Civeo (CVEO) Tanks On 2015 Operating Guidance

Civeo (CVEO) Tanks On 2015 Operating Guidance

The shares of Civeo Corporation (CVEO) closed 8.27% per share, up by 2.61% on Monday, but the stock price of the company plummeted 25% to $6.20 per share after-hours.

Civeo Corporation declined after-hours following its announcement about its initial operating guidance for 2015, which reflects the decisions of major oil companies in North America to significantly reduce capital spending next year particularly in Canada.

Capital spending cuts prompted by weak global commodity markets

According to Civeo Corporation, the capital spending reduction for next year was prompted but the continuing weakness in the global commodity markets and the impact of its business in Australia, Canada and the United States.

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“The acceleration in November of the decline in global crude oil prices and forecasts for a potentially protracted period of lower prices have resulted in major oil companies reducing their 2015 capital budgets from 2014 levels,”  explained Civeo Corporation.

The company added that the declining prices of crude oil globally impacted its near-term allocation of capital to its development or expansion projects in the oils sands, a major driver of demand for its services in Canada.

The situation also increased the Civeo Corporation’s difficulty of accurately estimating its 2015 occupancy levels for its facilities.

Civeo’s primary markets affected by low metallurgical coal prices

Civeo Corporation also stated that the persistent low metallurgical coal prices in Australia continue to negatively impact the demand for accommodations in the primary markets of Civeo Corporations

The company also expected to be negatively impacted by continuing weakness of the Australian and Canadian dollars, down by 2% and 6% respectively against the U.S. dollar over the past two months. The Australian and Canadian dollars were down 8% and 9% year-to-date, respectively.

Civeo 2015 financial estimates

Civeo Corporation estimated that its revenue for the first quarter of 2015 will be in the range of $160 million to $175 million based on the factors mentioned above. The company expected its EBITDA in the range of $45 million to $55 million.

For the second half of 2015, Civeo Corporation forecasted that its earnings will be sequentially lower citing the reason that some of its contracts are set to expire or replaced by contracts with fewer committed rooms at lower rates. Its estimated occupancy and average daily rates are expected to decline.

Civeo Corporation estimated that it will be able to achieve revenues of around $540 million to $600 million for the full-year 2015. Its EBITDA is expected to be around $135 million to $160 million.

The company reiterated its revenue guidance for the fourth quarter of 2014 in the range of $200 million to $210 million with an EBITDA margin of 32% to 34%.

The stock is a ‘favorite’ of David Einhorn’s Greenlight Capital.

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