Greetings and welcome to the Civeo Corporation First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Collin Gerry, Senior Director of Corporate Development and Investor Relations for Civeo Corporation. Please go ahead, sir.

Thank you, and welcome to Civeo's first quarter 2016 earnings conference call. Our call today will be led by Bradley Dodson, Civeo's President and Chief Executive Officer; and Frank Steininger, Senior Vice President and Chief Financial Officer. Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we're relying on the Safe Harbor protections afforded by Federal Law. Any such remarks should be read in the context of the many factors that affect our business, including risks disclosed in our Form 10-K, 10-Q and other SEC filings. I will now turn the call over to Bradley.

Thank you, Collin. Good morning to all of you and thank you for joining us. I would like to begin with an overview of our overall operational performance in the first quarter. Frank will than walk you through detailed financial results for the quarter and then I will wrap up with our prepared remarks with a discussion of each segment and our near term outlook before we take your questions. Energy markets and activity levels in North America in the first quarter of 2016 turned out to be weaker than expected. Met coal, mining sector in Australia remains challenging. The value of Canadian and Australian currencies against U.S. dollar also weighed on our reported financial results as we compared to prior period. Even so, we were within our guidance for the first quarter coming in at the upper end of our revenue forecast and in line with our EBITDA guidance. We also generated more than $8 million of free cash flow as defined and reconciled in our earnings release. The strategy we have put in place several quarters ago to help us weather this downturn, which is to drive free cash flow, reduce leverage and capture organic growth opportunities, hasn’t changed. But our immediate priority in this difficult market has been on generating and preserving cash and it's working. We continue to reduce our operating and overhead cost and look to enhance our financial footing while we pursue new business opportunities in our major markets. Quality and client satisfaction are big part of our competitive advantage and we have been careful to maintain that edge and that quality of service even as we continue to realign and right size our business. Operationally, we got off to a slightly slow start in January than we expected in Canada due to warm…

Thanks, Bradley, and good morning to everyone. Before I get into more discussion about the financial results for the first quarter, a reminder on foreign exchange. Our average currency rates for the quarter, for the first quarter of this year were down compared to the first quarter of 2015. But we saw strengthening of exchange rates in both Canada and Australia towards the end of our first quarter 2016, which as you will notice, had an impact on our balance sheet. Looking at the first quarter financial results, we reported a net loss on a GAAP basis of $26.8 million or $0.25 per diluted share on revenues of $95 million. If you exclude the impact of $8.4 million of pretax impairment charges on some of the U.S. assets located in the Bakken because of reduced drilling activity in the region and a $1 million cost related to our migration to Canada, our adjusted net loss would have been $20.7 million or $0.19 per diluted share. For the quarter adjusted EBITDA excluding the impact of these two charges was a positive $16.8 million and cash flow from operations was $11.3 million. The continuing evaluations of the Canadian and Australian dollars against the U.S. dollar negatively impacted us again in the first quarter. Although the Canadian dollar held up slightly better than we had figured in our first quarter guidance. The Canadian dollar was down 10% against the U.S. dollar year-over-year and the Australian dollar was down 8%. If you adjust for foreign exchange rates impact, consolidated revenues would have been $9.3 million higher and adjusted EBITDA would have been $2.5 million higher. We spent $4.8 million of CapEx in the first quarter exclusively for maintenance purposes. Our full-year CapEx guidance remains at $30 million for 2016 with a downward bias as…

Thanks, Frank. I will begin with our Canadian segment and as usual I will compare our sequential performance, that is first quarter 2016 compared to fourth quarter 2015. We got a slower start than expected in the New Year in Canada. During holidays, a seasonal drag in fourth quarter and post-holiday rebound was slow. Revenues from our Canadian segment were $65.5 million which is down slightly from the fourth quarter. Adjusted EBITDA increased by about $0.5 million to $14.2 million sequentially mainly due to lower SG&A expense and also to better occupancy and smaller pipeline driven camps. The decline in the Canadian dollar which fell from an average of 0.75 to less than 0.73 from the fourth quarter to the first quarter, reduced Canadian segment revenues by $1.9 million and adjusted EBITDA by $0.4 million. Average occupancy in our Canadian lodges was 60% versus 52% in the prior quarter. The new Sitka Lodge in British Columbia opened towards the end of last year and we saw increased seasonal occupancy at other locations. We also reopened the Athabasca lodge in mid-March to support a customer's turnaround activity that we discussed during our last call. So these rooms will so up in our second quarter results. The adjusted EBITDA margin in our Canadian operations was 22% in the first quarter of 2016 versus 21% in the fourth quarter of 2015 primarily due to reduced SG&A. Looking at our expectations for the second quarter in Canada, assuming a Canadian dollar exchange rate of 0.79, we are guiding to revenue of $72 million to $75 million in U.S. dollars for our Canadian segment and adjusted EBITDA of $17 million to $19 million in U.S. dollars for the second quarter of 2016. This is based on 9,500 rentable rooms and we expect lodge occupancy to…

[Operator Instructions] Our first question comes from the line of Blake Hancock with Scotia Howard Weil. Please proceed with your question.

Bradley, first I would like to touch on Australia a little bit. Maybe a two part question here. So first, I know you have got some contracts and renewals that are coming up here. Can you refresh us maybe how many rooms are at risk and then how this is progressing? And I know last [indiscernible] you kind of thought, hopefully by the 2Q call you might have some updates. Is that still kind of the path forward right now?

In Australia, I would say generally things are steady as they go. The conversations around renewals are generally constructive. To answer your specific question, we [framed] [ph] at the beginning of the year that somewhere between 500 and 750 rooms were at risk in terms of renewal. That’s the same number today. And generally we feel good about our ability to renew those rooms. Fuel prices are up recently as are iron ore prices. Met coal prices have trended up. So I think it's probably a little early for us to move Australian guidance up but I would say the trend is positive overall. So the team has done a good job of maintaining the existing occupancy and chasing the work that’s there. We are chasing a couple of organic opportunities to grow the business. None of which are related to met coal, they are all related to either LNG or civil projects. But generally speaking, the Australian business is, quite frankly, in pretty good shape.

And that was coming out to be my follow on right there, was regarding those opportunities you are talking about. What's kind of the -- can you give us an update on maybe the timing of those? Is that a 2016 or is that likely going to probably more impactful here in 2017?

It's more of 2017 issue. I think we will hopefully secure them in 2016 but the impact, much like LNG in Canada, at this point is going to be announced this year and impact next year.

All right. That’s great. And then kind of turning to the Canadian operations. As we think about the turnaround work that you discussed, are their more opportunities for this year, and I know you said opened Athabasca, given the new contract that was announced earlier this year. Are there more opportunities for this year to become available and keep utilization high in those lodges?

They've show interest, yes. I mean we are pursuing a couple of turnaround projects in addition to the work we already secured, I guess earlier this year and that has opened up Athabasca, middle part of March. Our hope is that if we secure this work we will be able to keep Athabasca and Beaver River, actually nicely occupied for the rest of the year. That will effectively fill the bucket, if you will, relative to guidance for the year. So not an opportunity to really push it forward but certainly secures and firms up the guidance for the rest of 2016.

That’s great. And then last one, I will throw it to you, Frank. Great job, flowing cash here in 1Q. Assuming -- if we assume the $30 million in CapEx, right, and obviously there could be some, that number could move higher if you win some of these LNG projects. But have you guys, can you help us with what you are modeling or what you are thinking free cash flow could actually be for 2016. In more of a steady state, right. And that’s not assuming more growth CapEx gets put through the system.

Yes. I mean I think right now we would spend about $30 million for the year. I mean looking at the guidance we have given you on EBITDA, [indiscernible] to $30 million plus what we see in interest cost for the year, you will get to around a number of about $30 million.

All right. That’s fine.

And the team -- I am sorry, I would like to interrupt there. I would say the team has done a really good job of managing maintenance CapEx. We are maintaining guest services and client satisfaction but at the same time we are trying to be smart about the way we spend capital. And last year kind of came in at about $14.5 million on maintenance CapEx. I think this year, our guidance is 30 because it's early. That’s our budget. But the fact of the matter is, is that I think we could probably be closer to 20. So we are very focused on driving the top line and managing the operating costs and capital expenditures.

And Blake, just as Bradley mentioned in his comments, we are looking at opportunities in the U.S. to sell excess or underutilized assets that will add to that cash generation.

Thank you. [Operator Instructions] Our next question comes from the line of [Arif Cole with Cole Capital]. Please proceed with your question.

I have a couple of questions but I will just ask you one at a time. Regarding the LNG bidding opportunities, can you clarify as to the number of rooms your firm has that are located in the right places that potentially could be rentable on a long-term basis, if you win part or some of these potential bid.

I will be happy to. I would line out the LNG opportunity as it relates to accommodations as follows. Starting at the coast, there is obviously rooms that will be needed for the construction of the liquefaction facilities. We expect that both Shell and Petronas will have rooms that they will own and rooms that they will outsource. In rough numbers they will need somewhere between 4500 and 7500 rooms in total per project. I expect that they will in-source some of those, so that provides an opportunity to, as we can construct those rooms to build for sale. That’s an opportunity for us to then manage those assets going forward on a facility management basis. Obviously, with the Sitka Lodge and we have got land in Port Edward to support Petronas. We can do the outsourced rooms as well. So that’s kind of three opportunities related to LNG. The fourth opportunity would be on the pipeline side where we could use our mobile camp asset to service the pipeline construction. We have got plenty of assets to service that and I think we are well positioned to do that for both projects. And then lastly we have got mobile assets that will be well suited for the drilling opportunity as longer term they need to get the hydrocarbons to feed the pipelines, to feed the liquefaction facilities.

Okay. And then the question number two is, the basic discussions with these potential partners, what sort of long-term natural gas prices do they need, I guess in U.S. dollar terms with potential buyers to make it economical for them to give the green light to those projects.

Well, I think that if you look at AECO prices and the fact that the projects are expensive, but if you look at AECO prices, you look at the fact that they are going to have ambient temperature benefit. They have got Canadian dollar benefits, the Canadian dollar stands stronger. Generally speaking, they are very economic projects. Now one thing we have been doing with our customers, both customers, is working around value engineering. As I mentioned in my comments, we have been in fairly active dialog with both around trying to cut down the overall cost of building the entirety of what we manage, the accommodations. Managing the entire cost of that project. So to the extent that we can reduce that cost ultimately will be beneficial to them. So I am not a natural gas expert. I can't tell you what the exact cost is. What we are trying to do is work with our customers, try and find ways that we can do things more efficiently and reduce the overall cost of the project so that they will feel comfortable to move forward. I think given the economics, I am cautiously optimistic that they will.

Okay, fine. And then just a final question. Regarding oil prices, when you look at U.S. WTI oil prices, at what level do the oil sands, people like Suncor and others, need the prices to go to average. And what sort of, I guess, western Canadian discount are they assuming for to be economical for them to start considering expansions in Greenfields again.

In regards to the price that we need this to be for continued development of oil sands.

Well, I think it depends on what kind of project you have [indiscernible]. What we are seeing really across the entire oil and gas infrastructure system globally is massive deflation. We are seeing cost being pulled out on the labor side, on the asset side, on the equipment side, to reduce the -- to your question, the breakeven price of developing new project. Canada, if the question was Canada, we are certainly seeing that significantly. And we are constantly working with our customers to try and reduce our cost and ultimately reduce their cost in terms of developing these resources. Specific to your question, if it's talking about oil sands, I would say in the SAGD region, it's probably 55 to 65. And oil in the mining region, the northern part of the play, I would say, 85 to 95. But I think that right now those are Greenfield costs. I think most of the operators right now are looking at kind of expansion opportunities where they can leverage existing infrastructure. And that would reduce those costs significantly.

All right. So was expansion...

Just to go back on your, also your question on LNG. Don’t forget that both of those projects, the Shell project and the Petronas led project, have dedicated natural gas properties to fill basically the pipeline to get it to the LNG facility. So both of those projects have dedicated natural gas reserves ready to be developed for those projects. Which takes in their purchase, they are pretty good priced from the standpoint of bringing out the ground and moving across to make those facilities competitive.

And just one clarification on the Canadian oil sands opportunities where they are doing Brownfield expansion on a per barrel basis. What sort of cost savings do they have? So those in the Greenfield, hypothetically they need $60 U.S. to make the project economical. If they are looking just into expansion, how many dollars below that $60 would be saved on the expansion project to make it economical to go forward.

I will be honest, I think that I have not seen anything publicly that would indicate what those rates are but they inherently have to be less. But I don’t know that number.

Thank you. Ladies and gentlemen, we have come to the end of our time allowed for questions. I would like to turn the floor back to Mr. Dodson for any final remarks.

Thank you. Well, thank you all for joining the call today. That concludes all our prepared comments. We look forward to speaking to you at the second quarter results.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.