What changed in Civeo Corp's 10-K — 2022 vs 2023
vs
Paragraph-level year-over-year comparison of Civeo Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+104 added−100 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)
Top changes in Civeo Corp's 2023 10-K
104 paragraphs added · 100 removed · 89 edited across 1 sections
- Item 1A. Risk Factors+104 / −100 · 89 edited
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
89 edited+15 added−11 removed121 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
89 edited+15 added−11 removed121 unchanged
2022 filing
2023 filing
Biggest changeThis summary should be read in connection with the Risk Factors more fully described below and should not be relied upon as an exhaustive summary of the material risks facing our business. • Risks Related to Our Macroeconomic-Business Environment ◦ Certain of our customers’ spending may be directly, and our business may be indirectly, affected by volatile or low oil, metallurgical (met) coal, natural gas or iron ore prices or unsuccessful exploration results. ◦ The effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, have materially affected, and may materially affect, how we and our customers are operating our and their businesses. • Risks Related to Our Customers ◦ Our customers and their operations are exposed to a number of unique operating risks and challenges. ◦ We depend on several significant customers. ◦ Our failure to retain our current customers, renew our existing customer contracts and obtain new customer contracts, or the termination of existing contracts, could adversely affect our business. ◦ Adverse events in areas where we operate could negatively impact our business, and our geographic concentration could limit the number of customers seeking our services. ◦ We may be adversely affected if customers reduce their accommodations outsourcing. • Risks Related to Our Operations ◦ We operate in a highly competitive industry, and if we fail to compete effectively, our business will suffer. ◦ Our operations may suffer due to over-capacity of certain types of accommodations assets in certain regions. ◦ Increased operating costs and limited cost recovery through pricing or contract terms may constrain our ability to make a profit. ◦ Employee and customer labor problems could adversely affect us. ◦ A failure to maintain food safety or comply with government regulations related to food and beverages or serving alcoholic beverages may subject us to liability. ◦ The majority of our major Canadian lodges are located on land subject to leases. ◦ We are susceptible to seasonal earnings volatility due to adverse weather conditions in our regions of operations. ◦ Failure to maintain positive relationships with the Indigenous people in the areas where we operate could adversely affect our business. ◦ Development of permanent infrastructure in the areas where we locate our assets could negatively impact our business. ◦ We may be subject to risks associated with the transportation, installation and demobilization of mobile accommodations. ◦ Our business could be negatively impacted by security threats, including cybersecurity threats and other disruptions. ◦ Loss of key members of our management could adversely affect our business. • Financial/Accounting Risks ◦ Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions. ◦ Currency exchange rate fluctuations could adversely affect our U.S. dollar reported results of operations and financial position. 26 ◦ The cyclical nature of our business and a severe prolonged downturn has, and could in the future, negatively affect the value of our long-lived assets and our goodwill. ◦ Our inability to control the inherent risks of identifying, acquiring and integrating businesses that we may acquire could adversely affect our operations. ◦ We may not have adequate insurance for potential liabilities and insurance may not cover certain liabilities. • Legal and Regulatory Risks ◦ We do business in Canada and Australia, whose political and regulatory environments and compliance regimes differ from those in the United States (U.S.) ◦ We are subject to extensive and costly environmental laws and regulations. ◦ We may be exposed to certain regulatory and financial risks related to climate change and other environmental, social and governance (ESG) related matters. • Risks Related to Our Common Shares ◦ The market price and trading volume of our common shares may be volatile. ◦ Any repurchases of our common shares are within the discretion of our Board of Directors, and there is no guarantee that we will repurchase common shares in the future. ◦ We are governed by the corporate laws in British Columbia, Canada. ◦ Provisions contained in our articles and applicable Canadian and British Columbia laws could discourage a take-over attempt. ◦ The enforcement of civil liabilities against Civeo may be more difficult. • Risks Related to Our Structure ◦ We are subject to various Canadian, Australian and other taxes. ◦ We remain subject to changes in tax law (in various jurisdictions) and other factors that could impact our effective tax rate. ◦ Future potential changes to U.S. tax laws could result in Civeo being treated as a U.S. corporation for U.S. federal income tax purposes.
Biggest changeThis summary should be read in connection with the Risk Factors more fully described below and should not be relied upon as an exhaustive summary of the material risks facing our business. • Risks Related to Our Macroeconomic-Business Environment ◦ Certain of our customers’ spending may be directly, and our business may be indirectly, affected by (i) volatile or low oil, metallurgical (met) coal, natural gas or iron ore prices; (ii) increasing production costs; or (iii) unsuccessful exploration results. ◦ The effects of public health crises, pandemics and epidemics may materially affect how we and our customers are operating our and their businesses. • Risks Related to Our Customers ◦ Our customers and their operations are exposed to a number of unique operating risks and challenges. ◦ We depend on several significant customers. ◦ Our failure to retain our current customers, renew our existing customer contracts and obtain new customer contracts, or the termination of existing contracts, could adversely affect our business. ◦ Adverse events in areas where we operate could negatively impact our business, and our geographic concentration could limit the number of customers seeking our services. ◦ We may be adversely affected if customers reduce their accommodations outsourcing. • Risks Related to Our Operations ◦ We operate in a highly competitive industry, and if we fail to compete effectively, our business will suffer. ◦ Our operations may suffer due to over-capacity of certain types of accommodations assets in certain regions. ◦ Increased operating costs and limited cost recovery through pricing or contract terms may constrain our ability to make a profit. ◦ Employee and customer labor problems could adversely affect us. ◦ A failure to maintain food safety or comply with government regulations related to food and beverages or serving alcoholic beverages may subject us to liability. ◦ The majority of our major Canadian lodges are located on land subject to leases. ◦ We are susceptible to seasonal earnings volatility due to adverse weather conditions in our regions of operations. ◦ Failure to maintain positive relationships with the Indigenous people in the areas where we operate could adversely affect our business. ◦ Development of permanent infrastructure in the areas where we locate our assets could negatively impact our business. ◦ We may be subject to risks associated with the transportation, installation and demobilization of mobile accommodations. ◦ Our business could be negatively impacted by security threats, including cybersecurity threats and other disruptions. ◦ Our business could be disrupted by any failure of our information technology systems. ◦ Loss of key members of our management could adversely affect our business. • Financial/Accounting Risks ◦ Currency exchange rate fluctuations could adversely affect our U.S. dollar reported results of operations and financial position. 24 ◦ We may not have adequate insurance for potential liabilities and insurance may not cover certain liabilities. ◦ The cyclical nature of our business and a severe prolonged downturn has, and could in the future, negatively affect the value of our long-lived assets and our goodwill. ◦ Our inability to control the inherent risks of identifying, acquiring and integrating businesses that we may acquire could adversely affect our operations. ◦ Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions. • Legal and Regulatory Risks ◦ We do business in Canada and Australia, whose political and regulatory environments and compliance regimes differ from those in the U.S. ◦ We are subject to extensive and costly environmental laws and regulations. ◦ We may be exposed to certain regulatory and financial risks related to climate change and other environmental, social and governance (ESG) related matters. • Risks Related to Our Common Shares ◦ The market price and trading volume of our common shares may be volatile. ◦ The payment of dividends and repurchases of our common shares are each within the discretion of our Board of Directors, and there is no guarantee that we will pay any dividends or repurchase common shares in the future or at levels anticipated by our shareholders. ◦ We are governed by the corporate laws in British Columbia, Canada. ◦ Provisions contained in our articles and applicable Canadian and British Columbia laws could discourage a take-over attempt. ◦ The enforcement of civil liabilities against Civeo may be more difficult. • Risks Related to Our Structure ◦ We are subject to various Canadian, Australian and other taxes. ◦ We remain subject to changes in tax law (in various jurisdictions) and other factors that could impact our effective tax rate. ◦ Future potential changes to U.S. tax laws could result in Civeo being treated as a U.S. corporation for U.S. federal income tax purposes.
Should the price of WTI decline or the WCS discount to WTI widen further, our oil sands customers may delay or eliminate additional investments, further reduce their spending in the oil sands region or curtail or shut-down additional existing operations.
Should the price of WTI decline or the WCS discount to WTI widen further, our oil sands customers may delay or eliminate additional investments, reduce their spending in the oil sands region or curtail or shut-down existing operations.
The price of and demand for natural resources produced by our customers may impact their desire and/or ability to continue producing existing projects or start new projects. Customers may also experience unexpected problems, higher costs or delays in commencing or developing a project.
The price of and demand for natural resources produced by our customers may impact their desire and/or ability to continue producing existing projects or start new projects. Customers may also experience unexpected problems, higher costs or delays in commencing, developing or producing a project.
We depend on several significant customers. We depend on several significant customers, including customers that operate in the natural resources industry.
We depend on several significant customers, including customers that operate in the natural resources industry.
Enterprise bargaining agreements in our Australian operations cover certain employees working at our villages in Queensland, New South Wales, Western Australia and South Australia, as well as certain employees working at our integrated services customer owned sites in Western Australia.
Enterprise bargaining agreements in our Australian operations cover certain employees working at our villages in Queensland, New South Wales and Western Australia, as well as certain employees working at our integrated services customer-owned sites in Western Australia and South Australia.
Provisions contained in our articles provide for a classified Board of Directors, limitations on the removal of directors, limitations on shareholder proposals at meetings of shareholders and limitations on shareholder action by written consent, which could make it more difficult for a third-party to acquire control of us.
Provisions contained in our articles provide for a classified Board, limitations on the removal of directors, limitations on shareholder proposals at meetings of shareholders and limitations on shareholder action by written consent, which could make it more difficult for a third-party to acquire control of us.
Because of the concentration of our business in three relatively small geographic areas: the oil sands region of Alberta, Canada, the coal producing, Bowen Basin region of Queensland, Australia and the iron ore producing, Pilbarra region of Western Australia, we have increased exposure to political, regulatory, environmental, labor, climate or natural disasters such as forest fires or flooding, events or developments that could disproportionately impact our operations and financial results.
Because of the concentration of our business in three relatively small geographic areas: the oil sands region of Alberta, Canada, the coal producing, Bowen Basin region of Queensland, Australia and the iron ore producing, Pilbarra region of Western Australia, we have increased exposure in these areas to political, regulatory, environmental, labor, climate or natural disasters such as forest fires or flooding, events or developments that could disproportionately impact our operations and financial results.
The final outcome of any audits by taxation authorities may differ from the estimates and assumptions we may use in determining our consolidated tax provisions and accruals. This could result in a material adverse effect on our consolidated income tax provision, financial condition and the net income for the period in which such determinations are made. The U.S.
The final outcome of any audits by taxation authorities may differ from 37 the estimates and assumptions we may use in determining our consolidated tax provisions and accruals. This could result in a material adverse effect on our consolidated income tax provision, financial condition and the net income for the period in which such determinations are made. The U.S.
Regardless of the source or cause, any report of food-borne illness or other food safety issues such as food tampering or contamination at one of our locations could adversely impact our reputation, hindering our ability to renew contracts on favorable terms or to obtain new business, and have a negative 31 impact on our revenue.
Regardless of the source or cause, any report of food-borne illness or other food safety issues such as food tampering or contamination at one of our locations could adversely impact our reputation, hindering our ability to renew contracts on favorable terms or to obtain new business, and have a negative impact on our revenue.
The outcome of Canadian, Australian and U.S. federal, regional, provincial and state actions to address global climate change could result in a variety of regulatory programs including potential new regulations, additional charges to fund energy 36 efficiency activities, or other regulatory actions.
The outcome of Canadian, Australian and U.S. federal, regional, provincial and state actions to address global climate change could result in a variety of regulatory programs including potential new regulations, additional charges to fund energy efficiency activities, or other regulatory actions.
Any of the foregoing could prevent or delay a change of control and may deprive or limit strategic opportunities for our shareholders to sell their common shares and/or affect the market price of our common shares. 38 The enforcement of civil liabilities against Civeo may be more difficult.
Any of the foregoing could prevent or delay a change of control and may deprive or limit strategic opportunities for our shareholders to sell their common shares and/or affect the market price of our common shares. The enforcement of civil liabilities against Civeo may be more difficult.
In addition, food prices can fluctuate as a result of foreign exchange rates and temporary changes in supply, including as a result of incidences of wildfires or severe weather such as droughts, heavy rains and late freezes, or other climate effects.
In addition, food 28 prices can fluctuate as a result of foreign exchange rates and temporary changes in supply, including as a result of incidences of wildfires or severe weather such as droughts, heavy rains and late freezes, or other climate effects.
We may attempt to limit the risks of currency fluctuation where possible by entering into financial instruments to protect against foreign currency exposure, but, to date, we have not entered into any foreign currency financial 34 instruments.
We may attempt to limit the risks of currency fluctuation where possible by entering into financial instruments to protect against foreign currency exposure, but, to date, we have not entered into any foreign currency financial instruments.
We have experienced, and expect to continue to confront, efforts by hackers and other third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information technology systems and networks.
We have experienced, and expect to continue to confront, efforts by hackers and other third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information systems and networks.
Operating risks and challenges our customers face, which may ultimately affect their need for the accommodations and services we provide, include: • commodity price volatility; • unforeseen and adverse geological, geotechnical, seismic and mining conditions; • lack of availability or failure of the required infrastructure, including sourcing sufficient water or power, necessary to maintain or to expand their operations; • the breakdown or shortage of equipment and labor necessary to maintain their operations; • capital project cost overruns and cost inflation; • risks associated with the natural resources industry being subject to laws and regulations, including those governing air and greenhouse gas emissions, as well as various regulatory approvals, including a government agency failing to grant an approval or failing to renew an existing approval, or the approval or renewal not being provided by the government agency in a timely manner or the government agency granting or renewing an approval subject to materially onerous conditions; • risks to land titles, mining titles and use thereof as a result of native title claims; • claims by persons living in close proximity to mining projects, which may have an impact on the consents granted; and 28 • interruptions to the operations of our customers caused by governmental action, industrial accidents, disputes or public health emergencies.
Operating risks and challenges our customers face, which may ultimately affect their need for the accommodations and services we provide, include: • commodity price volatility; • unforeseen and adverse geological, geotechnical, seismic and mining conditions; • lack of availability or failure of the required infrastructure, including sourcing sufficient water or power, necessary to maintain or to expand their operations; • the breakdown or shortage of equipment and labor necessary to maintain their operations; • capital project cost overruns and cost inflation; • risks associated with the natural resources industry being subject to laws and regulations, including those governing air and greenhouse gas emissions, as well as various regulatory approvals, including a government agency failing to grant an approval or failing to renew an existing approval, or the approval or renewal not being provided by the government agency in a timely manner or the government agency granting or renewing an approval subject to materially onerous conditions; • risks to land titles, mining titles and use thereof as a result of native title claims; • claims by persons living in close proximity to mining projects, which may have an impact on the consents granted; and • interruptions to the operations of our customers caused by governmental action, industrial accidents, disputes or public health emergencies. 26 We depend on several significant customers.
Our geographic concentration could limit the number of customers seeking our services, and as to any single lodge or village, we may have few potential customers.
Our geographic concentration could limit the number of customers seeking our services, and as to any single lodge or village, we 27 may have few potential customers.
Accordingly, while we own the accommodations assets, we only own a leasehold in those properties. If we are found to be in breach of a lease, we could lose the right to use the property. In addition, our leases generally have an initial term of ten years and will expire between 2023 and 2030 unless extended.
Accordingly, while we own the accommodations assets, we only own a leasehold in those properties. If we are found to be in breach of a lease, we could lose the right to use the property. In addition, our leases generally have an initial term of ten years and will expire between 2024 and 2030 unless extended.
In addition, any elimination of, or downward revision in, our share repurchase program could have an adverse effect on the market price of our common shares. While the U.S. has imposed an excise tax on U.S. domestic corporations repurchasing stock, our share repurchase program is not currently subject to this tax.
In addition, any elimination of, or downward revision in, our dividend policy or our share repurchase program could have an adverse effect on the market price of our common shares. While the U.S. has imposed an excise tax on U.S. domestic corporations repurchasing stock, our share repurchase program is not currently subject to this tax.
If we are unable to hire a sufficient labor force, we could be required to increase wages or use temporary labor at a higher cost and reduced efficiency. In 2022, we experienced, and expect to continue to experience, a shortage of labor for certain functions, inflationary pressures on wages, and an increasingly competitive labor market.
If we are unable to hire a sufficient labor force, we could be required to increase wages or use temporary labor at a higher cost and reduced efficiency. In recent years, we experienced, and expect to continue to experience, a shortage of labor for certain functions, inflationary pressures on wages, and an increasingly competitive labor market.
For example, some of these material differences include the following: (1) for material corporate transactions (such as amalgamations, arrangements, the sale of all or substantially all of our undertaking, and other extraordinary corporate transactions), the BCBCA, subject to the provisions of our articles, generally requires two-thirds majority vote by shareholders, whereas DGCL generally only requires a majority vote of shareholders for similar material corporate transactions; and (2) under the BCBCA, a holder of 5% or more of our common shares can requisition a general meeting of shareholders for the purpose of transacting any business that may be transacted at a general meeting, whereas the DGCL does not give this right.
Some of these material differences include the following: (i) for material corporate transactions (such as amalgamations, arrangements, the sale of all or substantially all of our undertaking, and other extraordinary corporate transactions), the BCBCA, subject to the provisions of our articles, generally requires two-thirds majority vote by shareholders, whereas DGCL generally only requires a majority vote of shareholders for similar material corporate transactions; and (ii) under the BCBCA, a holder of 5% or more of our common shares can requisition a general meeting of shareholders for the purpose of transacting any business that may be transacted at a general meeting, whereas the DGCL does not give this right.
Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, have adversely impacted and may continue to adversely impact, worldwide economic activity, including the operations of natural resources companies in Canada, Australia and the U.S. and the worldwide demand for oil and natural gas.
Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, have adversely impacted and may in the future adversely impact, worldwide economic activity, including the operations of natural resources companies in Canada, Australia and the U.S. and the worldwide demand for oil and natural gas.
We cannot assure that we will be able to obtain new business, renew existing customer contracts at the same or higher levels of pricing, or at all, or that our current customers will not turn to competitors, cease operations, elect to (1) utilize their own, on-site accommodations or (2) terminate contracts with us.
We cannot assure that we will be able to obtain new business, renew existing customer contracts at the same or higher levels of pricing, or at all, or that our current customers will not turn to competitors, cease operations, elect to (i) utilize their own, on-site accommodations or (ii) terminate contracts with us.
The market price of our common shares may be influenced by many factors, some of which are beyond our control, including those described above and the following: • changes in financial estimates by analysts and our inability to meet those financial estimates; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments; • variations in our quarterly operating results and those of our competitors; • general economic and stock market conditions; • risks related to our business and our industry, including those discussed above; • changes in conditions or trends in our industry, markets or customers; • geopolitical events or terrorist acts; • trading volume of our common shares; • the majority of our common shares being held by a few shareholders; • future sales of our common shares or other securities by us, members of our management team or our existing shareholders; and • investor perceptions of the investment opportunity associated with our industry or common shares relative to other investment alternatives.
The market price of our common shares may be influenced by many factors, some of which are beyond our control, including those described above and the following: • changes in financial estimates by analysts and our inability to meet those financial estimates; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments; • variations in our quarterly operating results and those of our competitors; • general economic and stock market conditions; • risks related to our business and our industry, including those discussed above; • changes in conditions or trends in our industry, markets or customers; • geopolitical events or terrorist acts, including cybersecurity threats; • trading volume of our common shares; • the majority of our common shares being held by a few shareholders; • our policy on share repurchases and dividend payments; 35 • future sales of our common shares or other securities by us, members of our management team or our existing shareholders; and • investor perceptions of the investment opportunity associated with our industry or common shares relative to other investment alternatives.
Price volatility may cause the average price at which we repurchase our common shares (see Note 17 – Common Share Repurchases for a discussion of repurchases of our common shares) in a given period to exceed the share price at a given point in time.
Price volatility may cause the average price at which we repurchase our common shares (see Note 17 – Share Repurchase Programs and Dividends for a discussion of repurchases of our common shares) in a given period to exceed the share price at a given point in time.
Consistent with U.S. generally accepted accounting principles, this liability is the estimated present value of the amount of required asset removal and site remediation costs related to the retirement of assets at this location in 2023. As of December 31, 2022, we had other ARO liabilities on our balance sheet of $14.0 million.
Consistent with U.S. generally accepted accounting principles, this liability is the estimated present value of the amount of required asset removal and site remediation costs related to the retirement of assets at this location in 2023. As of December 31, 2023, we had other ARO liabilities on our balance sheet of $16.2 million.
Cybersecurity attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, ransomware attacks and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of or denial of access to confidential or otherwise protected information and corruption of data.
Such attacks include, but are not limited to, malicious software, attempts to gain unauthorized access to data, ransomware attacks and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of or denial of access to confidential or otherwise protected information and corruption of data.
It should also be noted that scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events.
It should also be noted that scientists have concluded that increasing concentrations of greenhouse gases (GHG) in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events.
Any such change of law or regulatory action could adversely impact the treatment of Civeo as a foreign corporation for U.S. federal income tax purposes and could adversely impact its tax position and financial position and results in a material manner.
The timing and substance of any such change in law or regulatory action is uncertain. Any such change of law or regulatory action could adversely impact the treatment of Civeo as a foreign corporation for U.S. federal income tax purposes and could adversely impact its tax position and financial position and results in a material manner.
An inability to realize expected strategic advantages as a result of the acquisition would negatively affect the anticipated benefits of the acquisition. Additionally, an acquisition may bring us into businesses we have not previously conducted and expose us to additional business risks that are different from those we have previously experienced.
An inability to realize expected strategic advantages as a result of the acquisition would negatively affect the anticipated benefits of the acquisition. Additionally, an acquisition may bring us into businesses we have not previously conducted or geographies in which we have not previously operated and expose us to additional business risks that are different from those we have previously experienced.
We may be subject to risks associated with the transportation, installation and demobilization of mobile accommodations. In connection with our Canadian business, we currently have several contracts to transport and install modular, skid-mounted accommodations and central facilities that can be quickly configured to serve a multitude of short to medium-term accommodation needs.
We may be subject to risks associated with the transportation, installation and demobilization of mobile accommodations. We currently have several contracts to transport and install modular, skid-mounted accommodations and central facilities that can be quickly configured to serve a multitude of short- to medium-term accommodation needs.
If our business does not generate sufficient cash flows from operations to enable us to meet our obligations under our indebtedness, we will be forced to take actions such as reducing or delaying business activities, acquisitions, investments and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital.
If our business does not generate sufficient cash flows from operations to enable us to meet our obligations under our indebtedness, we will be forced to take actions such as reducing or delaying business activities, including dividend payments and share repurchases, 33 acquisitions, investments and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital.
Inefficient operations or further increased labor costs resulting from these labor market challenges could negatively impact our profitability and could damage our reputation with our customers. Additionally, as of December 31, 2022, we were party to collective bargaining agreements covering 1,123 employees in Canada and 768 employees in Australia.
Inefficient operations or further increased labor costs resulting from these labor market challenges could negatively impact our profitability and could damage our reputation with our customers. Additionally, as of December 31, 2023, we were party to collective bargaining agreements covering 798 employees in Canada and 1,020 employees in Australia.
These actions could both (1) directly impact us due to increased costs associated with our operations, and (2) indirectly impact us due to increased costs of and/or reduced demand for our customers' operations, and resulting reduced demand for our services.
These actions could both (i) directly impact us due to increased costs associated with our operations, and (ii) indirectly impact us due to increased costs of and/or reduced demand for our customers' operations, and resulting reduced demand for our services.
A significant portion of our revenue is attributable to operations in Canada and Australia. These activities accounted for 97% of our consolidated revenue in the year ended December 31, 2022.
A significant portion of our revenue is attributable to operations in Canada and Australia. These activities accounted for 98% of our consolidated revenue in the year ended December 31, 2023.
Other factors beyond our control that affect commodity prices include: • worldwide economic activity including growth in and demand for oil, coal and other natural resources, particularly from developing countries, such as China and India; • the level of activity and natural resource developments in Australia and the Canadian oil sands; • the level of global oil and gas exploration and production and the impact of government regulation or Organization of Petroleum Exporting Companies (OPEC) policies that impact production levels and oil prices; • the availability of transportation infrastructure and refining capacity for oil, natural gas, LNG and coal; 27 • global weather conditions, natural disasters, global health concerns, such as the COVID-19 pandemic, or any future disaster or pandemic, and geopolitical events such as the ongoing conflict between Russia and Ukraine; • global reduction in demand for fossil fuels due to international efforts to address climate change; • rapid technological change and the timing and extent of energy resource development, including hydraulic fracturing of horizontally drilled wells in shale discoveries and LNG; • development, commercialization, availability and economics of alternative fuels; and • government, tax and environmental regulation, including climate change legislation and clean energy policies.
Other factors beyond our control that affect commodity prices include: • worldwide economic activity including growth in and demand for oil, coal and other natural resources, particularly from developing countries, such as China and India; • the level of activity, spending and natural resource developments in Australia and Canada; • the level of global oil and gas exploration and production and the impact of government regulation or Organization of the Petroleum Exporting Countries Plus (OPEC+) policies that impact production levels and oil prices; • the availability of transportation infrastructure and refining capacity for oil, natural gas, LNG and coal; • global weather conditions, natural disasters and global health concerns; 25 • geopolitical events such as the ongoing Russia/Ukraine and Israel/Hamas conflicts; • global reduction in demand for fossil fuels due to international efforts to address climate change; • rapid technological change and the timing and extent of energy resource development, including hydraulic fracturing of horizontally drilled wells in shale discoveries and LNG; • development, commercialization, availability and economics of alternative fuels; and • government, tax and environmental regulation, including climate change legislation and clean energy policies.
Risk Factors: Risks Related to Our Macroeconomic Business Environment Certain of our customers’ spending may be directly, and our business may be indirectly, affected by volatile or low oil, met coal, natural gas or iron ore prices or unsuccessful exploration results.
Risk Factors: Risks Related to Our Macroeconomic Business Environment Certain of our customers’ spending may be directly, and our business may be indirectly, affected by (i) volatile or low oil, metallurgical (met) coal, natural gas or iron ore prices; (ii) increasing production costs; or (iii) unsuccessful exploration results.
Risks associated with our operations in Canada and Australia include, but are not limited to, (1) different taxing regimes; (2) changing political conditions at the federal, provincial or state level; (3) changing international and U.S. monetary policies; and (4) regional economic downturns.
Risks associated with our operations in Canada and Australia include, but are not limited to, (i) different taxing regimes; (ii) changing political conditions at the federal, provincial or state level; (iii) changing international and U.S. monetary policies; and (iv) regional economic downturns.
The extent and duration of the effect of these labor market challenges are subject to numerous factors, including geopolitical events such as the continuing effect of the COVID-19 pandemic or the ongoing Russia/Ukraine conflict, availability of qualified persons in the markets where we and our contracted service providers operate, inflation and unemployment levels within these markets and our reputation within the labor market.
The extent and duration of the effect of these labor market challenges are subject to numerous factors, including geopolitical events such as the ongoing Russia/Ukraine and Israel/Hamas conflicts, availability of qualified persons in the markets where we and our contracted service providers operate, inflation and unemployment levels within these markets and our reputation within the labor market.
As of December 31, 2022, we had an asset retirement obligation (ARO) liability related to the McClelland Lake Lodge on our balance sheet of $4.1 million.
As of December 31, 2023, we had an asset retirement obligation (ARO) liability related to the McClelland Lake Lodge on our balance sheet of $0.3 million.
There are a number of legislative and regulatory proposals to address greenhouse gas emissions, including increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting, and incentives for renewable energy, which are in various phases of discussion or implementation.
There are a number of legislative and regulatory proposals to address greenhouse gas emissions, including increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting, and incentives for renewable energy, which are in various phases of discussion or implementation. Moreover, such legislation, regulations and proposals are subject to frequent 34 change by regulatory authorities.
This volatility has had a significant effect on the market prices of securities issued by many companies for reasons potentially unrelated to their operating performance. For example, our share price may experience substantial volatility due to uncertainty regarding 37 commodity prices.
This volatility has had a significant effect on the market prices of securities issued by many companies for reasons potentially unrelated to their operating performance. For example, our share price may experience substantial volatility due to uncertainty regarding commodity prices. These market fluctuations, regardless of the cause, may materially and adversely affect our share price, regardless of our operating results.
Such public health crises, pandemics and epidemics are continuously evolving and the extent to which our business operations and financial results continue to be affected depends on various factors beyond our control, such as the duration, severity and sustained geographic resurgence of the COVID-19 virus; the emergence, severity and spread of new variants of the virus; the impact and effectiveness of governmental actions to contain and treat such outbreaks, including government policies and restrictions; vaccine hesitancy, vaccine mandates, and voluntary or mandatory quarantines; and the global response surrounding such uncertainties.
The extent to which our business operations and financial results may be affected by such public health crises, pandemics and epidemics depends on various factors beyond our control, such as the duration, severity and sustained geographic impact of the outbreak; the impact and effectiveness of governmental actions to contain and treat such outbreaks, including government policies and restrictions; vaccine hesitancy, vaccine mandates, and voluntary or mandatory quarantines; and the global response surrounding such uncertainties.
A similar tax has been proposed in Canada, which if enacted, would apply to us and may impact the tax efficiency of our share repurchase program. We are governed by the corporate laws in British Columbia, Canada which in some cases have a different effect on shareholders than the corporate laws in Delaware, U.S.
A similar 2% tax has been imposed in Canada, effective January 1, 2024, which applies to us and may impact the tax efficiency of our share repurchase program. We are governed by the corporate laws in British Columbia, Canada which in some cases have a different effect on shareholders than the corporate laws in Delaware, U.S.
Although customer production activity and resulting demand for our accommodations approached pre-pandemic levels in 2022, volatility in commodity price levels, the ongoing impact of COVID-19 or other global health crises, inflationary pressures, actions taken by OPEC+ to adjust production levels, geopolitical events such as the ongoing Russia/Ukraine conflict, and regulatory implications on such prices, among other factors, could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets, which would cause a decrease in customer demand for our accommodations.
Continued volatility in commodity price levels, any future global health crises, inflationary pressures, actions taken by OPEC+ to adjust production levels, geopolitical events such as the ongoing Russia/Ukraine and Israel/Hamas conflicts, and regulatory implications on such prices, among other factors, could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets, which would cause a decrease in customer demand for our accommodations.
Factors that may cause us to recognize further impairment losses on our long-lived assets or on the goodwill at our Australian reporting unit include, among other things, extended periods of limited or no activity by our customers at our lodges or villages, increased or unanticipated competition, and downward forecast revisions or restructuring plans or if certain of our customers do not reach positive final investment decisions on projects with respect to which we have been awarded contracts to provide related accommodation, which may cause those customers to terminate the contracts.
Factors that may cause us to recognize further impairment losses on our long-lived assets or on the goodwill at our Australian reporting unit include, among other things, extended periods of limited or no activity by our customers at our lodges or villages, increased or unanticipated competition, and downward forecast revisions or restructuring plans or if certain of our customers do not reach positive final investment decisions on projects with respect to which we have been awarded contracts to provide related accommodation, which may cause those customers to terminate the contracts. 32 Our inability to control the inherent risks of identifying, acquiring and integrating businesses that we may acquire, including any related increases in debt or issuances of equity securities, could adversely affect our operations.
The amount and timing of all future purchases of common shares pursuant to our share repurchase program, if any, are subject to the discretion of the Board of Directors and will depend upon business conditions, results of operations, financial condition and other factors. Our Board of Directors may, without advance notice, suspend or terminate our share repurchase program.
The amount and timing of all future payments of dividends or repurchases of common shares pursuant to our share repurchase program, if any, are each subject to the discretion of the Board of Directors (Board) and will depend upon business conditions, results of operations, financial condition and other factors.
If any of our key managers resign or become unable to continue in their present roles and are not adequately replaced, our business operations could be materially adversely affected. We do not maintain “key man” life insurance for any of our officers. Financial/Accounting Risks Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.
If any of our key managers resign or become unable to continue in their present roles and are not adequately replaced, our business operations could be materially adversely affected. We do not maintain “key man” life insurance for any of our officers.
We have agreed to not renew an expiring land lease associated with our McClelland Lake Lodge in Alberta, Canada, which currently expires in June 2023, to support our customer’s intent to mine the land where the lodge is currently located.
We did not renew an expiring land lease associated with our McClelland Lake Lodge in Alberta, Canada, which expired in June 2023, in order to support our customer’s intent to mine the land where the lodge was located.
The effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, have materially affected, and may materially affect, how we and our customers are operating our and their businesses.
The effects of public health crises, pandemics and epidemics may materially affect how we and our customers are operating our and their businesses.
As a result, the tax laws in the U.S. and other countries in which we and our affiliates do business could change on a prospective or retroactive basis (or both), and any such changes could materially adversely affect us. 39 Future potential changes to U.S. tax laws could result in Civeo being treated as a U.S. corporation for U.S. federal income tax purposes.
As a result, the tax laws in the U.S. and other countries in which we and our affiliates do business could change on a prospective or retroactive basis (or both), and any such changes could materially adversely affect us.
In addition, such events could result in litigation, regulatory action and potential liability, including liability under laws that protect the privacy of personal information, as well as the costs and operational consequences of implementing further data protection measures.
In addition, such events could result in litigation, regulatory action and potential liability, including liability under laws that protect the privacy of personal information, as well as the costs and operational consequences of implementing further data protection measures. Cybersecurity attacks in particular develop and evolve rapidly, including from emerging technologies, such as advanced forms of artificial intelligence.
Any repurchases of our common shares are within the discretion of our Board of Directors, and there is no guarantee that we will repurchase common shares in the future.
The payment of dividends and repurchases of our common shares are each within the discretion of our Board of Directors, and there is no guarantee that we will pay any dividends or repurchase common shares in the future or at levels anticipated by our shareholders.
If our Board of Directors elects to issue preferred shares, it could increase the difficulty for a third-party to acquire us, which may reduce or eliminate our shareholders’ ability to sell their common shares at a premium.
Our articles, subject to the corporate law of British Columbia, also authorize our Board to issue series of preferred shares without shareholder approval. If our Board elects to issue preferred 36 shares, it could increase the difficulty for a third-party to acquire us, which may reduce or eliminate our shareholders’ ability to sell their common shares at a premium.
Finally, global climate change may result in certain of these adverse weather conditions occurring more 32 frequently or with greater intensity. If any of these conditions occur, our operations could be interrupted and our earnings may be adversely impacted. Failure to maintain positive relationships with the Indigenous people in the areas where we operate could adversely affect our business.
Finally, global climate change may result in certain of these adverse weather conditions occurring more frequently or with greater intensity. If any of these conditions occur, our operations could be interrupted and our earnings may be adversely impacted.
Additionally, an increased proportion of temporary labor hire resources has the effect of driving up costs due to a lack of efficiency. The nature of temporary labor hire resource positions are short term, with key skills unable to be retained in our lodges and villages due to higher staff turnover.
The nature of temporary labor hire resource positions are short term, with key skills unable to be retained in our lodges and villages due to higher staff turnover.
As of December 31, 2022, we had approximately $29.5 million outstanding under the term loan portion of our Syndicated Facility Agreement (Credit Agreement), $102.5 million outstanding under the revolving portion of the Credit Agreement, $1.4 million of outstanding letters of credit and capacity to borrow an additional $96.1 million under the revolving portion of the Credit Agreement.
As of December 31, 2023, we had approximately $65.6 million outstanding under the revolving portion of our Syndicated Facility Agreement (Credit Agreement), $1.4 million of outstanding letters of credit and an additional $133.1 million in remaining capacity to borrow under the revolving portion of the Credit Agreement.
Many of the areas in which we operate are very remote with limited local supplies, including availability of water, electricity or natural gas necessary to operate our business, and any significant adverse events such as those discussed above could impact our ability to obtain good or services and personnel. 29 In addition, a limited number of potential customers operate in the areas in which our business is located, and occupancy at each of our lodges may be constrained by the radius which potential customers are willing to transport their workers.
Many of the areas in which we operate are very remote with limited local supplies, including availability of water, electricity or natural gas necessary to operate our business, and any significant adverse events such as those discussed above could impact our ability to obtain good or services and personnel.
Customer contract cancellations, reduced customer utilization, the failure to renew a significant number of our existing contracts or the failure to obtain new business would have a material adverse effect on our business and results of operations.
Revenues associated with the 2023 room commitments at the lodge through July 2023 were approximately C$39 million. Customer contract cancellations, reduced customer utilization, the failure to renew a significant number of our existing contracts or the failure to obtain new business would have a material adverse effect on our business and results of operations.
We specialize in providing hospitality services for workforces in remote areas which often lack the infrastructure typically available in nearby towns and cities.
Development of permanent infrastructure in the areas where we locate our assets could negatively impact our business. We specialize in providing hospitality services for workforces in remote areas which often lack the infrastructure typically available in nearby towns and cities.
See Item 1. “Business - Government Regulation” of this annual report for a more detailed description of our climate-change related risks. Risks Related to Our Common Shares The market price and trading volume of our common shares may be volatile. The market price of our common shares has historically experienced and may continue to experience volatility.
Additionally, members of the investment community may screen our ESG disclosures and performance before investing in our common shares. See Item 1. “Business - Government Regulation” of this annual report for a more detailed description of our climate-change related risks. Risks Related to Our Common Shares The market price and trading volume of our common shares may be volatile.
As of February 24, 2023, the West Texas Intermediate (WTI) price was $76.32 and the Western Canadian Select (WCS) price was $60.10, resulting in a discount (WCS Differential) at which WCS trades relative to WTI of $16.22.
As of February 23, 2024, the West Texas Intermediate (WTI) price was $77.54 and the Western Canadian Select (WCS) price was $58.60, resulting in a discount (WCS Differential) at which WCS trades relative to WTI of $18.94.
A variety of regulations at various governmental levels relating to the handling, preparation and serving of food (including, in some cases, requirements relating to the temperature of food), cleanliness of food production facilities and hygiene of food-handling personnel are enforced primarily at the local public health department level.
Future food product recalls and health concerns associated with food contamination may also increase our raw materials costs and, from time to time, disrupt our business. 29 A variety of regulations at various governmental levels relating to the handling, preparation and serving of food (including, in some cases, requirements relating to the temperature of food), cleanliness of food production facilities and hygiene of food-handling personnel are enforced primarily at the local public health department level.
For example, substantial increases in the cost of fuel and utilities have historically resulted in cost increases in our lodges and villages. 30 From time to time, we have experienced increases in our food costs.
For example, substantial increases in the cost of fuel and utilities have historically resulted in cost increases in our lodges and villages. In the last eighteen months, we have experienced a significant increase in our food costs due to global inflationary pressures.
If our ESG disclosures and practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, it could have a material adverse effect on our business or demand for our services. Additionally, members of the investment community may screen companies such as ours for ESG disclosures and performance before investing in our common shares.
If our ESG disclosures and practices do not meet regulatory, investor or other stakeholder expectations and standards, which continue to evolve, it could have a material adverse effect on our business or demand for our services.
Our capitalization and results of operations may change significantly following an acquisition, and our shareholders may not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in evaluating future acquisitions. We may not have adequate insurance for potential liabilities and insurance may not cover certain liabilities. Our operations are subject to many hazards.
Our capitalization and results of operations may change significantly following an acquisition, and our shareholders may not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in evaluating future acquisitions. Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.
A shortage of skilled labor could also result in higher wages due to more expensive temporary hire labor resources that would increase our labor costs, which could negatively affect our profitability. Since the COVID-19 pandemic began, we have been impacted by increased staff costs as a result of hospitality labor shortages in Australia.
A shortage of skilled labor could also result in higher wages due to more expensive temporary hire labor resources that would increase our labor costs, which could negatively affect our profitability.
Also, in certain areas in which we operate, we are required to seek permits from local government agencies in order to build a new lodge or operate an existing lodge on leased land.
Also, in certain areas in which we operate, we are required to seek permits from local government agencies in order to build a new lodge or operate an existing lodge on leased land. We can provide no assurances that we will be able to renew our leases or permits upon expiration on similar terms, or at all.
We have agreed to not renew an expiring land lease associated with our McClelland Lake Lodge in Alberta, Canada, which currently expires in June 2023, to support our customer’s intent to mine the land where the lodge is currently located. In addition, our hospitality services contract at McClelland Lake Lodge expires in June 2023.
We did not renew the land lease associated with our McClelland Lake Lodge in Alberta, Canada, which expired in June 2023, in order to support our customer’s intent to mine the land where the lodge was located.
A component of our business strategy is based on developing and maintaining positive relationships with the Indigenous people and communities in the areas where we operate. These relationships are important to our operations and customers who desire to work on traditional Indigenous lands.
Failure to maintain positive relationships with the Indigenous people in the areas where we operate could adversely affect our business. 30 A component of our business strategy is based on developing and maintaining positive relationships with the Indigenous people and communities in the areas where we operate.
We may not be able to identify and acquire acceptable acquisition candidates on favorable terms in the future. We may be required to incur substantial indebtedness to finance future acquisitions and also may issue equity securities in connection with such acquisitions. Such additional debt service requirements could impose a significant burden on our results of operations and financial condition.
Acquisitions have been, and our management believes acquisitions will continue to be, a key element of our growth strategy. We may not be able to identify and acquire acceptable acquisition candidates on favorable terms in the future. We may be required to incur substantial indebtedness to finance future acquisitions and also may issue equity securities in connection with such acquisitions.
Our reporting currency is the U.S. dollar, and we are exposed to currency exchange risk primarily between the U.S. dollar and the Canadian and Australian dollars. For the year ended December 31, 2022, 97% of our revenues originated from subsidiaries outside of the U.S. and were denominated in either the Canadian dollar or the Australian dollar.
For the year ended December 31, 2023, 98% of our revenues originated from subsidiaries outside of the U.S. and were denominated in either the Canadian dollar or the Australian dollar.
There can be no assurance that we will make repurchases of our common shares in the future. The existence of our share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic growth projects.
The payment of dividends on our common shares or repurchase of shares under our share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic growth projects.
We are susceptible to seasonal earnings volatility due to adverse weather conditions in our regions of operations. Our operations are directly affected by seasonal differences in weather in the areas in which we operate.
If we are unable to renew our leases or permits on similar terms, it may have an adverse effect on our business and results of operations. We are susceptible to seasonal earnings volatility due to adverse weather conditions in our regions of operations. Our operations are directly affected by seasonal differences in weather in the areas in which we operate.
This has been exacerbated by low levels of immigration into Australia and, specifically, an acute shortage of skilled labor. The reduced levels of immigration and shortage of skilled labor has subsequently led to an increased reliance on more expensive temporary labor hire resources and has negatively affected our profitability.
The reduced levels of immigration and shortage of skilled labor subsequently led to an increased reliance on more expensive temporary labor hire resources and negatively affected our profitability. Additionally, an increased proportion of temporary labor hire resources has the effect of driving up costs due to a lack of efficiency.
We may not be able to effect any of these remedies on satisfactory terms or at all, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Currency exchange rate fluctuations could adversely affect our U.S. dollar reported results of operations and financial position.
We may not be able to effect any of these remedies on satisfactory terms or at all, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Legal and Regulatory Risks We do business in Canada and Australia, whose political and regulatory environments and compliance regimes differ from those in the U.S.
The issuance of additional equity securities could result in significant dilution to shareholders. In addition, overpayment of an acquisition could cause potential impairments which could affect our results of operations. We expect to gain certain business, financial and strategic advantages as a result of business combinations we undertake, including synergies and operating efficiencies.
Such additional debt service requirements could impose a significant burden on our results of operations and financial condition. The issuance of additional equity securities could result in significant dilution to shareholders. In addition, overpayment of an acquisition could cause potential impairments which could affect our results of operations.
While we have not experienced a material incident in the last three years, a material cyber-incident could have a material adverse effect on our business, financial condition, results of operations or liquidity. 33 Loss of key members of our management could adversely affect our business. We depend on the continued employment and performance of key members of our management.
While we have not experienced a material cybersecurity incident in the last three years, a material cybersecurity incident could have a material adverse effect on our business, financial condition, results of operations or liquidity. Our business could be disrupted by any failure of our information systems.
Any such changes could apply retroactively to a date prior to the date of our redomestication from Delaware to British Columbia, Canada in 2015. If Civeo were to be treated as a U.S. corporation for U.S. federal income tax purposes, it could be subject to substantially greater U.S. federal income tax liability.
If Civeo were to be treated as a U.S. corporation for U.S. federal income tax purposes, it could be subject to substantially greater U.S. federal income tax liability.
The inability to develop and maintain relationships and to be in compliance with local requirements could have an adverse effect on our business and results of operations. Development of permanent infrastructure in the areas where we locate our assets could negatively impact our business.
These relationships are important to our operations and customers who desire to work on traditional Indigenous lands. The inability to develop and maintain relationships and to be in compliance with local requirements could have an adverse effect on our business and results of operations.
For example, members of Congress from time to time have proposed changes to the Internal Revenue Code, and the U.S. Treasury has taken and may continue to take regulatory action, in connection with inversion transactions. The timing and substance of any such change in law or regulatory action is uncertain.
Treasury regulations promulgated thereunder, or official interpretations thereof, could adversely affect Civeo’s status as a foreign corporation for U.S. federal income tax purposes. For example, members of Congress from time to time have proposed changes to the Internal Revenue Code, and the U.S. Treasury has taken and may continue to take regulatory action, in connection with inversion transactions.
… 35 more changes not shown on this page.