Collin Gerry - Director, Corporate Development Bradley Dodson - President and CEO Frank Steininger - SVP and CFO.

Jess Patel - Clarkson Capital Steven Gengaro - Sterne Agee.

Welcome to the Civeo Corporation First Quarter 2015 Earnings Conference Call. My name is Eric, 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 Collin Gerry, Director of Corporate Development. Mr. Gerry. You may begin..

Thank you, Eric. Welcome to Civeo's first quarter 2015 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 certain listeners regarding forward-looking statements.

To the extent that our remarks today contain information other than historical information, please note that we're relying on the safe harbor provision reported by 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-K and other SEC filings.

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

Thank you, Collin. Good morning to all of you and thank you for joining us today on Civeo's first quarter 2015 earnings conference call.

On the call today, I'll provide an overview of the first quarter results, Frank will walk through the specific results of the quarter as well as the status of the migration and then I’ll discuss each segment and the near-term outlook. Our first quarter results were in the upper range of our previously announced guidance.

We reported first quarter results for our Canadian segment, which reflected sequentially weaker Canadian dollar and lower lodge revenues as we closed the Athabasca lodge in October of 2014. Our Australian segment reported sequentially lower revenues and EBITDA, due to a weakening Australian dollar as well as lower occupancy. And our U.S.

segment reported sequentially lower revenues and EBITDA primarily due to decreased drilling and completion activity with the lower oil prices. On a consolidated basis, we reported revenues of $171 million and $53 million of adjusted EBITDA and adjusted EPS of $0.03 per diluted share.

The adjusted number excludes an impairment charge related to the closure of our U.S. manufacturing facility and migration costs. At this time, I would like to turn it over to Frank to take you through the details of the consolidated results and financial position.

Frank?.

Thank you, Bradley. During the first quarter of 2015, we reported operating income of $4.9 million on revenues of $171 million. Our net loss for the first quarter of 2015 totaled $16,000 or $0.00 per diluted share. This included an after-tax loss of $0.02 per diluted share due to our decision to close our U.S.

manufacturing facility and $0.01 per diluted share for cost incurred in connection with our planned migration to Canada. These results compared to operating income of $52.9 million on revenues of $253 million in the first quarter of 2014. Our net income for the first quarter of 2014 totaled $38.2 million or $0.34 per diluted share.

We recognized income tax expense of $1.2 million for the quarter, which resulted in an effective tax rate of 83% in the first quarter of 2015, compared to income tax expense of $12.3 million and an effective tax rate of 25.3% in the first quarter of 2014.

The increase in the effective tax rate for the prior year was largely the result of a change in the earnings mix between different tax jurisdictions as well as discreet items in the quarter. The company expects its consolidated effective tax rate to approximate 50% for the remainder of the year.

Our gross and net debt levels totaled $775 million and $495 million respectively at March 31, 2015, representing a debt to capitalization ratio of approximately 51%. Our leverage ratio was 2.56 times at March 31. During the first quarter of 2015 we reported cash flow from operations of $49 million, and we invested $11 million in capital expenditures.

As of the end of the first quarter, we had total liquidity of approximately $561 million, compared to $281 million comprised -- sorry, comprised of $281 million available under our credit facilities and $280 million of cash on hand.

For 2015, we're projecting between $75 million and $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 to our securing customer commitments to support the investment and the potential revenues and earnings from these unannounced projects are not included in our full year 2015 revenue and EBITDA guidance. I would now like to take a few minutes to provide an update on the status of our migration to Canada.

We filed an amendment registration statement on Form S4 on April 6, which was declared effective by the SEC on April 7. Our shareholder vote to approve the rebalance selling to Canada will occur at our Annual Shareholder Meeting on May 14. Also we have received required consent of our lenders to amend our existing credit facility.

This amendment will allow for our planned rebalance selling to Canada, provide additional lending capacity in Canada to allow us to substantially reduce both the existing U.S. term loan and the U.S. revolver and increase the maximum leverage ratio allowed under the credit facility.

We’re currently finalizing the documentation of our credit facility with our syndicated bank and expect to complete the documentation before the Annual Shareholder Meeting. This is an important milestone for Civeo since it will allow us to rebalance out in Canada. Also we plan to use our existing cash to significantly reduce our overall indebtedness.

Once finalized, the amended credit agreement will give us the necessary borrowing capacity and access to capital in the same jurisdiction as the majority of our business and allow for better operating flexibility. The amendment to our credit facility will be effective upon the completion of the redomicile into Canada.

Our anticipated timing for completing the migration remains in the second or third quarter of 2015. At this time, I would like to turn the call over to Bradley who will begin with a discussion of our segments and more comprehensive outlook on the first quarter and an update on our strategic initiatives.

Bradley?.

Thank you, Frank. I'll start with our Canadian segment. Our Canadian segment revenues were down sequentially by $34 million from the fourth quarter of 2014 to $151 million. Adjusted EBITDA decreased from $56 million in the fourth quarter of 2014 to $37.5 million in the first quarter of 2015.

The revenue decrease is primarily due the weaker Canadian dollar, negatively impacting first quarter revenues by $10.8 million; and the closure of the Athabasca lodge, negatively impacting the quarter revenues by $4 million as well as lower occupancy at several other lodges.

The EBITDA decrease was primarily driven by unfavorable Canadian dollar movements and an impact of $3.4 million, lower earnings out of Athabasca lodge and lower occupancy at our other Canadian oil sand lodges.

RevPAR decreased on a sequential basis from $96 a day to $74 again due to the weaker Canadian dollar and the closure of Athabasca lodge and lower overall occupancy. The lower occupancy and RevPAR sequentially drove the decrease in lodge revenues for the quarter. Moving to operations, our new McClelland Lake lodge is fully ramped up.

At the end of the first quarter we had our planning capacity of 1,997 rooms operational. Consistent with our investment strategy, we invested in the McClelland Lake lodge on the basis and supported by a three-year contract for the majority of that initial capacity.

We’re looking forward to Mike Ridley joining us next week as our Senior Vice President of our North American Division. Mike's industry experience and successful track record in the modular building sector make him an outstanding addition to our Executive Management Team.

I am confident with Mike and our existing Leadership in Canada, will continue to advance our presence in North America and further enhance the service delivery capabilities that our clients have come to rely on from Civeo.

Turning to the outlook, the environment in Canada continues to be challenging with low oil prices and constrained customer spending in the oil sands region. As we exited the first quarter customer capital spending were finalized and did begin to see some incremental short-term demand for accommodations in the oil sands region.

As announced earlier this week we were awarded a contract related to a turnaround project allowing us to reopen the Athabasca lodge for the second quarter of 2015. In addition we want to build for sale contract for our 327 room lodge and an extension to a catering contract.

While the volumes are lower, we continue to win contracts with multi-year terms like the recent McClelland extension through 2017 at Wapasu. Since our fourth quarter earnings call last month, our contract room position for 2015 has not materially changed. As a result we’re maintaining our full year expectations.

Assuming a Canadian dollar exchange rate of 0.8 for the second quarter, our guidance for Canadian operations is $90 million to $95 million of revenues, and EBITDA of $20.5 million to $23.5 million.

The second quarter guidance assumes 12,000 rentable rooms, lodge occupancy up 58% to 60% with an average daily rate of approximately CAD143 per day to a CAD145 per day.

Assuming a full year exchange rate of 0.8 for the Canadian dollar, our full-year 2015 guidance for our Canadian operations is $350 million to $375 million of revenues and EBITDA of $95 million to $110 million.

This full-year guidance assumes 10,350 rentable rooms, lodge occupancy of 61% to 63% with an average daily rate of approximately CAD140 to CAD147. The reason that our occupancy and average daily rate guidance is based off of rentable rooms, which excludes rooms that are used for staff and those rooms in closed lodges.

Our operational focus in Canada remains capturing market share, drive occupancy in our lodges and continued vigilance on operating cost and capital spending. We've taken many steps to arrest the chances of this market, while we continue to pursue incremental revenue.

In Australia, first quarter revenues and EBITDA margins were both slightly lower sequentially. Our Australian segment revenues were down $7.6 million, half of which was attributable to the weakening Canadian dollar, reduced occupancy and grow the remaining decrease.

Adjusted EBITDA was $20.7 million, a decrease of $4.3 million half of which was attributable to the Canadian -- weakening Australian dollar with reduced occupancy driving the remaining decrease.

We continue to manage operational capital spending -- operational cost and capital spending in Australia in light of the current met coal pricing and customer spending outlook. Our outlook for our Australian operations remains largely unchanged since our last earnings call last month aside from the weakness in this Aussie dollar.

The Bowen Basin continues to be oversupplied for rooms relative to the current net coal mining activity. As such we’re forecasting marginally lower occupancy in rooms nights for the balance of 2015. Occupancy in our New South Wales locations continues to decline as customers move from two operations from construction.

We’re forecasting our occupancy to stabilize in this region in the second half of 2015. Assuming an Australian dollar exchange rate of $0.75 for the second quarter, our guidance for our Australian operations is $32 million to $35 million of revenues and EBITDA of $14 million to $15 million.

This second quarter guidance assumes rentable rooms of 8,780, village occupancy of 54% to 56% with an average daily rate of approximately $101 to $104 in Aussie dollars. Our full year 2015 guidance remains unchanged assuming a full-year exchange rate of $0.76 for the Australian dollar.

Our full-year guidance for our Australian operations is $127 million to $125 million of revenues and EBITDA of $59 million to $62 million. This full-year guidance assumes rentable rooms of 8,860, village occupancy of 52% to 54% with an average daily rate Australian dollars of $99 to $102. Finally in the U.S.

revenues were down $7.5 million sequentially with adjusted EBITDA down approximately $1.9 million due to reduced drilling and completion activity, largely driven by lower oil prices. Our U.S. operations are being impacted by the swift reduction in U.S.

drilling and completion activity and we’re working to further reduce our cost structure and aggressively pursuing market share. On a consolidated basis, we're establishing our second quarter guidance of revenues of $135 million to $144 million and EBITDA of $29 million to $33 million.

We're maintaining our full-year 2015 guidance for revenues of $520 million to $560 million and EBITDA of $130 million to $150 million. In conclusion, our operating results in the first quarter were at the top end of our quarterly guidance. And we have set our second quarter guidance and are maintaining our full year guidance for 2015.

We're aggressively working to fill rooms, pursuing incremental work for our mobile fleet and we continue to focus our cost cutting efforts in each of our markets. Our focus remains on maximizing free cash flow, pursuing organic growth and completing the migration to Canada.

As we mentioned, we’ve seen incremental demand for short-term occupancy in Canada and continue to aggressively chase this work. We're pursuing expansion in our core markets with a near-term focus on Canada, which includes opportunities in the in-situ region of the oil sands play, as well as those in the British Columbia LNG markets.

Longer-term, we expect to capitalize on additional organic growth opportunities in Australia. We remain the 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 may present.

Finally due to the SEC's proxy solicitation rules we will not be taking questions regarding the migration. That completes our prepared comments. Eric, would you please open up the call for questions at this time..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Jeffrey Patel from Clarkson Capital. Jeffrey, please go ahead..

Good morning, Bradley, Frank, Collin..

Good morning..

Maybe if can -- hey fellows, if we could start off and I’m sorry if I missed this Bradley, I’m juggling a few calls. But maybe if you could take us inside your dialogue with customers up in Canada. And a couple of questions I guess.

Number one, are you getting the sense that you need to see a meaningful recovery in crude prices for them to start revisting project expansioning or could their decision making be simply impacted a little bit more by seeing some stabilization and not feeling like the bottom is going to fall out of crude prices?.

Good question I’ll divide it up into two categories.

For some of the maintenance work and turnaround work and a sustaining capital work I think the big factor we’ve seen is more getting a handle on -- our customers internally getting a handle on what they are spending capabilities and our authorization are and so we started to see some of that work get dead and awarded in the first quarter going in the second quarter and we’re pleased to win the work to open up Athabasca.

As it relates to new projects, that one I believe we do need to see, it really depends on what type of project I think for some of the in situ project stabilization is helpful and could help me with some of those projects forward for expansionary mining project in the oil sands region.

I do think we need to see a further recovery in oil prices before those start to shake free and start to move forward and in terms of BC LNG market there I think we’re just waiting to see either of the two major projects whether it’s the Furnace’s project or Shells project and their partners as those start to move forward.

So on that side of things, we’re well positioned in the BC LNG market to participate in either projects. We’re in active dialogue along those projects and are hopeful that they move forward with their decision to invest in the projects and then hopefully we’ll be successful in winning some work..

Appreciate that color and then maybe following on to that, in past downturn in the oil sands, we’ve seen the customers be fairly nimble or adjust their cost structure.

I guess can you give us a sense of how quickly your understanding is as to how that process is unfolding for them and obliviously that would add some sort of impact down the road?.

It was very swift Jeff, we saw that almost on January 2 during the first quarter. It was a quick movement by the customer base to adjust their cost structure.

The way we address it with them on contracted rooms was first and foremost to look at ways that we could adjust the scope of what we do for them that could save us cost and save them cost as well.

The principal way we do that is around the cleaning schedule of the rooms moving to either every other day or once a week type cleaning schedule depending on what the customer wants to do can save us lot of money and save them a lot of money.

As it relates to kind of pure pricing changes, typically we handle, actually exclusively we handled those by training some price decreases with additional volume. And we were very successful in working with our customers to do that.

So it was -- January and February were very busy with the customer base in terms of working through those type issues I think those are largely behind us. So I think at this point we’ve worked through much of that..

Outstanding, thanks for your time Bradley..

Good to talk to you, Jeff..

And our next question comes from Steven Gengaro from Sterne Agee. Steven please go ahead..

Thanks. Good morning, guys..

Good morning..

I guess to follow-up on the prior question and then maybe add one. But on the LNG front in Canada you mentioned the two projects.

What’s your best guess right now as far as is this a '16 event or later?.

My hope Steven is that it is award event in 2015 but to your point, in terms of meaningfully impacting our P&L it’s a 2015 event maybe a little bit in the fourth quarter, but primarily a 2016 event of earnings..

Yes exactly and is the competition for those jobs similar to what you face in the other parts of Canada?.

Yeah it would be the same list of competitors that we compete in the oil sands region. We’re all active and pursuing that work. The one piece of the work that I neglected to mention when answering Jeff’s question was the other piece that’s been actively out in the market is around the pipeline work to support the LNG.

So we’re actively pursuing that as well..

Okay. Thank you and then the other question I had it has to do with the 2015 guidance. And I know you originally gave guidance you gave some parameters on sort of contracted rooms and then occupancy embedded in your guidance. And it seems like from this contract awards you’ve filled in some of those holes.

Any update specifically on where you stand on your guidance versus what’s booked right now?.

We've filled in some and really implicitly in our guidance what we’re seeing is little bit stronger Canada and originally thought a little bit stronger Australia then originally thought and the U.S. being a lot weaker than we initially thought as we gave guidance.

But all in all, the modest improvement relative to initial budgeting or forecasting and that was the basis for our December guidance. We’re doing a little better in Canada, little bit better in Australia and the U.S. has been a very difficult market. The falloff in the U.S.

rig count has been precipitous that it is obviously impacting overall volumes of rentals whereas on the units and the pricing has been -- has reacted negatively very quickly.

So all in all, the guidance we’ve been able to maintain full year guidance, but there’s been a real -- a little bit of mix shift there, but we’re starting to fill in some of the uncontracted guidance if you will from the original guidance data late December.

So I feel like the team has done a very good job of hassling to capture the work that is available out there..

Okay. Thank you. That’s helpful..

And our next question comes from [Stephan Gibson from Altfort Capital] [ph]. Stephan, please go ahead..

Good morning..

I’m just wondering if you could….

I’m apologize I’m having a very high time hearing the question.

Could you repeat it please?.

Can you hear me now?.

Yeah, that’s much better. Thank you..

Sorry guys.

Could you guys set your relative strength in Kitamaat versus French or Burton if you're seeing any differences between the two?.

Well we have land bank in several locations in the BC LNG market including Kitamaat and Port Edward as well as another locations and I would say that right now for us, our strength is modestly better in Kitamaat market than in the Port Edward model, but we feel like we've got a good position in both..

Okay. Sounds good..

[Operator Instructions] And we have no further questions at this, oh, I’m sorry. Our next question comes from [Shenal Patel from Blue Lake Ridge]. Shenal, please go ahead..

I would like to ask you a question about it is -- I don’t know I got in the conference call a little late but I don't know if it was already address or not if there is any future pursuit the size of your contract later this year, any other contracts that might be coming up in the future that would be -- that would draw the bottom line for the company?.

Sure, well as we -- as I alluded to we’re pursuing opportunities in the British Columbia markets around LNG developments there. We’re hopeful and obviously it's dependent on customer timing and ultimately customers deciding to move forward with their projects.

But we’re hopefully and to receive an award middle part of this year, either on the LNG Canada project or on Petronas project and I would be potentially additive to fourth quarter results but certainly much more meaningfully additive to 2016 results..

Okay.

So enough info as far as third quarter?.

Well, those -- as I mentioned, those awards could happen in either second or third quarter of last year as shown on the timing we know today..

Okay.

And what is the probability -- can you say like how big is the competition for those contracts?.

Well as we talked about, we have the same competitors that we face in the oil sand region. We feel like we have done a good job of land banking in the key markets where these product where we could serve these projects, but ultimately it’s too tough to handicap at this point..

Okay..

Principally it still depends on the customers agreeing or move forward with their project. So it’s difficult to handicap at this point..

Thank you. So thank you, that’s it, that’s all my questions..

Thank you..

And we have no further questions at this time..

Well, thank you all for joining us. I know it’s a busy day and a busy week for earnings. So appreciate your interest and support in Civeo. We look forward to talking to you on the next earnings call or in between. Thanks so much..