WILLISTON, N.D., Dec 29 – Civeo Corp, which provides temporary housing for oilfield workers and miners, slashed its workforce on Monday and said revenue could fall by a third as slumping crude prices force oil producers to cut costs
The warning adds jitters to the already-wary global oil market and highlights weakness in Australia’s coal industry, one of Civeo’s biggest markets which has been battered by low global demand for steel.
Civeo suspended its quarterly dividend and said it has reduced its workforce in the United States, its smallest market, by 45 percent, and in Canada, its second-biggest market, by 30 percent.
Shares of the Houston-based company which was spun off from Oil States International Inc in May, fell 30 percent in extended trading.
Civeo had long struggled before it became independent, even losing money in 2013 in the United States, its most-promising market. A 50 percent decline in crude prices since June has put new pressure on it as demand for temporary housing softens.
Some oilfield workers also prefer to live in apartments, which many growing towns have urged developers to build. Williams County, North Dakota, has a moratorium on new temporary housing known as “man camps” which are made up of units that look like a cross between shipping containers and mobile homes.
Civeo forecasts revenue of $160 million to $175 million for the first quarter ending March. Analysts on average expect $228 million, according to Thomson Reuters I/B/E/S.
Civeo expects, at most, 40 percent of its Australian and Canadian rooms to be rented by the time the new year starts. At this time last year, 75 percent of Canadian rooms and 55 percent of Australian rooms were rented.
The company gained around 25 percent of overall 2013 revenues from the Australian coal mining industry.
Before the spin off, some investors openly questioned the wisdom of floating the company as a “pure-play,” saying it would be undercapitalized and lack the protection of an established parent during a cyclical downturn. Those warnings now seem prescient.
Civeo’s plans to try and abrogate the commodity-price cycle by setting up a tax-advantaged Real Estate Investment Trust (REIT) have also unraveled.
The REIT setback prompted the company to say in September it would try to relocate to Canada to enjoy lower taxes, though U.S. regulators have tried to stymie such moves.
Civeo, one of the largest publicly-traded players in the “man camp” accommodations business dominated mainly by privately-held companies, has more than 20,000 dormitory-style rooms across remote parts of Canada, Australia and the United States for workers at Imperial Oil Ltd, Vale and others.
One of its main rivals, Target Logistics, a subsidiary of Baltimore-based Algeco Scotsman, operates dozens of locations throughout North Dakota and has long-term contracts with Halliburton Co and others.
Video tour of North Dakota man camp:
The man camps are often constructed with dozens of trailers joined together by temporary hallways, with a common cafeteria and entertainment facilities. They enforce a zero tolerance policy on drugs and alcohol.
(Reporting by Anet Josline Pinto in Bengaluru and Ernest Scheyder in Williston; Editing by Joyjeet Das, Terry Wade and Andrew Hay)
This article was from Reuters and was legally licensed through the NewsCred publisher network.