CVEO has been operating at a cash flow positive level with very depressed REVPAR. If either occupancy
and/or room rates increase, the increase in REVPAR will have a dramatic result on CVEO’s free cash flow.
In 2012, CVEO had EBITDA of $492mm on Total Revenues of $1.1 billion. When the company was spun
off from Oil States in 2014, the stock traded as high at $27.14 on 7/4/14.
Horizon Kinetics, a mercurial value investor owns 18.7% of the shares.
I do not hold a position with the issuer such as employment, directorship, or consultancy. I and/or others I advise hold a material investment in the issuer's securities.
With increased scale from the Noralta and Lake Charles acquisitions, Civeo's ability to pay down their debt load is significantly increased, removing the largest uncertainty when I originally posted in April 2016. Prior to the acquisition, Civeo had gone from $775mm in debt in 2014 to $295mm at the end of 2017.
Civeo was awarded the contract to construct a 4,500 person workforce accomodation center for the liquefaction and export facility in Kitimat British Columbia originally planned for the end of 2016 by LNG Canada. The project was delayed however recent public statements by LNGC and new reports indicate that the decision is expected in the 2nd half of 2018. There are three different potential revenue streams for Civeo from the project. 1) 436 room Sitka Lodge which is currently empty would fill up and generate $30mm in annual revenue with a 50% EBITDA margin. 2) $100-200mm in construction revenue to build the workforce accomodation center with a 10-20% EBITDA margin. 3) $100-150mm revenue at a 25% EBITDA margin for 8,000 rooms required during the pipeline construction period.
Oil Prices have increased from $42 to $67 and Australian Met Coal prices have increased from $97 to $184 since my original post on 4/25/16. While there is a lag between higher resource prices and production activity, the longer prices stay elevated, the more likely production activity will increase. Production activity requires manpower.......