Civeo(US:CVEO)2022-02-27 16:00Financial Performance - Total revenue for the year ended December 31, 2021, was $594.5 million, an increase of 12.3% from $529.7 million in 2020[39] - Accommodation revenue in Canada was $239.5 million in 2021, compared to $202.5 million in 2020, reflecting a growth of 18.3%[40] - Mobile facility rental revenue increased to $77.3 million in 2021 from $50.0 million in 2020, marking a growth of 54.5%[40] - Food service and other services revenue remained stable at $124.8 million in 2021, slightly up from $124.4 million in 2020[40] - Revenues from lodges and villages represented over 65% of consolidated revenues for the year ended December 31, 2021[104] - The Australian operations generated 42% of total revenue, with 9,046 rooms owned across nine villages, maintaining the same number of rooms as in 2020[72][80] - The U.S. business accounted for 4% of total revenue, with 535 rooms across two lodges as of December 31, 2021, down from 925 rooms in 2020[85][92] Operations and Capacity - The company operates 27 lodges and villages with over 28,000 rooms, in addition to approximately 9,500 rooms owned by customers[27] - The company’s Wapasu Creek Lodge has more than 5,000 rooms, comparable in size to the largest hotels in North America[62] - As of December 31, 2021, the total number of rooms in Canadian lodges was 18,947, a decrease from 19,024 in 2020, representing a decline of approximately 0.4%[67] - The company had commitments for 29% of rentable rooms for 2022 and 9% for 2023, excluding exclusivity contracts[104] - As of December 31, 2021, the company had 8,281 rooms under contract, with 4,048 set to expire in 2022 and 3,616 in 2023[107] Market Demand and Influences - Demand for hospitality services is influenced by commodity prices, with a recovery in global oil demand observed throughout 2021 and into 2022[30] - The demand for hospitality services in Canada is largely driven by commodity prices, particularly crude oil prices for oil sands projects[55] - The company’s operations are significantly affected by seasonal weather, impacting service provision during spring thaw and winter months[106] - The company’s customers face unique operating risks that could adversely affect demand for the company’s services, including unexpected problems and higher costs in project development[203] - The current volatile commodity price environment may hinder customers from renewing contracts on favorable terms, impacting the company's revenue stability[209] Customer Base and Partnerships - The largest customers in 2021 included Suncor Energy Inc, Imperial Oil Limited, and Fortescue Metals Group Ltd, each accounting for over 10% of revenues[99] - The company entered into three new Indigenous partnerships in the oil sands region and two in British Columbia in 2018, with a new partnership in British Columbia in 2021[96] - In 2021, the company purchased more than C$56.5 million in goods and services from the Indigenous business community, representing 32% of total Canadian local spending[94] - The company is highly dependent on several significant customers in the natural resources industry, and the loss of any major customer could lead to substantial revenue loss[206] Regulatory and Environmental Factors - The British Columbia Oil and Gas Commission (BCOGC) has implemented new regulations effective January 1, 2020, requiring operators to eliminate or reduce natural gas leaks, which may lead to increased operational costs for customers[123] - Canada aims to reduce methane emissions from the oil and gas sector by 40-45% below 2012 levels by 2025, with regulations taking effect in 2020 and additional requirements in 2023[129] - The Greenhouse Gas Pollution Pricing Act (GGPPA) imposes a carbon price that will escalate to $50 per tonne of CO2e in 2022 and further increase to $170 per tonne by 2030, impacting operational costs for companies[130][132] - The Canadian Net-Zero Emissions Accountability Act mandates the government to achieve net-zero emissions by 2050, establishing five-year emissions-reduction targets[134] - The federal government has committed to reducing emissions by 40-45% below 2005 levels by 2030, which may result in additional costs for companies in the oil and gas sector[135] Challenges and Risks - The company is exposed to various legal and regulatory risks, including extensive environmental laws and potential changes in tax laws that could impact its financial position[190] - Increased operating costs, particularly in food, wages, and utilities, may constrain profitability if not recoverable through pricing adjustments[218] - A shortage of skilled labor has led to increased reliance on expensive temporary labor, negatively affecting profitability[221] - The company faces risks related to contract cancellations and reduced customer utilization, which could materially affect business operations[209] - The company’s profitability may be adversely affected by fluctuations in food prices due to global demand and climate-related supply issues[220] Impact of COVID-19 - The COVID-19 pandemic has materially affected the company’s operations and those of its customers, with ongoing uncertainty regarding future impacts on financial results[200] - The company has implemented measures to comply with COVID-19 regulations, which have resulted in disruptions and increased costs[201] - The company experienced a decrease in customer demand for accommodations in 2020 due to COVID-19, but demand began recovering in 2021, although not to pre-COVID levels[217] Strategic Positioning - The company has exited the Bakken region and reduced its presence in the Rockies due to volatility in oil prices, reallocating assets to the Permian Basin and Mid-Continent[90] - The company’s business model relies on customers outsourcing accommodations, which may be reversed if customers choose to utilize their own facilities[215] - The company operates in a highly competitive industry, facing challenges in maintaining service quality and pricing against larger competitors[216]