DALLAS, TX -- May 8th, 2025 -- Civeo Corporation (NYSE: CVEO): Stonegate Capital Partners updates their coverage on Civeo Corporation. CVEO reported revenue, adj EBITDA, and adj EPS of $144.0M, $12.7M, and ($0.72), respectively. This compares to our/consensus estimates of $150.7M/$148.1M, $12.0M/$14.8M, and ($0.84)/($0.43), respectively. Consolidated revenue fell short of expectations; this underperformance was driven by weakness in both pricing and billed rooms volume in the Canadian segment, despite the robust performance observed in the Australian segment.
Company Updates:
Acquisition Closed: On May 07, 2025 CVEO closed its acquisition of four villages in the Australian Bowen Basin. This acquisition is immediately accretive to the Company and is expected to add approximately $32.0M to revenue and $17.0M to EBITDA. We note that this establishes CVEO in the Blackwater region of Australia, further expanding its presence in the country, providing impressive contract coverage with new and existing met coal producers under take-or-pay contracts. Following this acquisition the Company has updated its full year guidance which is outlined below.
Canadian Segment: Civeo’s Canadian operations remained under pressure in 1Q25, with revenues falling 40.0% y/y to $40.4M and Adj. EBITDA declining to ($0.2M). This deterioration reflects reduced customer spending in the oil sands region and the loss of Fort Hills-related occupancy following the sale of McClelland Lake Lodge. Billed rooms declined to $358.7M, down from $610.0M y/y. In response, the Company implemented aggressive cost-cutting measures, including a 25% reduction in Canadian headcount and cold-shuttering two lodges, resulting in a $1.0M restructuring charge in the quarter, with a similar charge expected in 2Q25. Civeo also retained a third-party consultant to lead further cost-streamlining initiatives.
Australian Segment: The Australian segment remained a key driver of performance, posting 13% y/y revenue growth to $103.6M and stable Adj. EBITDA of $20.5M. Growth was driven by increased integrated services activity under the six-year, A$1.4B contract. The segment also advanced its strategic expansion in the Bowen Basin, with the acquisition of four villages and associated take-or-pay contracts expected to close in 2Q25. Despite FX headwinds, Australian operations continue to benefit from high occupancy and robust customer activity.
Guidance: CVEO revised its 2025 guidance following the most recent acquisition, with revenue between $640M and $670M and Adj. EBITDA of $86M to $96M. The Company maintained CapEx guidance in a range of $20M–$25M, citing a continued focus on disciplined capital deployment. We believe this is reasonable and have adjusted our model.
Valuation: We use both a DCF and EV/EBITDA comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $29.03 to $32.28 with a mid-point of $30.53. Our EV/EBITDA valuation results in a range of $31.07 to $37.91 with a mid-point of $34.49.
