CIVEO CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

You should read the following discussion and analysis along with our consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q.

Presentation and macroeconomic environment

We provide hospitality services to the natural resources industry in Canada,
Australia and the U.S. Demand for our services can be attributed to two phases
of our customers' projects: (1) the development or construction phase; and (2)
the operations or production phase. Historically, initial demand for our
hospitality services has been driven by our customers' capital spending programs
related to the construction and development of natural resource projects and
associated infrastructure, as well as the exploration for oil and natural gas.
Long-term demand for our services has been driven by natural resource
production, maintenance and operation of those facilities as well as expansion
of those sites. In general, industry capital spending programs are based on the
outlook for commodity prices, economic growth, global commodity supply/demand,
estimates of resource production and shareholder expectations. As a result,
demand for our hospitality services is largely sensitive to expected commodity
prices, principally related to oil, metallurgical (met) coal, liquefied natural
gas (LNG) and iron ore. Other factors that can affect our business and financial
results include the general global economic environment and regulatory changes
in Canada, Australia, the U.S. and other markets, including governmental
measures introduced to fight climate change or to help slow the spread or
mitigate the impact of COVID-19.

Our business is predominantly located in northern Alberta, Canada; British
Columbia, Canada; Queensland, Australia; and Western Australia. We derive most
of our business from natural resource companies who are developing and producing
oil sands, met coal, LNG and iron ore resources and, to a lesser extent, other
hydrocarbon and mineral resources. In the first quarter of 2022, approximately
63% of our revenue is generated by our lodges in Canada and our villages in
Australia. Where traditional accommodations and infrastructure are insufficient,
inaccessible or cost ineffective, our lodge and village facilities provide
comprehensive hospitality services similar to those found in an urban hotel. We
typically contract our facilities to our customers on a fee-per-person-per- day
basis that covers lodging and meals and is based on the duration of customer
needs,

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which can range from several weeks to several years. The remainder of our
revenue is generated by our hospitality services at customer-owned locations in
Canada and Australia, mobile assets in Canada and the U.S and our lodges in the
U.S.

Typically, our major Canadian oil sands clients and Australian mining companies make large up-front capital investments to develop their prospects, which have estimated reserve lives ranging from ten years to over 30 years. Therefore, these investments depend mainly on the long-term view of these customers on the demand and prices of raw materials.

The spread of COVID-19 and the response thereto have negatively impacted the
global economy. The actions taken by governments and the private-sector to
mitigate the spread of COVID-19 and the risk of infection, including
government-imposed or voluntary social distancing and quarantining, reduced
travel and remote work policies, evolved with the introduction of vaccination
efforts in 2021, and may continue to evolve as the surfacing of virus variants
has added a degree of uncertainty to the continuing global impact. Since the
COVID-19 pandemic began, we have been impacted by increased staff costs as a
result of hospitality labor shortages in Australia. This labor shortage has been
exacerbated by significantly reduced migration in and around Australia affecting
labor availability, which has subsequently led to an increased reliance on more
expensive temporary labor resources. We continue to closely monitor the COVID-19
situation and have taken measures to help ensure the health and well-being of
our employees, guests and contractors, including screening of individuals that
enter our facilities, social distancing practices, enhanced cleaning and deep
sanitization, the suspension of nonessential employee travel and implementation
of work-from-home policies, where applicable.

In part due to the impact of COVID-19 on the global economy, increasing
inflationary pressures are being experienced worldwide. These price increases
could negatively impact our labor and food costs, as well as consumable costs
such as fuel. The Company is managing inflation risk with service scope changes
and contractual protections.

Global oil prices dropped to historically low levels in March and April 2020 due
to severely reduced global oil demand, high global crude inventory levels,
uncertainty around timing and slope of worldwide economic recovery after
COVID-19 related economic shut-downs and effectiveness of production cuts by
major oil producing countries, such as Saudi Arabia, Russia and the U.S. Since
this trough in early 2020, global oil prices increased later in 2020 and
throughout 2021 primarily due to improved global oil demand and lagging global
oil supply due to oil production discipline from publicly traded oil producers
and OPEC+ countries. These supply/demand dynamics have continued into early 2022
and have been exacerbated by the recent conflict between Russia and Ukraine and
related sanctions on Russia, which decreased global fossil fuel supply even
further. This has led to a significant increase in global oil prices to above
$100 per barrel. Several governments, including the U.S. government under the
Biden administration, have begun to release oil from the government controlled
strategic reserves in the hopes of stemming high oil prices and the related
impacts on higher heating fuels and gasoline.

Alberta, Canada. In Canada, Western Canadian Select (WCS) crude is the benchmark
price for our oil sands customers. Pricing for WCS is driven by several factors,
including the underlying price for West Texas Intermediate (WTI) crude, the
availability of transportation infrastructure (consisting of pipelines and crude
by railcar) and governmental regulation. Historically, WCS has traded at a
discount to WTI, creating a "WCS Differential," due to transportation costs and
capacity restrictions to move Canadian heavy oil production to refineries,
primarily along the U.S. Gulf Coast. The WCS Differential has varied depending
on the extent of transportation capacity availability.

Certain expansionary oil pipeline projects have the potential to both drive
incremental demand for mobile assets and to improve take-away capacity for
Canadian oil sands producers over the longer term. The Enbridge Line 3
replacement project was completed at the end of 2021 and the Trans Mountain
Pipeline (TMX) is currently under construction and approximately 50% complete.
The Canadian federal government acquired the TMX pipeline in 2018, approved the
expansion of the project and is currently working through a revised construction
timeline to adjust for recent delays related to legal challenges, the COVID-19
pandemic, flooding along certain sections of the pipeline corridor and seasonal
wildfires. As a result, the TMX pipeline construction has been delayed, and
there is a risk that there are more delays to come. Recent legal issues between
the Canadian government and First Nation groups have been resolved for the time
being and construction has resumed.

WCS prices in the first quarter of 2022 averaged $82.04 per barrel compared to
an average of $46.28 in the first quarter of 2021. The WCS Differential
decreased from $14.12 per barrel at the end of the fourth quarter of 2021 to
$10.78 at the end of the first quarter of 2022. As of April 25, 2022, the WTI
price was $99.54 and the WCS price was $86.62, resulting in a WCS Differential
of $12.92.

Together with the initial spread of COVID-19, depressed price levels of both WTI
and WCS materially impacted 2020 maintenance and production spending and
activity by Canadian operators and, therefore, demand for our hospitality
services. Customers began increasing production activity in the fourth quarter
of 2020, throughout 2021 and into the first three months of 2022. While oil
prices have recently increased to multi-year highs, there is continued
uncertainty around commodity price

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levels, including the impact of COVID-19 and regulatory complications on these prices, which could cause our Canadian oil sands and pipeline customers to cut production, delay expansion and maintenance expenditures and defer additional investment in their oil sands assets.

British Columbia, Canada. Our Sitka Lodge supports the LNG Canada project and
related pipeline projects (see discussion below). From a macroeconomic
standpoint, LNG demand continued to grow despite the spread of COVID-19,
reinforcing the need for the global LNG industry to expand access to natural
gas. Evolving government energy policies around the world have amplified support
for cleaner energy supply, creating more opportunities for natural gas and LNG.
The conflict between Russia and Ukraine has further highlighted the need for
secure natural gas supply globally, particularly in Europe. Accordingly,
additional investment in LNG supply will be needed to meet the resulting
expected long-term LNG demand growth.

Currently, Western Canada does not have any operational LNG export facilities.
LNG Canada (LNGC), a joint venture among Shell Canada Energy, an affiliate of
Royal Dutch Shell plc (40 percent), and affiliates of PETRONAS, through its
wholly-owned entity, North Montney LNG Limited Partnership (25 percent),
PetroChina (15 percent), Mitsubishi Corporation (15 percent) and Korea Gas
Corporation (5 percent), is currently constructing a liquefaction and export
facility in Kitimat, British Columbia (Kitimat LNG Facility). British Columbia
LNG activity and related pipeline projects are a material driver of activity for
our Sitka Lodge, as well as for our mobile assets, which are contracted to serve
several portions of the related pipeline construction activity. The actual
timing of when revenue is realized from the Coastal GasLink (CGL) pipeline and
Sitka Lodge contracts could be impacted by any delays in the construction of the
Kitimat LNG Facility or the pipeline, such as protest blockades or COVID-19. Our
current expectation is that our contracted commitments associated with the CGL
pipeline project will be completed in the second half of 2022 or early 2023.

In late March 2020, LNGC announced steps being taken to reduce the spread of
COVID-19, including reduction of the workforce at the project site to essential
personnel only. In late December 2020, British Columbia's public health officer
issued a health order limiting workforce size at all large industrial projects
across the province, including LNGC. These actions resulted in reduced occupancy
at our Sitka Lodge beginning in the second quarter of 2020. British Columbia's
public health order was phased out in the second quarter of 2021. It was
replaced with less restrictive requirements focused on monitoring, allowing
workforces to return to their optimal sizes, which increased occupancy at our
Sitka Lodge in the second half of 2021 and into 2022.

Australia. In Australia, 82% of our rooms are located in the Bowen Basin of
Queensland, Australia and primarily serve met coal mines in that region. Met
coal pricing and production growth in the Bowen Basin region is predominantly
influenced by the levels of global steel production, which decreased by 6.8%
during the first three months of 2022 compared to the same period of 2021 but
remained at high levels. As of April 25, 2022, met coal spot prices were $480
per metric tonne. Long-term demand for steel is expected to be driven by global
infrastructure spending and increased steel consumption per capita in developing
economies, such as China and India, whose current consumption per capita is a
fraction of developed countries.

The Chinese embargo on Australian coal continues, without any resolution
foreseeable in the near term. However, Australian met coal producers have found
new markets, including India and Europe, for their premium product. This led to
a rebalancing of the market globally in 2021, with China relying on domestic
production along with increased met coal imports from the U.S., Canada and
Mongolia. With the backdrop of continuing strong steel demand and met coal
supply constraints, the spot price for met coal surged to record highs through
the second half of 2021 into early 2022. While met coal prices have receded from
their all-time highs, they still remain over $400 per tonne. Analysts expect
elevated met coal prices to persist in the short-term but to moderate and
decline further over the medium term if supply and demand issues are resolved.
If the trade impasse with China remains unresolved and the Ukraine conflict
continues, there remains a possibility of further volatility in the short to
medium term.

Civeo's activity in Western Australia is driven primarily by iron ore
production, which is a key steel-making ingredient.  Iron ore prices experienced
strong support through the first half of 2021, with prices reaching in excess of
$200 US per metric tonne by mid year due to high demand for steel used for
infrastructure and increased manufacturing activity in China. Through the second
half of 2021, with forced cuts in Chinese steel production along with weaker
demand, prices retreated. As of April 25, 2022, iron ore spot prices were
$126.38 per metric tonne, which reflects a sustained improvement in prices early
in 2022 with tighter supply and strong demand. Higher iron production is
expected to continue through 2022 and along with constrained supply, analysts
are forecasting an average iron ore price of $135-$150 per metric tonne for
2022. Despite some constraint in supply, Australian iron ore exports in 2022 are
forecast to exceed both 2020 and 2021 volumes.

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U.S. Our U.S. business supports oil shale drilling and completion activity and
is primarily tied to WTI oil prices in the U.S. shale formations in the Permian
Basin, the Mid-Continent, the Bakken and the Rockies. In 2020, the U.S. oil rig
count and associated completion activity decreased due to COVID-19 and the
global oil price decline discussed above. Only 267 oil rigs were active at the
end of 2020. With the recovery of oil prices, oil rig count and drilling
activity have recovered substantially, with 531 oil rigs active at the end of
the first quarter 2022. The Permian Basin remains the most active U.S.
unconventional play, representing 60% of the oil rigs active in the U.S. at the
end of the first quarter of 2022. The increase in the U.S. rig count and oil
prices has only resulted in slight increases to U.S. oil production from an
average of 11.3 million barrels per day in 2021 to an average of 11.4 million
barrels per day at the end of January 2022. As of April 22, 2022, there were 549
active oil rigs in the U.S. (as measured by Bakerhughes.com). U.S. oil shale
drilling and completion activity will continue to be impacted by higher WTI oil
prices, pipeline capacity, federal energy policies and availability of capital
to support exploration and production (E&P) drilling and completion plans. In
addition, consolidation among our E&P customer base in the U.S. has historically
created short-term spending and activity dislocations. Should the current trend
of industry consolidation continue, we may see activity, utilization and
occupancy declines in the near term.

Recent commodity prices. Recent price trends for WTI crude, WCS crude, coal and iron ore are as follows:


                                                                          Average Price (1)
                                                                                          Hard
                                                WTI                  WCS               Coking Coal              Iron
              Quarter                          Crude                Crude              (Met Coal)                Ore
               ended                         (per bbl)            (per bbl)            (per tonne)           (per tonne)
  Second Quarter through April 25,
                2022                       $    101.36          $     88.55          $     475.20          $     140.72
             3/31/2022                           95.17                82.04                474.83                129.46
             12/31/2021                          77.31                60.84                371.95                104.88
             9/30/2021                           70.54                57.58                258.41                164.90
             6/30/2021                           66.19                53.27                136.44                195.97
             3/31/2021                           58.13                46.28                127.95                159.83


(1)Source: WTI crude prices come from US Energy Information Administration
(EIA), WCS crude prices and iron ore prices are from Bloomberg and hard coking coal prices are from IHS Markit.

Foreign Currency Exchange Rates. Exchange rates between the U.S. dollar and each
of the Canadian dollar and the Australian dollar influence our U.S. dollar
reported financial results. Our business has historically derived the vast
majority of its revenues and operating income (loss) in Canada and Australia.
These revenues and profits/losses are translated into U.S. dollars for U.S. GAAP
financial reporting purposes. The following tables summarize the fluctuations in
the exchange rates between the U.S. dollar and each of the Canadian dollar and
the Australian dollar:

                                                                      Three Months Ended
                                                                          March 31,
                                         2022                 2021                 Change                 Percentage
Average Canadian dollar to U.S.
dollar                                      $0.790               $0.790                     $-                -%
Average Australian dollar to U.S.
dollar                                      $0.724               $0.773                ($0.05)              (6.3)%


                                                                                   As of
                                       March 31, 2022              December 31, 2021               Change                Percentage
Canadian dollar to U.S. dollar                     $0.800                         $0.789                $0.011              1.4%
Australian dollar to U.S. dollar                   $0.749                         $0.726                $0.023              3.2%



These fluctuations in the Canadian and Australian dollars have had and will continue to have an impact on the translation of the profits generated by our Canadian and Australian subsidiaries and, consequently, on our financial results.

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Capital Expenditures. We continue to monitor the global economy, the price of
and demand for crude oil, met coal, LNG and iron ore and the resultant impact on
the capital spending plans of our customers, and the COVID-19 global pandemic
and the responses thereto in order to plan our business activities. We currently
expect that our 2022 capital expenditures will be in the range of approximately
$20 million to $25 million, compared to 2021 capital expenditures of $15.6
million. We may adjust our capital expenditure plans in the future as we
continue to monitor customer activity. See "Liquidity and Capital Resources"
below for further discussion of 2022 capital expenditures.

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Operating results

Unless otherwise indicated, discussion of results for the three months ended
March 31, 2022is based on a comparison with the corresponding period of 2021.

Results of Operations - Three Months Ended March 31, 2022 Compared to Three
Months Ended March 31, 2021


                                                                        Three Months Ended
                                                                             March 31,
                                                         2022                  2021                 Change

                                                                         ($ in thousands)
Revenues
Canada                                              $     95,952          $     61,885          $     34,067
Australia                                                 63,529                59,637                 3,892
U.S. and other                                             6,197                 3,908                 2,289
Total revenues                                           165,678               125,430                40,248
Costs and expenses
Cost of sales and services
Canada                                                    75,206                51,885                23,321
Australia                                                 44,514                42,903                 1,611
U.S. and other                                             6,123                 5,022                 1,101
Total cost of sales and services                         125,843                99,810                26,033
Selling, general and administrative expenses              15,213                14,181                 1,032
Depreciation and amortization expense                     20,127                21,269                (1,142)

Other operating expense                                      258                    71                   187
Total costs and expenses                                 161,441               135,331                26,110
Operating income (loss)                                    4,237                (9,901)               14,138

Interest expense, net                                     (2,468)               (3,362)                  894
Other income                                               1,696                 4,914                (3,218)
Income (loss) before income taxes                          3,465                (8,349)               11,814
Income tax (expense)                                      (1,557)               (1,076)                 (481)
Net income (loss)                                          1,908                (9,425)               11,333
Less: Net income attributable to noncontrolling
interest                                                     498                    59                   439
Net income (loss) attributable to Civeo Corporation        1,410                (9,484)               10,894
Less: Dividends attributable to preferred shares             487                   478                     9
Net income (loss) attributable to Civeo common
shareholders                                        $        923          $     (9,962)         $     10,885



We reported net income attributable to Civeo for the quarter ended March 31,
2022 of $0.9 million, or $0.06 per diluted share compared to net loss
attributable to Civeo for the quarter ended March 31, 2021 of $10.0 million, or
$0.70 per diluted share.

Revenues. Consolidated revenues increased $40.2 million, or 32%, in the first
quarter of 2022 compared to the first quarter of 2021. This increase was
primarily due to (i) higher billed rooms at our Canadian lodges as occupancy in
the first quarter of 2021 was negatively impacted by the COVID-19 pandemic,
particularly at our Sitka Lodge, (ii) higher average daily rate at our Canadian
lodges due to mix, (iii) increased mobile asset activity from pipeline projects
in Canada, (iv) increased occupancy at our Australian Civeo owned villages and
(v) increased activity in our U.S. offshore and wellsite business. These items
were partially offset by a weaker Australian dollar relative to the U.S. dollar
in the first quarter of 2022 compared to the first quarter of 2021. See the
discussion of segment results of operations below for further information.

Cost of Sales and Services. Our consolidated cost of sales and services
increased $26.0 million, or 26%, in the first quarter of 2022 compared to the
first quarter of 2021. This increase was primarily due to (i) higher billed
rooms at our Canadian lodges, (ii) increased mobile asset activity from pipeline
projects in Canada, (iii) increased occupancy at our Australian Civeo owned
villages and the increased cost of temporary labor due to ongoing labor
shortages in Australia and (vi) increased activity in our U.S. offshore business
and wellsite business. These items were partially offset by a weaker Australian
dollar relative to the U.S. dollar in the first quarter of 2022 compared to the
first quarter of 2021. See the discussion of segment results of operations below
for further information.

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Selling, General and Administrative Expenses. SG&A expense increased $1.0
million, or 7%, in the first quarter of 2022 compared to the first quarter of
2021. This increase was primarily due to higher share-based compensation expense
and information technology expense related to our newly implemented human
capital management system. The increase in share-based compensation expense was
due to an increase in our stock price during the first quarter of 2022 compared
to the first quarter of 2021.

Amortization and depreciation charges. Depreciation and amortization decreased $1.1 millionor 5%, in the first quarter of 2022 compared to the first quarter of 2021. The decrease is mainly attributable to certain assets in
Canada amortizing in full in 2021 and the disposal of our Western Permian Lodge in 2021 in the WE

Operating Income (Loss). Consolidated operating income increased $14.1 million,
or 143%, in the first quarter of 2022 compared to the first quarter of 2021,
primarily due to higher activity levels in Canada and Australia in the first
quarter of 2022 compared to the first quarter of 2021.

Interest Expense, net. Net interest expense decreased by $0.9 million, or 27%,
in the first quarter of 2022 compared to the first quarter of 2021, primarily
related to lower average debt levels on credit facility borrowings during 2022
compared to 2021 and lower interest rates on credit facility borrowings.

Other Income. Consolidated other income decreased $3.2 million in the first
quarter of 2022 compared to the first quarter of 2021, primarily due to $2.8
million of other income in 2021 related to proceeds from the Canada Emergency
Wage Subsidy (CEWS) and higher gains on sale of assets in 2021 compared to 2022.

Income Tax (Expense) Benefit. Our income tax expense for the three months ended
March 31, 2022 totaled $1.6 million, or 44.9% of pretax income, compared to an
income tax expense of $1.1 million, or (12.9)% of pretax loss, for the three
months ended March 31, 2021. Our effective tax rate for both the three months
ended March 31, 2022 and 2021 was impacted by considering Canada and the U.S.
loss jurisdictions that were removed from the annual effective tax rate
computation for purposes of computing the interim tax provision.

Other Comprehensive (Loss) Income. Other comprehensive income increased $9.6
million in the first quarter of 2022 compared to the first quarter of 2021,
primarily as a result of foreign currency translation adjustments due to changes
in the Canadian and Australian dollar exchange rates compared to the U.S.
dollar. The Canadian dollar exchange rate compared to the U.S. dollar increased
1% in the first quarter of 2022 compared to a 1% increase in the first quarter
of 2021. The Australian dollar exchange rate compared to the U.S. dollar
increased 3% in the first quarter of 2022 compared to a 2% decrease in the first
quarter of 2021.
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Segment operating results – Canadian segment

                                                              Three Months Ended
                                                                   March 31,
                                                      2022           2021          Change
     Revenues ($ in thousands)
     Accommodation revenue (1)                     $ 67,194       $ 46,530       $ 20,664
     Mobile facility rental revenue (2)              24,018         10,499         13,519
     Food service and other services revenue (3)      4,740          4,856           (116)

     Total revenues                                $ 95,952       $ 61,885       $ 34,067

     Cost of sales and services ($ in thousands)
     Accommodation cost                            $ 53,127       $ 38,336       $ 14,791
     Mobile facility rental cost                     14,884          6,774          8,110
     Food service and other services cost             4,359          4,121            238

     Indirect other costs                             2,836          2,654            182
     Total cost of sales and services              $ 75,206       $ 51,885       $ 23,321

     Gross margin as a % of revenues                   21.6  %        16.2  %         5.5  %

     Average daily rate for lodges (4)             $    106       $     97       $      9

     Total billed rooms for lodges (5)              635,555        480,066        155,489

     Average Canadian dollar to U.S. dollar        $  0.790       $  0.790       $      -



(1)Includes revenues related to lodge rooms and hospitality services for owned
rooms for the periods presented.
(2)Includes revenues related to mobile assets for the periods presented.
(3)Includes revenues related to food services, laundry and water and wastewater
treatment services for the periods presented.
(4)Average daily rate is based on billed rooms and accommodation revenue.
(5)Billed rooms represents total billed days for owned assets for the periods
presented.

Our Canadian segment reported revenues in the first quarter of 2022 that were
$34.1 million, or 55%, higher than the first quarter of 2021. This increase was
driven by higher billed rooms at our lodges as occupancy in the first quarter of
2021 was negatively impacted by the COVID-19 pandemic, particularly at our Sitka
Lodge, higher average daily rate at our lodges largely due to mix and by
increased mobile asset activity from pipeline projects.

Our Canadian segment cost of sales and services increased $23.3 million, or 45%,
in the first quarter of 2022 compared to the first quarter of 2021. The
increased cost of sales and services was driven by increased occupancy at our
lodges and by increased mobile asset activity from pipeline projects.

Our Canadian segment gross margin as a percentage of revenues increased from
16.2% in the first quarter of 2021 to 21.6% in the first quarter of 2022. This
was primarily driven by increased lodge and mobile asset activity and related
operating efficiencies.
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Segment Operating Results – Australian Segment

                                                              Three Months Ended
                                                                   March 31,
                                                      2022           2021          Change
     Revenues ($ in thousands)
     Accommodation revenue (1)                     $ 37,599       $ 33,675       $  3,924
     Food service and other services revenue (2)     25,930       $ 25,962       $    (32)
     Total revenues                                $ 63,529       $ 59,637       $  3,892

     Cost of sales and services ($ in thousands)
     Accommodation cost                            $ 18,407       $ 17,105       $  1,302
     Food service and other services cost            24,363         24,297             66
     Indirect other cost                              1,744          1,501            243
     Total cost of sales and services              $ 44,514       $ 42,903       $  1,611

     Gross margin as a % of revenues                   29.9  %        28.1  %         1.9  %

     Average daily rate for villages (3)           $     79       $     79       $      -

     Total billed rooms for villages (4)            474,474        424,666         49,808

     Australian dollar to U.S. dollar              $  0.724       $  0.773       $ (0.049)



(1)Includes revenues related to village rooms and hospitality services for owned
rooms for the periods presented.
(2)Includes revenues related to food services and other services, including
facilities management for the periods presented.
(3)Average daily rate is based on billed rooms and accommodation revenue.
(4)Billed rooms represent total billed days for owned assets for the periods
presented.

Our Australian segment reported revenues in the first quarter of 2022 that were
$3.9 million, or 7%, higher than the first quarter of 2021. The weakening of the
average exchange rate for Australian dollars relative to the U.S. dollar by 6%
in the first quarter of 2022 compared to the first quarter of 2021 resulted in a
$4.2 million period-over-period decrease in revenues. Excluding the impact of
the weaker Australian exchange rate, the Australian segment experienced
increased activity at Civeo owned villages in the Bowen Basin.

Our Australian segment cost of sales and services increased $1.6 million, or 4%,
in the first quarter of 2022 compared to the first quarter of 2021. The
weakening of the average exchange rate for Australian dollars relative to the
U.S. dollar by 6% in the first quarter of 2022 compared to the first quarter of
2021 resulted in a $3.0 million period-over-period decrease in cost of sales and
services. Excluding the impact of the weaker Australian exchange rate, the
increase in cost of sales and services was largely driven by increased occupancy
at our Bowen Basin villages and increased costs of temporary labor due to
ongoing labor shortages.

Our Australian segment gross margin as a percentage of revenues increased to
29.9% in the first quarter of 2022 from 28.1% in the first quarter of 2021. This
was primarily driven by improved margins at Civeo owned villages in the Bowen
Basin as a result of increased occupancy.

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Segment operating results – WE Segment

                                                              Three Months Ended
                                                                  March 31,
                                                       2022          2021         Change
      Revenues ($ in thousands)                     $ 6,197       $ 3,908       $ 2,289

      Cost of sales and services ($ in thousands)   $ 6,123       $ 5,022       $ 1,101

      Gross margin as a % of revenues                   1.2  %      (28.5) %       29.7  %



Our U.S. segment reported revenues in the first quarter of 2022 that were $2.3
million, or 59%, higher than the first quarter of 2021. This increase was due to
increased activity in our offshore rental and fabrication businesses and
increased U.S. drilling activity positively impacting our wellsite business.

Our U.S. segment cost of sales and services increased in the first quarter of
2022 compared to the first quarter of 2021. This increase was due to increased
activity in our offshore rental and fabrication businesses and increased U.S.
drilling activity positively impacting our wellsite business. These increases
were partially offset by reduced costs from our former West Permian lodge, which
operated in the first quarter of 2021 and was sold in the fourth quarter of
2021.

Our U.S. segment gross margin as a percentage of revenues increased from (28.5)%
in the first quarter of 2021 to 1.2% in the first quarter of 2022 primarily due
to improved operating efficiencies in our offshore and wellsite businesses at
higher activity levels.

Cash and capital resources

Our primary liquidity needs are to fund capital expenditures, which in the past
have included expanding and improving our hospitality services, developing new
lodges and villages, purchasing or leasing land, and for general working capital
needs. In addition, capital has been used to repay debt, repurchase our common
shares and fund strategic business acquisitions. Historically, our primary
sources of funds have been available cash, cash flow from operations, borrowings
under our Credit Agreement and proceeds from equity issuances. In the future, we
may seek to access the debt and equity capital markets from time to time to
raise additional capital, increase liquidity, fund acquisitions, refinance debt
or retire preferred shares.

The following table summarizes our consolidated liquidity position at March 31, 2022 and December 31, 2021 (in thousands):

                                                 March 31, 2022       December 31, 2021
 Lender commitments                             $       200,000      $          200,000

 Borrowings against revolving credit capacity          (121,886)            

(112,026)

 Outstanding letters of credit                           (1,456)                 (1,439)
 Unused availability                                     76,658                  86,535
 Cash and cash equivalents                                6,423                   6,282
 Total available liquidity                      $        83,081      $           92,817



Cash totaling $2.0 million was provided by operations during the three months
ended March 31, 2022, compared to $12.8 million provided by operations during
the three months ended March 31, 2021. During the three months ended March 31,
2022 and 2021, $21.8 million and $0.1 million was used in working capital,
respectively. The increase in cash used in working capital in 2022 compared to
2021 is largely due to increased accounts receivable balances resulting from
increased activity in our Canadian and Australian businesses during the three
months ended March 31, 2022 compared to the three months ended March 31, 2021
and decreased accounts payable and accrual balances largely due to timing of
payments.

Cash was used in investing activities during the three months ended March 31,
2022 in the amount of $1.0 million, compared to cash provided by investing
activities during the three months ended March 31, 2021 in the amount of $3.3
million. The decrease in cash provided by investing activities was primarily due
to proceeds from the sale of our manufacturing facility and mobile assets in
Canada during the three months ended March 31, 2021. Capital expenditures
totaled $3.6 million and $3.4 million during the three months ended March 31,
2022 and 2021, respectively.

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We expect our capital expenditures for 2022 to be in the range of $20 million to
$25 million, which excludes any unannounced and uncommitted projects, the
spending for which is contingent on obtaining customer contracts or commitments.
Whether planned expenditures will actually be spent in 2022 depends on industry
conditions, project approvals and schedules, customer room commitments and
project and construction timing. We expect to fund these capital expenditures
with available cash, cash flow from operations and revolving credit borrowings
under our Credit Agreement. The foregoing capital expenditure forecast does not
include any funds for strategic acquisitions, which we could pursue should the
transaction economics be attractive enough to us compared to the current capital
allocation priorities of debt reduction. We continue to monitor the global
economy, the price of and demand for crude oil, met coal, LNG and iron ore and
the resultant impact on the capital spending plans of our customers, the
COVID-19 global pandemic and the responses thereto in order to plan our business
activities, and we may adjust our capital expenditure plans in the future.

Net cash of $1.3 million was used in financing activities during the three
months ended March 31, 2022 primarily due to term loan repayments of $8.0
million and $1.0 million used to settle tax obligations on vested shares under
our share-based compensation plans, partially offset by net borrowings under our
revolving credit facilities of $7.7 million. Net cash of $16.7 million was used
in financing activities during the three months ended March 31, 2021 primarily
due to net repayments under our revolving credit facilities of $6.7 million,
repayments of term loan borrowings of $8.9 million and $1.1 million used to
settle tax obligations on vested shares under our share-based compensation
plans.

The following table summarizes the changes in outstanding debt during the three months ended March 31, 2022 (in thousands):

      Balance at December 31, 2021                                                   $ 175,130
      Borrowings under revolving credit facilities                                      94,266
      Repayments of borrowings under revolving credit facilities                       (86,586)
      Repayments of term loans                                                          (8,003)
      Translation                                                                        3,100
      Balance at March 31, 2022                                                      $ 177,907



We believe that cash on hand and cash flow from operations will be sufficient to
meet our anticipated liquidity needs in the coming 12 months. If our plans or
assumptions change, including as a result of the impact of COVID-19 or changes
in price of and demand for oil, or are inaccurate, or if we make acquisitions,
we may need to raise additional capital. Acquisitions have been, and our
management believes acquisitions will continue to be, an element of our
long-term business strategy. The timing, size or success of any acquisition
effort and the associated potential capital commitments are unpredictable and
uncertain. We may seek to fund all or part of any such efforts with proceeds
from debt and/or equity issuances or may issue equity directly to the sellers.
Our ability to obtain capital for additional projects to implement our growth
strategy over the longer term will depend on our future operating performance,
financial condition and, more broadly, on the availability of equity and debt
financing. Capital availability will be affected by prevailing conditions in our
industry, the global economy, the global financial markets and other factors,
many of which are beyond our control. In addition, any additional debt service
requirements we take on could be based on higher interest rates and shorter
maturities and could impose a significant burden on our results of operations
and financial condition, and the issuance of additional equity securities could
result in significant dilution to shareholders.

In August 2021, our Board authorized a common share repurchase program to
repurchase up to 5.0% of our total common shares which are issued and
outstanding, or 715,814 common shares, over a twelve month period. See Note 11 -
Share Repurchase Program to the notes to the unaudited consolidated financial
statements included in Item 1 of this quarterly report for further discussion.

credit agreement

As of March 31, 2022, our Credit Agreement (as then amended to date, the Credit
Agreement) provided for: (i) a $200.0 million revolving credit facility
scheduled to mature on September 8, 2025, allocated as follows: (A) a $10.0
million senior secured revolving credit facility in favor of one of our U.S.
subsidiaries, as borrower; (B) a $155.0 million senior secured revolving credit
facility in favor of Civeo, as borrower; and (C) a $35.0 million senior secured
revolving credit facility in favor of one of our Australian subsidiaries, as
borrower; and (ii) a C$100.0 million term loan facility scheduled to be fully
repaid on December 31, 2023 in favor of Civeo.
                                       27
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As of March 31, 2022, we had outstanding letters of credit of $0.3 million under
the U.S. facility, zero under the Australian facility and $1.2 million under the
Canadian facility. We also had outstanding bank guarantees of A$0.8 million
under the Australian facility.

See Note 7 – Debt of the Notes to the Unaudited Consolidated Financial Statements included in Section 1 of this Quarterly Report for further discussion.

Dividends

The declaration and amount of all potential future dividends will be at the
discretion of our Board and will depend upon many factors, including our
financial condition, results of operations, cash flows, prospects, industry
conditions, capital requirements of our business, covenants associated with
certain debt obligations, legal requirements, regulatory constraints, industry
practice and other factors the Board deems relevant. In addition, our ability to
pay cash dividends on common or preferred shares is limited by covenants in the
Credit Agreement. Future agreements may also limit our ability to pay dividends,
and we may incur incremental taxes if we are required to repatriate foreign
earnings to pay such dividends. If we elect to pay dividends in the future, the
amount per share of our dividend payments may be changed, or dividends may be
suspended, without advance notice. The likelihood that dividends will be reduced
or suspended is increased during periods of market weakness. There can be no
assurance that we will pay a dividend in the future.

The preferred shares we issued in the Noralta acquisition are entitled to
receive a 2% annual dividend on the liquidation preference (initially $10,000
per share), paid quarterly in cash or, at our option, by increasing the
preferred shares' liquidation preference, or any combination thereof. Quarterly
dividends were paid in-kind on March 31, 2022, thereby increasing the
liquidation preference to $10,830 per share as of March 31, 2022. We currently
expect to pay dividends on the preferred shares through an increase in
liquidation preference rather than cash until they mandatorily convert to Civeo
common shares in April 2023.

Critical accounting policies

For a discussion of the critical accounting policies and estimates that we use
in the preparation of our consolidated financial statements, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the year ended December 31, 2021. These estimates
require significant judgments, assumptions and estimates. We have discussed the
development, selection and disclosure of these critical accounting policies and
estimates with the audit committee of our Board of Directors. There have been no
material changes to the judgments, assumptions and estimates upon which our
critical accounting estimates are based.
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