the U.S. dollar in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 offset the increased cost of sales and services. See the discussion of segment results of operations below for further information. 
Selling, General and Administrative Expenses. SG&A expense decreased $4.1 million, or 9%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. This decrease was primarily due to lower share-based compensation expense and lower travel and entertainment expenses, partially offset by higher incentive compensation costs. The decrease in share-based compensation was due to a reduction in the amount of phantom share awards outstanding and the reduction in our stock price during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.
Depreciation and Amortization Expense. Depreciation and amortization expense decreased $20.4 million, or 22%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The decrease was primarily due to (i) certain assets and intangibles becoming fully depreciated during 2019, (ii) the extension of the remaining life of certain long-lived accommodation assets in Canada during the fourth quarter of 2019, (iii) the impairment of certain long-lived assets in Canada and the U.S. during the first quarter of 2020 and (iv) weaker Canadian and Australian dollars relative to the U.S. dollar in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. These items were partially offset by additional depreciation and intangible amortization expense related to our acquisition in 2019.
Impairment Expense. Impairment expense of $144.1 million in the nine months ended September 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 our U.S. reporting unit.

Impairment expense of $5.5 million in the nine months ended September 30, 2019 was associated with long-lived assets in our Australian segment. This includes $1.0 million of impairment expense related to an error corrected in the second quarter 2019. We identified a liability related to an ARO at one of our villages in Australia that should have been recorded in 2011. We determined that the error was not material to our previously issued financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, and therefore, corrected the error in the second quarter of 2019. Specifically, we recorded the following amounts in our second quarter 2019 unaudited consolidated statements of operations related to prior periods: (i) additional accretion expense related to the ARO of $0.9 million, (ii) additional depreciation and amortization expense of $0.5 million related to amortization of the asset retirement cost and (iii) additional impairment expense related to the impairment of the asset retirement cost of $1.0 million offset by recognition of an ARO liability totaling $2.3 million as of June 30, 2019.

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 increased $116.7 million, or 431%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to impairments of goodwill and long-lived assets, partially offset by increased activity levels in Australia, as well as lower depreciation and amortization expense.
 
Interest Expense and Income, net. Net interest expense decreased by $7.1 million, or 35%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily related to lower average debt levels and lower interest rates on term loan and revolving credit facility borrowings during 2020 compared to 2019.

Other Income. Consolidated other income increased $10.3 million, or 150%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to $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
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related to the Noralta acquisition, partially offset by a lower gain on sale of assets in 2020 compared to 2019. The nine months ended September 30, 2019 included $2.6 million of other income related to proceeds from an insurance claim associated with the closure of a lodge in 2018 for maintenance-related operational issues and a gain on sale of assets related to the sale of a village in Australia and related $2.2 million release of an ARO liability assumed by the buyer.
 
Income Tax Benefit. Our income tax benefit for the nine months ended September 30, 2020 totaled $8.5 million, or 6.1% of pretax loss, compared to an income tax benefit of $14.0 million, or 34.2% of pretax loss, for the nine months ended September 30, 2019. For the nine months ended September 30, 2020, Canada and the U.S. were considered loss jurisdictions for tax accounting purposes and were not included in the annual effective tax rate computation for purposes of computing the interim tax provision. Although Australia was not considered a loss jurisdiction for the nine months ended September 30, 2020, our effective tax rate was impacted by utilization of deferred tax assets and a release of the corresponding valuation allowance in Australia, resulting in no income tax expense for that jurisdiction. Our effective tax rate for the nine months ended September 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. For the nine months ended September 30, 2019, the U.S. was considered a loss jurisdiction. Additionally, the effective tax rate for the nine months ended September 30, 2019 was impacted by a tax benefit of $3.0 million related to a reduction in the Alberta, Canada income tax rate, as well as a $2.1 million tax benefit related to the change in the valuation allowance in Australia resulting from the acquisition of Action.

Other Comprehensive Income (Loss). Other comprehensive loss increased $2.4 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar decreased 3% in the nine months ended September 30, 2020 compared to a 3% increase in the nine months ended September 30, 2019. The Australian dollar exchange rate compared to the U.S. dollar increased 2% in the nine months ended September 30, 2020 compared to a 4% decrease in the nine months ended September 30, 2019.

Segment Results of Operations – Canadian Segment
 
  Nine Months Ended
September 30,
  2020 2019 Change
Revenues ($ in thousands)      
Accommodation revenue (1) $ 156,068  $ 203,774  $ (47,706)
Mobile facility rental revenue (2) 21,715  5,648  16,067 
Food service and other services revenue (3) 26,336  25,507  829 
Manufacturing revenue (4) —  1,014  (1,014)
Total revenues $ 204,119  $ 235,943  $ (31,824)
Cost of sales and services ($ in thousands)      
Accommodation cost $ 109,143  $ 137,140  $ (27,997)
Mobile facility rental cost 17,099  4,735  12,364 
Food service and other services cost 23,773  23,620  153 
Manufacturing cost 461  1,007  (546)
Indirect other cost 7,654  9,698  (2,044)
Total cost of sales and services $ 158,130  $ 176,200  $ (18,070)
Gross margin as a % of revenues 22.5  % 25.3  % (2.8) %
Average daily rate for lodges (5) $ 95  $ 91  $ 4 
Total billed rooms for lodges (6) 1,626,668  2,241,510  (614,842)
Average Canadian dollar to U.S. dollar $ 0.739  $ 0.752  $ (0.01)

(1)Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented.
(2)Includes revenues related to mobile camps for the periods presented.
(3)Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented.
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(4)Includes revenues related to modular construction and manufacturing services for the periods presented.
(5)Average daily rate is based on billed rooms and accommodation revenue.
(6)Billed rooms represent total billed days for the periods presented.

Our Canadian segment reported revenues in the nine months ended September 30, 2020 that were $31.8 million, or 13%, lower than the nine months ended September 30, 2019. The weakening of the average exchange rates for the Canadian dollar relative to the U.S. dollar by 2% in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 resulted in a $3.4 million period-over-period decrease in revenues. Excluding the impact of the weaker Canadian exchange rates, the segment experienced a 12% decrease in revenues. This decrease was driven by reduced occupancy at our lodges in the oil sands region related to lower oil prices and the COVID-19 pandemic. Partially offsetting these items, revenue was favorably impacted by increased mobile camp activity from a pipeline project.

Our Canadian segment cost of sales and services decreased $18.1 million, or 10%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The weakening of the average exchange rates for the Canadian dollar relative to the U.S. dollar by 2% in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 resulted in a $2.7 million period-over-period decrease in cost of sales and services. Excluding the impact of the weaker Canadian exchange rates, the decreased cost of sales and services was driven by reduced occupancy at our lodges in the north oil sands region and reduced indirect other costs from a continued focus on cost containment and operational efficiencies. These decreases were partially offset by increased mobile camp activity from a pipeline project and increased costs related to the implementation of enhanced measures during the COVID-19 pandemic.

Our Canadian segment gross margin as a percentage of revenues decreased from 25.3% in the nine months ended September 30, 2019 to 22.5% in the nine months ended September 30, 2020. This was primarily driven by increased costs related to the implementation of enhanced measures during the COVID-19 pandemic, as well as reduced operating efficiencies due to lower occupancy.

Segment Results of Operations – Australian Segment
  Nine Months Ended
September 30,
  2020 2019 Change
Revenues ($ in thousands)
Accommodation revenue (1) $ 106,988  $ 92,473  $ 14,515 
Food service and other services revenue (2) 63,881  14,687  49,194 
Total revenues $ 170,869  $ 107,160  $ 63,709 
Cost of sales ($ in thousands)
Accommodation cost $ 46,665  $ 44,816  $ 1,849 
Food service and other services cost 53,627  12,807  40,820 
Indirect other cost 2,703  2,095  608 
Total cost of sales and services $ 102,995  $ 59,718  $ 43,277 
Gross margin as a % of revenues 39.7  % 44.3  % (4.5) %
Average daily rate for villages (3) $ 72  $ 74  $ (2)
Total billed rooms for villages (4) 1,487,819  1,253,856  233,963 
Australian dollar to U.S. dollar $ 0.677  $ 0.699  $ (0.02)

(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 the periods presented.

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Our Australian segment reported revenues in the nine months ended September 30, 2020 that were $63.7 million, or 59%, higher than the nine months ended September 30, 2019. Action contributed $63.9 million in revenues in the nine months ended September 30, 2020. The weakening of the average exchange rates for Australian dollars relative to the U.S. dollar by 3% in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 resulted in a $2.2 million period-over-period decrease in revenues and a $2 reduction in the average daily rate. Excluding the impact of the weaker Australian exchange rates, the Australian segment experienced a 64% increase in revenues primarily due to the Action acquisition. In addition, increased activity at our Bowen Basin villages was partially offset by decreased activity at our Western Australia villages.
 
Our Australian segment cost of sales increased $43.3 million, or 72%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The increase was primarily driven by the Action acquisition. Increases related to increased activity at our Bowen Basin villages were partially offset by decreased activity at our Western Australia villages and the weakening of the Australian dollar.
 
Our Australian segment gross margin as a percentage of revenues decreased to 39.7% in the nine months ended September 30, 2020 from 44.3% in the nine months ended September 30, 2019. This was primarily driven by Action, which has a service-only business model and therefore results in lower overall gross margins than the accommodation business, partially offset by improved margins at our Bowen Basin villages as a result of increased occupancy.

Segment Results of Operations – U.S. Segment
  Nine Months Ended
September 30,
  2020 2019 Change
Revenues ($ in thousands) $ 21,363  $ 35,763  $ (14,400)
Cost of sales ($ in thousands) $ 22,755  $ 28,432  $ (5,677)
Gross margin as a % of revenues (6.5) % 20.5  % (27.0) %
 
Our U.S. segment reported revenues in the nine months ended September 30, 2020 that were $14.4 million, or 40%, lower than the nine months ended September 30, 2019. This was primarily due to reduced occupancy at our West Permian, Killdeer and Acadian Acres lodges, reduced U.S. drilling activity in the Bakken, Rockies, Mid-Continent and West Permian markets affecting our wellsite business, partially offset by increased activity in our offshore rental business, as there were a greater number of large fabrication jobs completed in the period.
 
Our U.S. segment cost of sales decreased $5.7 million, or 20%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The decrease was driven by reduced occupancy at our West Permian, Killdeer and Acadian Acres lodges, reduced U.S. drilling activity in the Bakken, Rockies, Mid-Continent and West Permian markets affecting our wellsite business, partially offset by increased activity in our offshore rental business, as there were a greater number of large fabrication jobs completed in the period.

Our U.S. segment gross margin as a percentage of revenues decreased from 20.5% in the nine months ended September 30, 2019 to (6.5)% in the nine months ended September 30, 2020 primarily due to reduced activity at our lodges and wellsite markets and reduced operating efficiencies at lower activity levels.

Liquidity and Capital Resources

In September 2020, we entered into an amendment to our Credit Agreement, which reduced total lender commitments by $96.2 million. For additional information regarding the Amended Credit Agreement, see "Amended Credit Agreement" below.

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, fund strategic business acquisitions and pay dividends. Historically, our primary sources of funds have been available cash, cash flow from operations, borrowings under our Amended Credit
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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, 2020 and December 31, 2019 (in thousands):
  September 30, 2020 December 31, 2019
Lender commitments (1) $ 167,300  $ 263,500 
Reductions in availability (2)
—  (6,591)
Borrowings against revolving credit capacity (85,175) (134,117)
Outstanding letters of credit (3,433) (2,031)
Unused availability 78,692  120,761 
Cash and cash equivalents 6,938  3,331 
Total available liquidity $ 85,630  $ 124,092 

(1)We also have a A$2.0 million bank guarantee facility. We had bank guarantees of A$0.7 million under this facility outstanding as of both September 30, 2020 and December 31, 2019, respectively.
(2)As of September 30, 2020, there were no reductions in our availability under the Amended Credit Agreement. As of December 31, 2019, $6.6 million of our borrowing capacity under the Credit Agreement could not be utilized in order to maintain compliance with the maximum leverage ratio financial covenant in the Credit Agreement.

Cash totaling $80.7 million was provided by operations during the nine months ended September 30, 2020, compared to $33.5 million provided by operations during the nine months ended September 30, 2019. During the nine months ended September 30, 2020 and 2019, $4.6 million was provided by working capital and $29.4 million was used in working capital, respectively. The increase in cash provided by working capital in 2020 compared to 2019 is largely due to decreased accounts receivable balances in Canada.

Cash was provided by investing activities during the nine months ended September 30, 2020 in the amount of $1.7 million, compared to cash used in investing activities during the nine months ended September 30, 2019 in the amount of $34.7 million. The decrease in cash used in investing activities was primarily due to lower capital expenditures and $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition in the nine months ended September 30, 2020. This compares to $16.9 million to fund the Action acquisition in the nine months ended September 30, 2019. Capital expenditures totaled $6.2 million and $25.5 million during the nine months ended September 30, 2020 and 2019, respectively. The decrease in capital expenditures from 2019 to 2020 was related primarily to the completion of the Sitka Lodge expansion, which occurred during 2019.

We expect our capital expenditures for 2020, exclusive of any expansionary spending, to be less than $15 million, which excludes any expansionary projects, the spending for which is contingent on obtaining customer contracts. Whether planned expenditures will actually be spent in 2020 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 Amended Credit Agreement. The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the economic environment in our industry improve and the transaction economics are deemed to be attractive to us. 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 as we continue to monitor the impact of COVID-19.
 
Net cash of $79.6 million was used in financing activities during the nine months ended September 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. Net cash of $2.8 million was used in financing activities during the nine months ended September 30, 2019 primarily due to repayments of term loan borrowings of $26.1 million, $4.3 million used to settle tax obligations on vested shares under our share-based compensation plans and debt issuances costs of $1.9 million, partially offset by net borrowings under our revolving credit facilities of $29.5 million.
 
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The following table summarizes the changes in debt outstanding during the nine months ended September 30, 2020 (in thousands): 
 
Balance at December 31, 2019 $ 359,080 
Borrowings under revolving credit facilities 324,611 
Repayments of borrowings under revolving credit facilities (369,122)
Repayments of term loans (31,092)
Translation (10,931)
Balance at September 30, 2020 $ 272,546 
 
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 burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders.

Amended Credit Agreement
 
As of December 31, 2019, our Credit Agreement, as then amended, provided for: (i) a $263.5 million revolving credit facility scheduled to mature on November 30, 2021 for certain lenders, allocated as follows: (A) a $20.0 million senior secured revolving credit facility in favor of certain of our U.S. subsidiaries, as borrowers; (B) a $183.5 million senior secured revolving credit facility in favor of Civeo and certain of our Canadian subsidiaries, as borrowers; and (C) a $60.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower; and (ii) a $285.4 million term loan facility scheduled to mature on November 30, 2021 for certain lenders in favor of Civeo.

On September 3, 2020, the third amendment to the Credit Agreement (as so amended, the Amended Credit Agreement) became effective, which, among other things:

•Extended the maturity date by 18 months of the commitments and loans of each lender remaining a lender following the effectiveness of the Amended Credit Agreement to May 30, 2023. Certain lenders are not extending the maturity date of their commitments and loans; the loans of the non-extending lenders were paid in full primarily with borrowings under the facility, and their commitments terminated on the date the Amended Credit Agreement became effective.

•Increased the margin applicable to loans and the commitment fee payable on the commitments of the lenders. Prior to entering into the Amended Credit Agreement, (i) the margin applicable to Eurocurrency loans, BBSY rate loans and B/A loans ranged from 2.25% to 4.00%, (ii) the margin applicable to ABR loans, Canadian Prime rate loans and U.S. Base rate loans ranged from 1.25% to 3.00% and (iii) the commitment fee ranged from 0.51% to 0.90%, in each case increasing as the total leverage ratio of the parent borrower and its subsidiaries increased from less than 2.00 to 1.00 to greater than 4.00 to 1.00. Following entry into the Amended Credit Agreement, these ranges have increased to (i) 3.50% to 4.50%, (ii) 2.50% to 3.50% and (iii) 0.875% to 1.125%, respectively, in each case as the total leverage ratio increases from less than 2.50 to 1.00 to greater than 3.50 to 1.00.

•Decreased (i) the U.S. revolving commitments from $20.0 million to $10.0 million, (ii) the maximum permitted amount of U.S. L/C exposure from $15.0 million to $10.0 million to match the reduction in the U.S. revolving commitments, (iii) the Canadian revolving commitments from $183.5 million to $122.3 million and (iv) the Australian revolving commitments from $60.0 million to $35.0 million.

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We are required to maintain, if a qualified offering of indebtedness with gross proceeds in excess of $150 million has been consummated, a maximum leverage ratio of 4.00 to 1.00 and, if such qualified offering has not been consummated, a maximum leverage ratio not to exceed the ratios set forth in the following table:
Period Ended Maximum Leverage Ratio
September 30, 2020 3.75 : 1.00
December 31, 2020 and thereafter 3.50 : 1.00

U.S. dollar amounts outstanding under the facilities provided by the Amended Credit Agreement bear interest at a variable rate equal to the London Inter-Bank Offered Rate (LIBOR) plus a margin of 3.50% to 4.50%, or a base rate plus 2.50% to 3.50%, in each case based on a ratio of our total debt to consolidated EBITDA (as defined in the Amended Credit Agreement). Canadian dollar amounts outstanding bear interest at a variable rate equal to a B/A Discount Rate (as defined in the Amended Credit Agreement) based on the Canadian Dollar Offered Rate (CDOR) plus a margin of 3.50% to 4.50%, or a Canadian Prime rate plus a margin of 2.50% to 3.50%, in each case based on a ratio of our total debt to consolidated EBITDA. Australian dollar amounts outstanding under the Amended Credit Agreement bear interest at a variable rate equal to the Bank Bill Swap Bid Rate plus a margin of 3.50% to 4.50%, based on a ratio of our total debt to consolidated EBITDA. The future transitions from LIBOR and CDOR as interest rate benchmarks is addressed in the Amended Credit Agreement and at such time the transition from LIBOR or CDOR takes place, we will endeavor with the administrative agent to establish an alternate rate of interest to LIBOR or CDOR that gives due consideration to (1) the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time for the replacement of LIBOR and (2) any evolving or then existing convention for similar Canadian Dollar denominated syndicated credit facilities for the replacement of CDOR.
The Amended Credit Agreement contains customary affirmative and negative covenants that, among other things, limit or restrict: (i) indebtedness, liens and fundamental changes; (ii) asset sales; (iii) acquisitions of margin stock; (iv) specified acquisitions; (v) certain restrictive agreements; (vi) transactions with affiliates; and (vii) investments and other restricted payments, including dividends and other distributions. In addition, we must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.0 to 1.0 and our maximum leverage ratio, defined as the ratio of total debt to consolidated EBITDA, of no greater than 3.75 to 1.0 (as of September 30, 2020). As noted above, the permitted maximum leverage ratio to 3.5 to 1.0 beginning December 31, 2020. Following a qualified offering of indebtedness with gross proceeds in excess of $150 million, we will be required to maintain a maximum senior secured ratio less than 2.50 to 1.0. Each of the factors considered in the calculations of these ratios are defined in the Amended Credit Agreement. EBITDA and consolidated interest, as defined, exclude goodwill and asset impairments, debt discount amortization, amortization of intangibles and other non-cash charges. We were in compliance with our covenants as of September 30, 2020.
Borrowings under the Amended Credit Agreement are secured by a pledge of substantially all of our assets and the assets of our subsidiaries. The obligations under the Amended Credit Agreement are guaranteed by our significant subsidiaries. As of September 30, 2020, we had eight lenders that were parties to the Amended Credit Agreement, with total commitments (including both revolving commitments and term commitments) ranging from $22.4 million to $71.1 million. As of September 30, 2020, we had outstanding letters of credit of $0.3 million under the U.S. facility, $0.5 million under the Australian facility and $2.6 million under the Canadian facility.

Dividends
 
The declaration and amount of all potential future dividends will be at the discretion of our Board of Directors 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 of Directors deems relevant. In addition, our ability to pay cash dividends on common or preferred shares is limited by covenants in the Amended 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.

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The preferred shares we issued in the Noralta 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 on September 30, 2020, thereby increasing the liquidation preference to $10,511 per share as of September 30, 2020. 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 September 30, 2020, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
 
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 ended December 31, 2019. As of September 30, 2020, except for 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 December 31, 2019.
 
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 ended December 31, 2019. 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. 


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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
 
Our principal market risks are our exposure to changes in interest rates and foreign currency exchange rates.
 
Interest Rate Risk
 
We have credit facilities that are subject to the risk of higher interest charges associated with increases in interest rates. As of September 30, 2020, we had $272.5 million of outstanding floating-rate obligations under our credit facilities. These floating-rate obligations expose us to the risk of increased interest expense in the event of increases in short-term interest rates. If floating interest rates increased by 100 basis points, our consolidated interest expense would increase by approximately $2.7 million annually, based on our floating-rate debt obligations and interest rates in effect as of September 30, 2020.

Foreign Currency Exchange Rate Risk
 
Our operations are conducted in various countries around the world, and we receive revenue and pay expenses from these operations in a number of different currencies. As such, our earnings are subject to movements in foreign currency exchange rates when transactions are denominated in (i) currencies other than the U.S. dollar, which is our reporting currency, or (ii) the functional currency of our subsidiaries, which is not necessarily the U.S. dollar. Excluding intercompany balances, our Canadian dollar and Australian dollar functional currency net assets total approximately C$0.2 billion and A$0.3 billion, respectively, at September 30, 2020. We use a sensitivity analysis model to measure the impact of a 10% adverse movement of foreign currency exchange rates against the United States dollar. A hypothetical 10% adverse change in the value of the Canadian dollar and Australian dollar relative to the U.S. dollar as of September 30, 2020 would result in translation adjustments of approximately $16 million and $29 million, respectively, recorded in other comprehensive loss. Although we do not currently have any foreign exchange agreements outstanding, in order to reduce our exposure to fluctuations in currency exchange rates, we may enter into foreign exchange agreements with financial institutions in the future.
 
ITEM 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2020, at the reasonable assurance level.
 
Changes in Internal Control over Financial Reporting
 
During the three months ended September 30, 2020, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II -- OTHER INFORMATION
 
ITEM 1. Legal Proceedings
 
We are a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning our commercial operations, products, employees and other matters, including occasional claims by individuals alleging exposure to hazardous materials as a result of our products or operations. Some of these claims relate to matters occurring prior to our acquisition of businesses, and some relate to businesses we have sold. In certain cases, we are entitled to indemnification from the sellers of businesses, and in other cases, we have indemnified the buyers of businesses from us. Although we can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on us, we believe that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by indemnity or insurance, will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.
 
ITEM 1A. Risk Factors
 
There are numerous factors that affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this quarterly report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, you should carefully read and consider “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019 and "Risk Factors" in our Form 10-Q for the quarter ended March 31, 2020, which contain descriptions of significant factors that may cause our future operating results to differ materially from those currently expected.

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ITEM 6. Exhibits

(a)INDEX OF EXHIBITS
Exhibit No.   Description
10.1
—
10.2 †* —
31.1* —
     
31.2* —
     
32.1** —
     
32.2** —
     
101.INS* — Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
     
101.SCH* — Inline XBRL Taxonomy Extension Schema Document
     
101.CAL* — Inline XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF* — Inline Taxonomy Extension Definition Linkbase Document
     
101.LAB* — Inline XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE* — Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 — Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
---------
* Filed herewith.
** Furnished herewith.
† Management contracts and compensatory plans and arrangements.

PLEASE NOTE: Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed or incorporated by reference the agreements referenced above as exhibits to this Quarterly Report on Form 10-Q. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about Civeo or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain
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representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in our public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about Civeo or its business or operations on the date hereof.
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
CIVEO CORPORATION
 
Date: October 28, 2020
By  /s/ Carolyn J. Stone                          
             Carolyn J. Stone
  Senior Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer)
 
 

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