Civeo (CVEO) Stock Pummeled on 2015 Guidance, Dividend Cut

Shares of Civeo Corp. (CVEO) were down -3.07 or -37.73 percent to $5.13 in premarket trading on Tuesday. The company announced yesterday after the close that it would be suspending its dividend and gave a lower than expected guidance for its 2015 fiscal year. Civeo stock closed at $8.27, up +0.21 or +2.61 percent in Monday's regular trading session.

Houston, Texas based Civeo Corp. was originally part of Oil States International OIS and was spun off from Oil States Int'l on June 2, 2014.
The company had its initial public offering at $23.23 per share after giving Oil States International shareholders two shares of Civeo for every share of OIS they owned on May 30th. Civeo's principal business is as a provider of workforce accommodations and services. The company offers temporary and permanent accommodations such as housing, food services, water and wastewater services and facility management for mines and oil drilling locations in Australia, Canada and the United States.

Citing the accelerating decline in oil prices in November, and forecasts of a prolonged period of lower prices, Civeo cut its guidance for first quarter 2015 revenue to $160 million to $175 million with full year 2015 revenue reduced to $540 million to $600 million. The analyst consensus was for revenue of $228 million for the first quarter and $817 million for the full 2015 fiscal year.

Second quarter earnings were also expected to be weaker as certain contracts expire and are replaced with contracts with fewer lodgings at lower rates, especially in Australia. Nevertheless, the company reiterated its full year 2014 guidance of $200 million to $210 million in revenue with an EBITDA margin of 32 percent to 34 percent.

President and Chief Executive Officer of Civeo Corp., Bradley J. Dodson stated in the company's press release that, "As it became evident during the fourth quarter that capital spending budgets among the major oil companies were going to be cut, we began taking steps to reduce marketed room capacity, control costs and curtail discretionary capital expenditures. In Canada, we have since closed our Athabasca and Lakeside lodges and are evaluating similar actions in select other locations.

"We are limiting our discretionary capital spending in 2015 to those projects that are supported by customer contracts. From a revenue perspective, we are reassessing where in our regional markets we can profitably improve occupancy while maintaining the high safety and service levels for which our company is known. These efforts reflect our proactive approach to improving the company's structural efficiency, managing cash flow and maintaining our balance sheet.

Also pressuring the company's stock price, Civeo's board decided to cut the company's quarterly dividend to maintain financial flexibility. In light of the current situation, the company wants to use any excess cash to reduce their debt in 2015.

Civeo stock has lost considerable value since its IPO in June, especially after the almost -50 percent decline in the stock on September 29th, when the company announced it would relocate its operations and domicile in Canada. The company is still on track to relocate and plans to file a Form S-4 with the Securities and Exchange Commission.

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Published on Dec 30, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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