Q4 2020 Civeo Corp Earnings Call
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Please standby.
Good day, everyone and welcome to the city of corporations fourth quarter, 'twenty and 'twenty earnings call. Today's call is being recorded and at this time I would like to turn the conference over to Rick and Nielsen Director of corporate development and Investor Relations. Please go ahead Sir.
Thank you and welcome to city of its fourth quarter 2020 earnings Conference call.
So the air call will be led by Bradley Dodson, <unk>, President and Chief Executive Officer, and Carolyn and John <unk>.
<unk> Senior Vice President and Chief Financial Officer Treasurer.
Before we begin we would like to caution listeners regarding forward looking statements. So the ex.
And that our remarks today contain the information other than historical information. Please.
But we're one of them the safe harbor protections afforded by federal law.
And you touch remarks should be right and the context of of the many factors that affect our business, including the risks disclosed in our form 10-K, 10-Q, and other SEC filings I will now turn the call of the Bradley.
Thank you Reagan and thank you all for joining us today on our fourth quarter earnings call. We hope that you shouldn't your loved ones are staying safe and well the.
And we're thinking of our employees customers and stakeholders, who are affected by the historic winter weather last week, and Texas and the surrounding states, we hope you're all safe work and getting to recover.
And again.
I have on all of the earnings call since the pandemic started by emphasizing that at city of the.
Safety and wellbeing of our employees guests and contractors is always our top priority.
For today's call I'll start with the key takeaways and then give a brief summary of our fourth quarter and full year performance cash.
And will then provide the financial and segment level review.
And I'll conclude with our initial full year 2021 guidance and regional underlying assumptions to that guidance as well as some directional commentary as we prepare for a post COVID-19 world.
And then we will open up the call for questions.
The key takeaways from our call today are.
So it is business continues to generate cash which is furthering our ongoing debt reduction efforts.
For the full year of 2020 video generated $111 million of free cash flow and increase of 119% year over year and.
Reduced our total debt during 2020 $508 million to end of the year at $251 billion.
Total debt.
This is really the key point from the press release and this earnings call.
Our fourth quarter results were modestly better than we were expecting and.
And the fourth quarter severe delivered 20 people and $7 million of adjusted EBITDA and $33.2 million of free cash flow.
We reduced our total debt by $21 $5 million and the fourth quarter and raised our leverage ratio down to two one times.
As of December 31, 2020.
Delevering, our balance sheet remains our top financial priority and this quarter is the seventh straight quarter that the leverage ratio has come down.
We also had another successful quarter in terms of new contract awards and extensions and today, we announced three contract renewals and the Australian business with the expected total revenues of $101 million, Australia over the two year terms.
Australia business had another good quarter, delivering adjusted EBITDA of $17 $2 million.
9% improvement year over year on robust room demand and our team's operational execution.
Despite typical holiday downtime and the fourth quarter our operations in Canada are showing early signs of normalization from the negative impacts of the lower oil prices are.
Our customers of gradually mobilize the employees and contractors as the worst of the impacts of the pandemic appear to be abating.
In total our team put together a solid fourth quarter and despite the challenges of the pandemic and a weaker oil price environment of 'twenty and 'twenty.
And I'll take the moment of a variety of business update on the increased headwinds.
And in Canada of revenues and adjusted EBITDA stop and both sequentially and year over year do you mean that given the lingering constraints on occupancy and from the volatile oil prices of the pandemic.
For the holiday downtime.
And of strong unusually strong turnaround schedule and the fourth quarter of last year. The segment's performance was consistent with the expectations.
Our Australia and results were in line with our expectations of our Bowen basin, the occupancy was slightly better than expected.
And did reflect some typical holiday downtime, coupled with lower occupancy and a graph of location.
Oh Gee related occupancy declined.
Adjusted EBITDA and the fourth quarter was up year over year as a result of stronger customer activity and the Bowen basin and in our Western Australia and integrated services business.
And the U S conditions for our U S business continue to be extraordinarily challenging and we're not counting on a meaningful improvement of the business and the first half of 2021.
Although we are encouraged by the recent improvement of drilling and completion activity.
Independent of disruptions from the recent Arctic blast activity remains subdued and we expect E&P customers and the U S and continue to live within their cash flows constraining overall activity.
Okay.
Turning to the balance sheet or the leverage ratio declined to two one times at year end from 2.16 times at the end of the third quarter.
Proactively dedicating cash flow to reducing debt remains.
Our key financial priority.
2020 presented a series of unprecedented obstacles and 'twenty 'twenty, one and adopted similarly atypical start with the continued Chinese Australia and trade dispute slow vaccine rollout in North America, and the impacts of the recent Arctic weather and the southern U S.
And we.
And we adhere to our battle tested playbook.
And when these unexpected crisis is present themselves.
And our employees and guests and vendors safe and comfortable as possible.
Operate responsibly and our communities continue to focus on what we control and rely on consistent strategic priorities to maximize free cash flow generation reduce debt and enhance financial flexibility and contained costs without compromising service quality.
And with that I'll turn the call over to Carol.
Thank you Bradley and thank you all for joining us this morning.
Today, we reported total revenue and the fourth quarter of $133 $4 million with the GAAP net loss of $2 3 million for 16 cents per diluted share.
During the fourth quarter, we generated adjusted EBITDA of $23 7 million.
Operating cash flow of $36 7 million and free cash flow of $33 2 million.
The lower adjusted EBITDA, we experienced in the fourth quarter of 'twenty and 'twenty as compared to the same period and 2019 was largely due to lower of billed runs and our Canadian oil sands and watch it and to a lesser extent lower occupancy decreased drilling and completion activity and the U S.
These items were partially offset by C E Ws proceeds.
And what was by the continued favorable performance of our Australia business.
For the full year 2020, and your reported revenue of $529 $7 million and the.
The net loss of $136 1 million for $9 $9.64 per share.
And 2020, we generated adjusted EBITDA of $108 $1 million for the full year, which was consistent with our 2019 full year adjusted EBITDA of one of eight point for $9.
Weaker activity in Canada, and the U S related to the pandemic and lower oil prices was almost completely offset by stronger activity in Australia, as well I'd say AWS part of seats.
Let's now turn for the fourth quarter results for our three segments I'll begin whether it'd be at the Canadian segment performance compared to at the performance a year ago and the fourth quarter of 2019.
Revenue from our Canadian segment was $65 $5 million as compared to revenue of $89 $7 million and the fourth quarter of 2019.
Adjusted EBITDA, and Canada was $13 8 million of decrease from $20 9 million and the fourth quarter of 2019.
The negative impact on revenue and adjusted EBITDA was largely caused by a meaningful reduction in billed rooms in 'twenty and 'twenty.
Related to the protracted decline and oil prices and the effects of the COVID-19, pandemic, especially and out walking lodges.
Coupled with unusually high fourth quarter turnaround activity in 2019.
Adjusted EBITDA and the fourth quarter of 'twenty and 'twenty for our Canadian segment included $3 $3 million related the proceeds from the C. E. W. S.
During the fourth quarter billed rooms in our Canadian lodges totaled 469000, which was down 44% year over year from 837000, and the fourth quarter of 2019 data of the factors I just mentioned.
Our daily room rate for the Canadian segment in the U S dollars with 98 nine.
$98 up slightly with the 7% year over year increase.
Turning to Australia during the fourth quarter, we recorded revenue of $63 $7 million up from $48 9 million and the fourth quarter of 2019.
Adjusted EBITDA was $17 42 million.
From $15 7 million journey of the same period and 20 <unk>.
These results represent a 22% period over period of top line increase on a constant currency basis and.
And were driven by increased activity and our integrated services business.
And our increased occupancy and are bound based on losses.
Our U S. Dollar results further reflect the impact of the strengthened Australian dollar and journey relative to the U S dollar.
Australia and build runs and the quarter were 480000 and from 463000 and the fourth quarter of 2019.
Thank you again for the continued improvement and metallurgical coal activity across the borrowing base and.
The average daily rate for Australia, and villages and the rest of ours was $77 from the fourth quarter up from 72 year over year.
And probably mentioned we are very pleased to announce our new contract and Western Australia to provide hospitality services through our integrated services business with estimated revenues of 62 million Australian dollars ever it's T of term.
We also announced the renewal of two contracts to provide accommodations and hospitality services and our Bowen basin villages.
The expected revenues under these contracts totaling 39 million of Australian dollars and were approximately two year terms.
Yeah.
Moving to the U S revenue for the fourth quarter was $4 2 million as compared to 10 million and the fourth quarter of 2019.
The U S segment saw a negative adjusted EBITDA of $1 $4 million and the fourth quarter and a reduction from negative adjusted EBITDA of here at point of $2 million during the same period of 2019.
These year over year declines were primarily related to broadly and lower drilling and completion activity largely due to lower oil prices as well as the impact of the COVID-19 pandemic.
On a consolidated basis, our capital expenditures for the full year, 'twenty and 'twenty were $10 $1 million down from $29 $8 million during 2019.
This decrease is primarily due to the completion of the Sitka Lodge expansion in 2019 as.
As well as capital discipline employed during 2020 gates of the pandemic and results and global economic environment.
Okay.
Our total debt outstanding on December 31st with the $251 1 million, which was the $21 5 million decrease and September 30th the D.
The increase consisted of $34 6 million and payments during the quarter from.
From a free cash flow generated by the business.
And was partially offset by an unfavorable foreign currency translation impact of $13 $1 million.
Our leverage ratio for the quarter decreased to 2.11 times as of December 31, 'twenty and 'twenty from 2.16 times as of September 30th.
And finally as of December 31st we had total liquidity of approximately $105 $4 million, which consisted of $99 $3 million available under our revolving credit facility and $6 2 million of cash on hand.
Bradley will now discuss our outlook for the full year 2021 badly.
Thank you Carolyn I would like to provide you with our full year 2021 guidance on a consolidated basis and then provide you with the underlying outlooks for each of the regions as well as the underlying assumptions to our guidance.
Following the successful end of 'twenty and 'twenty in light of the economic conditions, we are initiating full year for 'twenty one guidance.
The breadth of of revenues and that's it.
555 for $565 million, and EBITDA of $90 million to $95 million.
And.
Our initial full year, 'twenty, one and capital expenditures forecast of $20 million to $25 million.
Capital expenditures are expected to be higher year over year in 'twenty and 'twenty, one as we return maintenance capital expenditures to more normalized levels, and we'll make investments tied to customer contracts supporting and Canadian LNG and Australian iron ore projects.
Again, our primary financial objective is free cash flow generation.
So based on the EBITDA and Capex guidance just outlined.
<unk> interest expense of $15 million for 'twenty and 'twenty, one no expected material cash taxes working capital investment, we expect 2021 free cash flow for the full year to range between 50 and 60.
The million dollars.
The bridge of our 'twenty and 'twenty, one guidance to our 2020 of actuals and you need to take out some of the onetime items and 2000 22020 of adjusted EBITDA included $15 million.
Of non operating items comprised of $13 million from the C E Ws program and $2 million and gains on sales of assets exclude.
Excluding those from the 'twenty and 'twenty results are the 2020 of adjusted EBITDA would have been $93 million in line with our 'twenty 'twenty, one EBITDA guidance of $90 million to $95 million.
Now I'll provide the regional outlooks and the corresponding on a line of assumptions by region.
And Canada from a macroeconomic perspective, the recent improvement and global oil and gas prices as an encouraging sign for our Canadian segment as we start 2021.
And although the bulk of our business is tied to the existing oil sands production and committed the LNG development.
The war accommodative of commodity price backdrop, congratulate and subsiding and constraints from the pandemic shape of our view that our Canadian performance should improve year over year should improve year over year throughout 2021.
We expect the oilsands occupancy each of improve sequentially as customers gradually mobilize additional personnel with the COVID-19 concerns for getting to abate.
This was offset by the negative impact of the beat British Columbia and.
And provincial health of older eliminating head counts at all large industrial projects across the province, including the LNG C and C. G L projects.
We do expect modestly improved year over year turnaround activity and the second and third quarters of 'twenty and 'twenty, one as well as modest of improved year over year of mobile camp activity tied to the C. G L and T J Maxx pipelines.
Our Canadian guidance, primarily depends on the following for assumptions.
One COVID-19 infections, and the hospitalization rates and not impact of industrial activity more than currently expected.
As of May have seen the province of British Columbia has plenty of head count and limitations on industrial projects. This is currently negatively impacting our occupancy at our Sitka location.
And our pipeline and cans that are supporting the construction of the C. G O pipeline.
Should the pandemic worse and this could negatively impact our outlook and our occupancy and Canada.
We are expecting and improved year over year, the turnaround activity and the Oilsands region and as many of the major oil sands of operators are making up for delayed turnarounds in 'twenty and 'twenty.
This activity could be deferred or cut back and.
But we expect to have a clearer picture of turnaround season by the.
One of our next earnings call.
We do expect to be busy supporting pipeline construction projects and 2021 and if these projects are delayed the to push this activity from 'twenty 'twenty, one 'twenty and 'twenty two.
Lastly, the availability of skilled labor could the common issue limiting ours, and our customers' ability to increase staffing and to the levels required to support construction and turnaround plans ultimately negatively impacting our outlook for the occupants.
Yeah.
Turning to Australia, the bulk commodity price environment should continue to underpin the healthy fundamentals for Australia and business in 'twenty and 'twenty one.
Iron ore prices remain near multi year highs of supply outages continue and steel demand in the industrial nation industrial nation and gradually improves.
Metallurgical coal prices were weak and the fourth quarter of 2020, as the China, Australia of trade tensions flared.
Australia is found and new markets first call of exports and prices have recovered early here in 'twenty and 'twenty one.
China's restrictions are expected to be lower and the first half of of the year, which should continue to support the solid activity for our business.
We expect the osprey and occupancy to be up slightly year over year. However, this assumes the China, Australia courageous move does not negatively impact our customers' production or maintenance plans for 'twenty and 'twenty one.
Our guidance also assumes for the current tight labor supply and Australia, particularly in Western Australia does not worse and further and that is the recent reinstatement and of the Interstate travel and Australia will help a day some of the labor tightness as we move through 'twenty and 'twenty one.
For our U S business, the oil and gas price environment has improved modestly in recent months, but we're not forecasting and a meaningful improvement and our U S business for the first half of 2021.
E&P customers and the major life.
The tight oil plays.
And issued a clear mandate to live within operating cash flows.
Expect the gradual and modest improvement in the U S activity largely in the second half of the year.
I will conclude by underscoring the key elements of our strategy as we navigate this extraordinary market climate.
Our mandates are as follows we will prioritize the safety and wellbeing of our guests and employees and vendors, we will manage our cost structure and accordance with the occupancy outlook across all three regions. We will continue to enhance our best in class hospitality offerings.
And we will allocate the capital prudently to maximize free cash flow generation, while we continue to reduce debt.
Before I proceed to the questions section of the call I'd like to thank our incredible employees around the world for their dedication selflessness and professionalism that they bring to work every day.
2020 per cent and our team with unprecedented challenges and your <unk>.
Dictograph roast of mutations and their return on behalf of the severe of a management team and board of directors. Thank you again for banking of so proud to work with.
With that we'll take questions.
Yes.
Thank you if he would like to ask the question on the phone line today, you can press star one on your telephone keypad. If you are on the speaker phone. Please make sure you owe me and options turned off and although your signal to reach our equipment and so on.
And everyone that of Star one.
And we do have a question from Stephen <unk> with Stifel. Please go ahead.
Hi, Thanks, Good morning, everybody I hope everybody is doing well and recovering from the weather.
And.
So.
Couple of things I wanted to hit on but I just wanted to start off you gave.
There are a lot of detail on 2021 guidance, but a couple of things I want that and.
As for the first is just seasonality and other.
And I think most of the time, you'll see kind of a normal drop off and one two and then of ramp and how how should we think about the season out of seasonal patterns and 'twenty one.
And your guidance.
Yeah.
We will see and it's been a slower start to the year really both in Canada and Australia.
Failure.
And Canada the the.
Patients on head count and industrial projects and is negatively impacting our activity and our British Columbia and so that's many of the.
The impacting things and it's been a little bit of a slow start and the Oilsands region.
We do as you mentioned see particularly well both in Canada and Australia. The main.
And season is typically Q2, and Q3 and so if you think about our 90 $95 million EBITDA guidance of about 65 per cent of that happens and the middle of the year. So two thirds of the earnings are in the middle half of the year and then we'll have a slower start and the fourth quarter at least at this point it looks to be fair.
The normal fairly consistent with the fourth quarter of this year.
So.
Uh huh.
That's what we're seeing thus far is two of them.
And it sounds like Youre adjusted you look at 'twenty 'twenty was $13 million of of the benefit.
From the seat UWS program I am assuming your guidance doesn't have anything and it for 'twenty, one and I and I also think that's does that suggest won't you EBITDA is down year over year before growing and the rising year over year going forward.
Bad debt.
That's correct.
And not have any gws proceeds and the guidance, we just gave.
And we are.
We do expect EBITDA to be down year over year and the first quarter.
Okay.
The two other things if you don't mind the first is.
And that's where it's needed.
One additional point of that.
It's a difficult comp.
Year over year, because January and February of 'twenty, and 'twenty were actually pretty good months and did not have of COVID-19 impact and so.
It's the that's a tough comp given that we're not out of the pandemic yet.
Yeah, no if I recall of <unk> 'twenty was actually very strong even relative to expectations.
Yes.
Okay.
And you mentioned.
What kind of a cautious shorter term out and the.
The us business.
Yes.
And when we started to see of ramp there and activity.
Starts moving higher is is that of business you would think about the vesting overtime.
Well were not we took a lot of costs out of the business last year, we consolidated our activity and the more active basins we've.
Got it and so that our district offices are now each one of contribution basis positive I'm sorry.
The likely familiar right size of the business. So should we expect it to improve year over year, if we see of ramp up and activity and can get it to where it's making money.
And we certainly I think you know as well, we will be pragmatic with anything and our portfolio.
It's a business that with the way the cycles of worked over the last.
And 510 years, it's never been and <unk> business for accommodations has never been in a position where someone could consolidated.
It does need consolidation.
But it's never gotten for long enough runway, if you will where consolidation of those feasible, but it's weird and get it to the point where it was.
Whereas making money and and there was an attractive.
Offer we'd certainly take a look at it.
Great. Thanks, and then just one final one for me and that is when you you you walk through the guidance and you <unk> you.
The way it out I think some of the parameters around your expectations.
The.
When I think about it.
What are the what could be drivers of upside and because I think and talk about some of the risks to the guidance.
But as you think about it.
And the potential upside what could move the needle that and that direction.
Okay.
Ah well certainly if we can get the.
The number one would be the Chinese Australia and.
The labor.
I'm sorry, the trade dispute.
And if that starts to abate.
And then I think there's upside to Australia.
We are if we can start getting a better availability of labor and Australia.
You know, it's with some of the social.
The safety net programs, both in Canada, and Australia, there is less of an incentive for people to want to work and remote environments and cause there.
They can stay at home and and receive the the safety net checks and those programs start to.
Phase out there and that might help with the labor situation and primarily in Australia, but we're also feeling and in Canada as well.
And so that would be upside on the margin side and then the third one would be a turnaround activity.
And Canada.
And I think we've it is we are planning for it to be up but I think there's hopefully and opportunity for that to be higher than our initial expectations. Our current expectation.
And then the last one would be the scope and breadth of pipeline of accommodations.
We are those are the bar camps and our section of the voice of the section that we're supporting of the particularly the C. G. L pipeline, if we see our scope and expand there that could be and opportunity for upside.
And I Wonder is there anything else of it.
Yeah, no that was and that's the lens.
Okay, great. Thank you.
And I'll remind everyone that of star one to ask a question.
Alright, and there are no further questions and the queue I would like to turn the call back over to Bradley Dodson for any additional or closing remarks.
Well. Thank you all for listening for our call today and thank you for your interest and the city of stock and we hope you're all doing well and are staying safe and we'll look forward to speaking to you on the first quarter earnings call.
Take care.
That does conclude todays presentation. Thank you for your participation you may now disconnect.
Okay.
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