Oilfield housing firm's stumble may herald more oil industry pain

Wed Dec 31, 2014 1:00am EST
 
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By Ernest Scheyder

WILLISTON, N.D. Dec 31 (Reuters) - A nasty profit warning and deep job cuts. A gutted capital budget, a suspended dividend and shares tumbling by more than half on a single day.

The retrenchment at Civeo Corp, which provides temporary housing for oilfield workers and miners, is the most-severe symptom of pain inflicted on the oil service industry by the slide in crude prices, and may presage similar steps by peers.

It also exposes the transient nature of the "man camp" business of dormitory-style temporary housing the company helped pioneer.

Drilling, a barometer of oilfield activity, has been slowing for weeks as producers slashed spending plans by 20 to 40 percent. Baker Hughes reported last week the U.S. land rig count fell by 35 to 1,770 and hundreds more rigs will be idled, hitting scores of services companies from ones renting trailers to those repairing pumps.

The pain will spread unevenly. Companies with weaker finances or older equipment are set to be hit sooner and harder by the more-than 50 percent drop in crude prices since June.

Analysts and investors say Civeo's problem is that it has spread itself geographically too thin, with not enough cash to quickly respond to customers' needs.

The company, spun off in May from equipment maker Oil States International Inc, has seen demand drop in Canada's oil sands regions and in Australia, where it houses coal miners, leaving it with little cash to expand in North Dakota's oil counties, where it has only two facilities.

Civeo shares are down over 80 percent this year after tumbling 53 percent on Tuesday, compared with Oil States's 15 percent slide and a roughly 13 percent gain in the S&P 500 index.   Continued...