Civeco Plunge Typical of Downdraft Trend in Energy Stocks

Civeo Sinks 50% After Halting Dividends, Closing Camps

Civeo Corp. (CVEO), the Houston-based owner of so-called man camps for energy workers, dropped 50 percent after suspending its dividend and closing lodges in response to lower demand for its services.

Civeo cut staff in Canada by 30 percent and in the U.S. by 45 percent this year as oil prices fell by almost half since June, according to a statement late yesterday. Capital spending next year will drop by an estimated 78 percent to $85 million, and Civeo warned it may need to write down the value of some of its assets.

The company halted its 13-cent quarterly dividend. Cutbacks by oil-sands producers have reduced demand for its services in Canada and coal companies in Australia are suffering from “persistently low” prices, Civeo said. It has closed two lodges in Canada and is evaluating other locations.

“There are few major oil-sands construction and expansion projects forecast for 2015, reducing the demand for labor and accommodations,” Chief Executive Officer Bradley Dodson said on a conference call yesterday, adding that the Athabasca oil-sands region is oversupplied with rooms for workers.

Civeo dropped to $4.14 at 12:18 p.m. in New York after plunging as much as 52 percent, the most on record.

The company was spun off by Oil States International Inc. (OIS) and began trading publicly in June at $23.25, when West Texas Intermediate crude was above $100 a barrel. The U.S. oil benchmark has since fallen to less than $54 a barrel.

Spending Cuts

Large U.S. oil companies in shale formations have reduced spending by 25 to 50 percent, and major producers in Canada’s oil sands have forecast spending for 2015 that’s 15 to 20 percent lower than this year, Dodson said. Civeo has limited work commitments in the oil sands after the first three months of 2015, he said.

Projects in the oil sands, where the extraction of thick bitumen requires multibillion-dollar mining operations or drilling that includes vast amounts of steam, are among the most costly to develop. About one-quarter of oil-sands projects need crude prices of at least $80 a barrel to be profitable, according to the International Energy Agency.

Cenovus Energy Inc. (CVE), a Calgary-based oil-sands developer, said this month it will reduce spending next year by 15 percent, including a 64 percent reduction at its Narrows Lake project and a 46 percent cut to other emerging projects in the region.

Civeo said occupancy rate for rooms contracted in Canada has plunged to 35 to 40 percent in 2015 from more than 75 percent this year. In Australia, the rate has also dropped to 35 to 40 percent from more than 55 percent at the start of the year.

First-quarter sales will be $160 million to $175 million, down from $252.8 million a year earlier, Civeo said. Full-year sales next year will be $540 million to $600 million, missing the average estimate of $815 million compiled by Bloomberg from four analysts.

A private club in North Dakota’s Bakken shale that once charged membership fees as high as $25,000 and served jumbo shrimp cocktail was evicted this month in a sign that oil’s plunge is undercutting the region’s go-go years.

The Bakken Club was ordered on Dec. 17 to vacate its premises on Williston’s Main Street after failing to pay rent, state court records show. The club owed $21,598 for rent plus $1,329.90 in late fees, the landlord, On The Spot Development LLC, said in a Nov. 25 complaint. One check bounced.

The eviction, in the capital of the oilfield that set off the record surge in U.S. output, comes as a price war casts doubt on the boom’s future. The benchmark for U.S. crude oil fell as low as $52.70 a barrel today, the cheapest since May 2009, from more than $107 in June. Drillers such as Continental Resources Inc., the Bakken pioneer led by billionaire Harold Hamm, are idling rigs and cuttingspending.

 

Read More – our previous article :

Oil Falls : Sector Update Dec. 29 – and worse to come ( as we forecast)

Tax Planning for 2015  see http://www.youroffshoremoney.com

 

 

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