Carolyn Stone - VP, Controller and Corporate Secretary Bradley Dodson - CEO Frank Steininger - SVP & CFO.

Stephen Gengaro - Sterne Agee Blake Hutchinson - Howard Weil Phillip Pennell - Mariner Investment Group.

Welcome to the Civeo Corporation Fourth Quarter 2014 Earnings Conference Call. My name is Vivian and I'll your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. I'll now turn the call over to Ms.

Carolyn Stone, Vice President, Controller and Corporate Secretary. You may begin..

Thank you, Vivian. Welcome to Civeo's fourth quarter 2014 earnings conference call. Our call today will be led by Bradley Dodson, Civeo's President and Chief Executive Officer and Frank Steininger, Senior Vice President and Chief Financial Officer. Before we begin, we would like to caution listeners regarding forward-looking statements.

To the extent that our remarks today contain information that isn’t historical information, please note that we're relying on the safe harbor provision of Federal Law. Any such remarks should be read in the context of the many factors that affect our business including those risks disclosed in our Form 10 and other SEC filings.

I'll now turn the call over to Bradley..

Thank you, Carolyn. Good morning to all of you and thank you for joining us today on Civeo's fourth quarter 2014 earnings conference call. On the call today, I'll provide an overview of the fourth quarter results, Frank will walk through the specific results of the quarter and then I'll discuss each segment and the near-term outlook.

Our fourth quarter results exceeded our previously provided guidance. Our reported fourth quarter results for our Canadian segment reflected sequentially weaker Canadian dollar and lower lodge revenues as we closed the Athabasca lodge in early November 2014.

Our Australian segment reported sequentially lower revenues and EBITDA, almost entirely due to the weakening Australian dollar. Our U.S. segment's revenues were sequentially higher due to offshore revenue, but adjusted EBITDA was down slightly due to lower realized margins.

On a consolidated basis, we reported revenues of $220 million and excluding the impairment charges and other items $78 million of adjusted EBITDA and adjusted EPS of $0.19 per diluted share. At this time, I would like to turn it over to Frank to take you through the details of the consolidated results and our financial position.

Frank?.

Thank you, Bradley. During the fourth quarter of 2014, we reported an operating loss of $258 million on revenues of $220 million. Our net loss for the fourth quarter of 2014 totaled $271.6 million or $2.54 per diluted share.

This included a number of items including a $2.37 per diluted share after-tax loss from goodwill, fixed asset and intangible asset impairments.

A $0.33 per diluted share after-tax loss from the establishment of a deferred tax liability related to a portion of our undistributed foreign earnings, which we no longer expect to definitely reinvest and evaluation allowance against certain deferred tax assets and a $0.03 per diluted share after-tax loss from transition cost incurred in connection with the spinoff of Civeo from Oil States and the proposed migration to Canada.

In the fourth quarter, we conducted our annual review of a carrying value of our goodwill balances. In light of the current outlook for net coal mining and U.S. drilling and completion activities, we determine that the goodwill associated with our Australian and U.S. operations was fully impaired and we recorded a pretax charge totaling $202.7 million.

Further, we recorded an impairment charge for certain fixed assets and intangible assets in both Canada and the U.S. totaling $76.2 million pre tax. Excluding this cost, adjusted operating income, net income and earnings per share would have totaled $24.4 million, $18 million and $0.17 per diluted share respectively.

These results compared to operating income of $63.7 million on revenues of $258 million in the fourth quarter of 2013. Our net income for the fourth quarter of 2013 totaled $45.7 million or $0.43 per diluted share.

We recognized income tax expense of -- recognized income tax expense of $15 million, which resulted in an effective tax rate of a negative 6% in the fourth quarter of 2014, compared to income tax expense of $12.7 million and an effective tax rate of 21.7% in the fourth quarter of 2013.

The negative effective tax rate in the fourth quarter of 2014 is primarily due to the effect of the non-deductible goodwill impairment charges, the establishment of a $23.7 million deferred tax liability related to a portion of our undistributed core earnings, which we no longer expect to indefinitely reinvest and an $8.9 million evaluation allowance against certain deferred tax assets.

Our gross and net debt levels totaled $775 million and $512 million respectively at December 31, 2014, representing a debt to capitalization ratio of approximately 47%. Our leverage ratio was 2.26 times at December 31.

During 2014, we reported strong cash flow from operations of $291 million, and we invested $251 million in capital expenditures, the large component of which related to the newly constructed McClelland Lake facility in Canada.

At the end of the fourth quarter, we had total liquidity of approximately $686 million, comprised of $422 million available under our credit facility and $263 million of cash on hand. For 2015, we are projecting $75 million to $85 million of capital expenditures, compared to $251 million in 2014.

Our 2015 CapEx guidance excludes approximately $50 million of discretionary spending. These discretionary projects are subject our securing customer commitments to support the investment, and the potential revenues and earnings from these unannounced projects are not included in our full 2015 revenue and EBITDA guidance as Bradley will discuss later.

I would like to take a few minutes now to provide an update on the status of our migration to Canada. We filed the initial registration statement on Form S4 with SEC on December 31. We expect to file an amendment in the first few weeks -- in the next few weeks and shareholders -- we'll incur our Annual Shareholder Meeting on May 14.

We are currently working with our bank syndication on the refinancing of our credit agreement, which we expect to complete in the second quarter of 2015. Our anticipated timing for completing the migration remains in second or third quarter of 2015.

At this time, I would like to turn the call over to Bradley, who will begin with the discussion of our segments, and more comprehensive outlook for the fourth quarter, and an update on our strategic initiatives.

Bradley?.

Thank you, Frank. I'll start with our Canadian segment. Our new McClelland Lake lodge continues to ramp up. At the end of the fourth quarter, we had 1,888 rooms operational and had our planned capacity of 1,997 rooms operational just after year-end.

Consistent with our investment strategy, the McClelland Lake lodge investment is supported by a three-year contract for the majority of that initial capacity. Moving to operations, our Canadian segment revenues were down sequentially by $24 million from the third quarter of 2014 to $151 million.

Adjusted EBITDA decreased from $67 million in the third quarter of 2014 to $56 million in the fourth quarter. Revenue decrease is primarily due the weaker Canadian dollar, negatively impacting fourth quarter revenues by $6.4 million; and the closure of the Athabasca lodge, negatively impacting quarterly revenues further by $13 million.

These negative revenue impacts were partially offset by sequentially higher revenues at our McClelland Lake lodge. The EBITDA decrease was primarily driven by the unfavorable Canadian dollar movements, and impact of approximately $2.4 million. Lower earnings from the Athabasca lodge partially offset by contributions from McClelland Lake lodge.

RevPAR decreased on a sequential basis from $112 a day to $96 a day, again due to the weaker Canadian dollar and the closure of the Athabasca lodge. The lower occupancy and RevPAR sequentially drove the decrease in lodge revenues for the quarter.

Turning to the outlook for our Canadian operations, the outlook in the Canadian oil sands region continues to be challenging. Since our 2015 guidance call in December, there has been little incremental demand for accommodations, and our visibility remains limited beyond the first quarter.

We have been successful in securing some additional short-term work. However, the market remains oversupplied for rooms, extremely competitive and price sensitive. Our primary contractual commitments in Canada are at the McClelland Lake and Wapasu locations supporting the Fort Hills and Kearl projects respectively.

We expect that demand for our rooms in the Wapasu region will decline throughout the year as both the Kearl and Sunrise projects move into operations, coupled with limited incremental project work expected in the area. At our Conklin and Anzac locations we have limited visibility for additional room demand after spring breakup.

Since our guidance call in December, our contracted room position has not materially changed. As a result, we are maintaining our first quarter expectations and lowering our full-year expectations due to the weakening Canadian dollar.

Assuming that Canadian dollar exchange rate of 0.80 for the first quarter, our guidance for Canadian operations is $110 million to $120 million of revenues, and EBITDA of $30 million to $40 million. This first quarter guidance is since lodge occupancy at 53% to 55% with an average daily rate of approximately $155 to $175 Canadian dollars per day.

Assuming a full year exchange rate of 0.79 for the Canadian dollar, our full-year 2015 guidance for our Canadian operations is $330 million to $360 million of revenues and EBITDA of $90 million to $100 million.

This full-year guidance assumes lodge occupancy of 42.5% to 44% with an average daily rate of approximately $145 to $155 Canadian dollars per day.

Our operational focus remains on capturing market share and driving occupancy in our lodges, continuing to address our operational and overhead cost structure, and limiting capital expenditures where we can. As we move into the second quarter, we will assess the need to further locations if the outlook for occupancy does not improve.

To this end, we are currently plan to temporarily close the Henday lodge at the end of this month and continue to assess the potential flow-through of other locations. We believe that we've taken the necessary steps to position the company for this difficult market, and we'll continue to pursue incremental revenue and adjust our spending accordingly.

Moving to Australia, our fourth quarter revenues were slightly lower sequentially and EBITDA margins remained flat. Our Australian segment revenues were down $4.6 million, the majority of which was attributable to the weakening Australian dollar.

Adjusted EBITDA was $25 million, a decrease of $2.1 million, which again was almost entirely attributable to the weakening Australian dollar. Our outlook for our Australian operations largely remains unchanged since our initial 2015 guidance aside from the weakness in Aussie dollar.

We continue to manage our operational and capital spending in Australia in light of the current met coal pricing and customer spending outlook. For our Bowen Basin locations, we expect some occupancy in rate declines, oversupply of accommodations exist in several markets in that basin.

In our New South Wales locations Boggabri and Narrabri, our major customers are shifting from construction to operations, requiring fewer personnel and therefore fewer accommodations. This coupled with lower coal seam gas drilling in the region has likewise created an oversupply market putting pressure on occupancy and rates.

Moving to the guidance and outlook. Assuming an Australian dollar exchange rate of 0.79 for the first quarter, our guidance for our Australian operations is $40 million to $45 million of revenues and EBITDA of $20 million to $22 million.

This first quarter guidance is assuming the Civeo's occupancy of 61% to 63%, with an average daily rate of approximately $101 to $102 Aussie dollars per day.

For the full-year, assuming a full-year exchange rate of 0.77 for the Australian dollar, our full-year 2015 guidance for Australian operations is $135 million to $145 million of revenues and EBITDA of $55 million to $65 million.

This full-year guidance assumes Civeo's occupancy of 53% to 55% with an average daily rate of approximately $99 to $102 Australian dollars per day. Lastly, moving to the U.S. operations, revenues were up $4.6 million due to offshore fabrication sales. However, adjusted EBITDA was down $1.9 million due to the lower mix of margins. Our U.S.

operations are being impacted by swift reduction in U.S. drilling and completion activity. We are working to further reduce our cost structure and we are aggressively pursuing market share.

In summary, on a consolidated basis, we are maintaining our first quarter guidance of $160 million to $175 million of revenues, and $45 million to $55 million of EBITDA. We are adjusting our full-year guidance to reflect the 10% weaker Canadian and Australian dollars.

As such, we are expecting full-year 2015 revenues of $520 million to $550 million, and full-year 2015 EBITDA of $130 million to $150 million. In conclusion, our operating results for the fourth quarter exceeded our previously provided quarterly guidance. We are maintaining our first quarter guidance for 2015.

And we have adjusted our full-year 2015 guidance to reflect the currency movements. We are aggressively working to fill rooms, pursuing incremental work for our mobile fleet and working on rightsizing our cost structures in all markets. We are pursuing expansion in our core markets with a near-term focus on Canada.

We are pursuing opportunities in the in-situ region of the oil sands play, as well as those in the B.C. LNG markets. Longer-term, we expect to capitalize on additional organic growth projects in Australia, and consolidation opportunities in all of our core markets.

Our focus remains on maximizing free cash flow, pursuing organic growth and completing the migration to Canada. We remain a leader in workforce accommodations in our markets, and have a plan to improve our financial position to weather this downturn in activity, as well as capitalize on the opportunities that it will present.

Due to the SEC's proxy solicitation rules, we will not be able to take questions regarding the migration. And that completes our prepared comments. Please open up the call for questions at this time..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Stephen Gengaro from Sterne Agee. Please go ahead..

Thank you. Good morning, guys..

Good morning, Stephen..

A couple things on the balance sheet side to the extent you can give some color. We've been working under sort of the loose expectation that you'll have lower debt levels, but kind of similar interest cost as the cost of debt rises with a refinance.

Is that still kind of in the realm of a fairly good expectation?.

It is, Stephen..

Okay. And then….

We expect with the migration we'll be able to more efficiently use the existing cash balances to reduce the overall debt load. And so, very much your point, aggregate debt goes down, interest cost rate goes up, but on average the total dollar amount of interest expense going forward should be about the same. That's right..

Thanks.

And then, when you look at the EBITDA guidance you have for 2015, and then obviously other cash cost and capital expenditures, to balance sort of the equation how, Frank, should we think about working capital, cash -- potential cash generation in '15?.

We've said previously that when obviously revenues were down, working capital will reduce naturally and the focus of ours, as I mentioned, to maximize free cash flow. I would put a conservative estimate in terms of cash flow from working capital changes in 2015 to be in the range of $10 million to $20 million..

That's exactly right. Yeah..

Okay. Thank you. And then just one final operational question.

Any updates on the Western Canadian opportunities?.

Well, as I alluded to, we've secured a handful of smaller projects in Canada. And as we entered into this year, the difficulty we had not only in the budgeting process, but then also in providing that initial 2015 guidance is that there was limited visibility on the shorter term work. Once some turnaround work recently that will be helpful.

We've won some additional work in the area that we're hopeful to announce soon, but generally it's still a tough market. We're pleased to have the work that we do have at McClelland and Wapasu. The closure of Athabasca and moving demand we have in that region over to big river has worked that's planned.

The work in the in-situ area passed, which is Conklin and Anzac passed spring breakup of going into the second quarter is limited right now and was hard to assess that. So there are some projects that are moving forward, but again it's very competitive out there.

There is each incremental piece of work that's being put out the bit by our customers and we're having to compete usually with several competitors not only on price, but we got to position our locations accordingly. We do have excellent services. In many cases, we're better.

We have a better location either from the quality of the service or assets or even the location of the asset or location itself. So its competitive market, but I think that we're winning fair amount of work that's out there. There is just not a lot out there..

Okay. Thank you..

And our next question comes from Blake Hutchinson from Howard Weil. Please go ahead..

Good morning..

Good morning..

Good morning..

I just wanted to -- starting with Australia and your first quarter utilization guidance versus kind of full year running at above 60% rate, just want to be point of clarification here I guess, I didn't think there was anything necessarily running off from a kind of physical contracting standpoint is the 60 plus for the first quarter kind of representative of your commentary around doing a little bit better in the current market, but a long dated visibility runs out? So in essence you are tracking a little bit better.

In 1Q, but you're just out of in conservatism kind of pulling that out for the rest of year or is there something physically you know will take you down to the 50s starting 2Q, 3Q?.

Where we're coming from is kind of occupancy in Australia in the back half of this year in the high 60s. So it is coming down slightly. And again the biggest piece of that lake is the movement from construction activity to operational activity in the Gunnedah Basin of New South Wales and our locations of Boggabri and Narrabri.

There are some role-offs, I would call them generally minor role-offs or magnitude of 250 to 500 rooms in the Bowen Basin in the middle part of this year that we need to see those renewals that we've taken a fairly conservative approach to those renewals as it relates to our full year guidance, but the major driver is the Gunnedah Basin with some conservatism around renewals in the Bowen Basin..

Great, that’s excellent, what I was looking for.

And then taking your 1Q Canadian commentary and just kind of applying it to the mobile accommodations business for I guess, lack of better term, would that imply starting the year somewhere around half of which you did in 4Q for the mobile business?.

I know there -- I have to look at where it was sequentially, but it was definitely about half of what we did last year year-over-year going into the fourth quarter -- given into the fourth quarter given that typically that work is bit out kind of late summer, early fall for anything from [such] [ph] drilling projects, pipeline projects etcetera.

We knew that this 2014, 2015 winter drilling or winter activities season in Canada was going to be challenging and it has been. So it is fairly limited and we did see that as we entered into September, October..

Okay. And you mentioned in the release that you're entering '15, it sounds like with your cost structure where you wanted to be.

Is there anything notable with regard to what we should see coming out of the cost structure in terms stuff you would care to call out or is it more just you're rightsizing at an appropriate pace for the current book of business?.

Well, what we've tried to do is very pragmatic about the cost structure based on the outlook and as obviously as we went into September and made the announcement we thought that 2015 was going to be materially weaker we made a cost structure adjustment at that point including the closure in the fourth quarter of both Lake Side and Athabasca locations.

We will have to see as I said that the visibility is fairly limited after the first quarter, particularly federal locations outside of McClelland and Wapasu. And so we have to make further cost structure adjustments. I think they're largely behind us, but we may have to make some additional ones.

Our focus now really is how do we become more efficient? We have to make some very difficult and unfortunate changes to headcount into the cost structure. I would say that's fairly force in nature.

Now we need to be very intelligent about how we really step back and look at our processes and see how we can we reduce the cost of delivering a high level of services in our operations and that's actually a process we've begun probably nine months ago, but certainly in this market has exceedingly higher importance as we look to reduce our cost structure and then ultimately in order to remain cost competitive with our customers who are facing the need to reduce their cost as well..

Great. And then just clarification on the 50 million of discretionary expenditure, it sounds like that would pretty much be earmarked towards the possibility of an in-situ project maybe a 500 room in-situ project and if that happens or doesn’t happen in terms of that cash being spent..

It would be in-situ. It also -- we continue to be I guess cautiously optimistic around British Columbia LNG projects both on the pipeline construction side as well as on the terminal construction side. So if were to -- and again all of that $50 million will necessitate customer contracts. So we will not be doing that speculatively.

We will need a signed customer contract in hand to spend that money..

Okay great. Thanks for the time. I’ll turn it back..

Thank you, Blake..

And our next question comes from Phillip Pennell from Mariner Investment Group. Please go ahead..

Thanks for taking my question. I guess on the U.S. side you guys commented that you've seen more radical I guess reductions in capital spending on the exploration side.

What is your view in terms of where that market is going on accommodations specifically in terms of like the Bakken or the Eagle Ford where there is not a lot of places for people to stay if they're going to be up there actually doing work..

Sure so just to put it in context, the U.S. side of our businesses is less than 10% of our revenues and even less so of the EBITDA projections. What we provide in the U.S.

is where we have four open lodge locations, two in the Bakken, one in the Eagle Ford, one in West Texas and then we also provide well side accommodation primarily in the Bakken and through the Rockies. We also have a small offshore accommodation out of Louisiana.

The biggest impact we've seen thus far has really been around the well side units and a reduction in utilization, as well as a reduction in rate and what we're trying to do is be responsive on the rate side to garner the work that's out there.

If there is I guess underlying question, but not presumed, there is still some work in the Bakken, we're seeing that, we're chasing that aggressively out there.

Our Bakken locations have stayed up fairly well, but we’re trying to be pragmatic about the fact that the rig count is down from say somewhere around 1,925 at the most recent 1,925 in the most recent peak to now below 1,200 rigs and likely headed below a 1,000 at least and in some cases on third-party research probably somewhere between 800 and 900 rigs.

So, we recognize that there’s going to be a significant impact to the U.S. drilling and completion activity. We don’t have a business mix in the U.S. that touches all the markets. So we have to be cognizant of what’s happening in those specific market dimensions. So generally we’re expecting U.S.

to be down pretty significantly year-over-year from both a revenue standpoint as well as from a margin and EBITDA standpoint..

Right and thanks for that and I guess from my perspective, what I was trying to get at to a certain extent right on the Bakken is if you look at what companies have been saying and obviously there’s a lot of completion work that’s been mothballed or inventoried if you will.

And so I guess it’s a question of how do you manage to stay in the game for the event that in the second half when the decline rate is going to kick in and company starts doing these completions then they staff back up to do that here and there to kind of pick up a business?.

Well, at this point we can maintain profitable although at lower profitability levels our operating locations in those markets; had to make headcount reductions in those markets to do so. But I think that allows us to your question to stay in those markets and should things improve later on in the year, we’ll be able capitalize on it.

But we’ve been able to -- we’ve not had to completely exit before time on specifically the Bakken. We've not completely exited that market and so we are in a position to take advantage of that should things improve later on..

Great, thanks..

And we have a follow-up question from Stephen Gengaro from Sterne Agee. Please go ahead..

Thanks. Guys, just one quick one you were talking in the past I believe about kind of an exit rate EBITDA margin kind of in the low 20s I believe.

Is that still a reason of a benchmark?.

Yes..

Okay. Thank you..

[Operator Instructions] Now I am not showing any further questions at this time. I’ll now turn the call back over to Bradley Dodson for closing remarks..

Thank you Vivian, and well we thank you everyone listening in on the call today. Look forward to speaking with you both during the quarter and at the first quarter earnings call. So thank you everyone..

And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect..