Civeo(US:CVEO)2020-07-30 05:04Financial Data and Key Metrics Changes - Civeo generated revenues of $114.7 million in Q2 2020, with adjusted EBITDA of $28.1 million and free cash flow of $25.1 million [15][9] - The company reduced total debt outstanding by $15 million, bringing the leverage ratio down to 2.34 times as of June 30, 2020, from 2.54 times at the end of Q1 2020 [7][23] - Net income on a GAAP basis was $6.1 million, or $0.03 per diluted share, which included $4.7 million from a warranty claim settlement [15][9] Business Line Data and Key Metrics Changes - Canadian segment revenues were $53 million, down from $78.1 million in Q2 2019, with adjusted EBITDA of $15.3 million, a decrease from $16.3 million [16] - Australian segment revenues increased to $57.1 million from $31 million in Q2 2019, with adjusted EBITDA rising to $18.8 million from $13 million [19] - U.S. segment revenues fell to $4.6 million from $13.1 million in Q2 2019, with adjusted EBITDA declining to a negative $1.4 million from $2.6 million [21] Market Data and Key Metrics Changes - In Australia, metallurgical coal prices stabilized between $100 to $120 per metric ton, with strong customer occupancy levels in the Bowen Basin [11] - Canadian operations saw a decline in billed rooms to 410,000 from 740,000 year-over-year, attributed to reduced customer activity due to oil price declines and COVID-19 [17] - The U.S. segment faced challenges due to a collapse in E&P drilling and completion spending, leading to significant revenue declines [12] Company Strategy and Development Direction - The company aims to drive free cash flow and reduce debt while maintaining a healthy balance sheet and liquidity profile [6][9] - Civeo is focusing on maximizing free cash flow generation, reducing costs, and preserving financial flexibility without compromising service quality [14][31] - The company is tracking potential growth projects in Australia for 2021 while managing costs in the U.S. segment due to ongoing financial distress in the E&P sector [28][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the resiliency and diversification of the business model, particularly in Australia and Canada, despite challenges in the U.S. [6][10] - The outlook for the Canadian segment is stabilizing, with expectations of modestly higher occupancy in Q3 due to oil sands turnaround activity [24] - The U.S. segment is expected to remain challenging, with no recovery anticipated in the second half of 2020 [28] Other Important Information - Civeo expects to remain free cash flow positive for the remainder of 2020 and has reinstated full-year guidance for revenues between $476 million to $486 million and adjusted EBITDA between $80 million to $85 million [30][31] - The company reported a total liquidity of approximately $166.2 million as of June 30, 2020, consisting of available credit and cash on hand [23] Q&A Session Summary Question: What are the factors affecting free cash flow generation in the second half of the year? - Management indicated that while they expect to remain free cash flow positive, there may be some working capital outflows due to insurance renewals and property tax payments [35][36] Question: How does the leverage ratio impact discussions with banks regarding future agreements? - Management noted that having a lower leverage ratio is beneficial for discussions with banks, especially with a maturity coming up in November 2021 [37][38] Question: Will the full-year EBITDA guidance include onetime benefits from Q2? - Management confirmed that the full-year EBITDA guidance includes onetime benefits from Q2, with expectations of flat EBITDA from Canada for the rest of the year [40][43] Question: What is the outlook for the Australian segment in the second half? - Management expressed a conservative outlook for Australia, anticipating modestly lower billed rooms in Q3 compared to Q2, while acknowledging strong performance from the Action Catering acquisition [47][48]