Civeo Corp - Quarter Report: 2016 March (Form 10-Q)

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2016

OR

For the transition period from _________________________ to                          

Commission file number: 001-36246

Civeo Corporation

_______________

(Exact name of registrant as specified in its charter)

(713) 510-2400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "accelerated filer," "large accelerated filer" and "smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one): 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The Registrant had 107,684,417 common shares outstanding as of April 22, 2016.

CIVEO CORPORATION

INDEX

PART I -- FINANCIAL INFORMATION

ITEM 1. Financial Statements

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

CONSOLIDATED BALANCE SHEETS

(In Thousands)

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY

(In Thousands)

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

The accompanying notes are an integral part of these financial statements.

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

CIVEO CORPORATION

NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains certain “forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. The forward-looking statements can be identified by the use of forward-looking terminology including "may," "expect," "anticipate," "estimate," "continue," "believe" or other similar words. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors. For a discussion of known material factors that could affect our results, please refer to “Risk Factors,” “Forward-Looking Statements,” and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2015 and our subsequent SEC filings. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may differ materially from those expected, estimated or projected. Our management believes these forward-looking statements are reasonable. However, you should not place undue reliance on these forward-looking statements, which are based only on our current expectations and are not guarantees of future performance. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any of them in light of new information, future events or otherwise.

In addition, in certain places in this quarterly report, we refer to reports published by third parties that purport to describe trends or developments in the energy industry. We do so for the convenience of our shareholders and in an effort to provide information available in the market that will assist our investors in a better understanding of the market environment in which we operate. However, we specifically disclaim any responsibility for the accuracy and completeness of such information and undertake no obligation to update such information.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis together with our consolidated financial statements and the notes to those statements included elsewhere in this quarterly report on Form 10-Q.

Redomiciling to Canada

On July 17, 2015, we completed our change in place of incorporation from Delaware to British Columbia, Canada (the Redomicile Transaction). In the Redomicile Transaction, Civeo Corporation, a British Columbia, Canada limited company formerly named Civeo Canadian Holdings ULC (Civeo Canada), became the publicly traded parent company of the Civeo group of companies, and our former publicly traded Delaware parent (Civeo US) became a wholly owned subsidiary of Civeo Canada. Each issued share of Civeo US common stock, other than those shares of Civeo US common stock held by Civeo US in treasury, was effectively transferred to Civeo Canada and converted into one common share, no par value, of Civeo Canada. An aggregate of approximately 107.5 million Civeo Canada common shares were issued in the Redomicile Transaction. The Civeo Canada common shares are listed on the NYSE under the symbol “CVEO,” the same symbol under which the Civeo US common stock traded prior to the effective time.

The Redomicile Transaction qualified as a “self-directed redomiciling” of the Company as permitted under the U.S. Internal Revenue Code. U.S. federal income tax laws permit a company to change its domicile to a foreign jurisdiction without corporate-level U.S. federal income taxes provided that such company has “substantial business activity” in the relevant jurisdiction. “Substantial business activity” is defined as foreign operations consisting of over 25% of the company’s total (i) revenues, (ii) assets, (iii) employees and (iv) employee compensation. With approximately 50% or more of our operations in Canada based on these metrics, we qualified for a self-directed redomiciling.

We incurred costs related to the Redomicile Transaction totaling $1.0 million and $1.2 million for the three months ended March 31, 2016 and 2015, respectively.

Macroeconomic Environment

We provide workforce accommodations to the natural resource industry in Canada, Australia and the U.S. Demand for our services can be attributed to two phases of our customers’ projects: (1) the development or construction phase and (2) the operations or production phase. Initial demand for our services is driven by our customers’ capital spending programs related to the construction and development of oil sands and coal mines and associated infrastructure as well as the exploration for oil and natural gas. Long-term demand for our services is driven by continued development and expansion of natural resource production and operation of oil sands and mining facilities. Industry capital spending programs are generally based on the outlook for commodity prices, economic growth and estimates of resource production. As a result, demand for our products and services is largely sensitive to expected commodity prices, principally related to crude oil, metallurgical (met) coal and natural gas.

In Canada, Western Canadian Select (WCS) crude is the benchmark price for our oil sands accommodations customers. Pricing for WCS is driven by several factors, including the underlying price for West Texas Intermediate (WTI) crude and the availability of transportation infrastructure. Historically, WCS has traded at a discount to WTI, creating a “WCS Differential,” due to transportation costs and limited capacity to move Canadian heavy oil production to refineries, primarily in the U.S. Gulf Coast. Depending on the extent of pipeline capacity availability, the WCS Differential has varied.

During the first quarter of 2016, global oil prices dropped to their lowest level in over ten years due to concerns over global oil demand, the economic growth rate in China, the overall economic health of Europe and price cutting by major oil producing countries, such as Saudi Arabia. Increasing global supply, including increased U.S. shale oil production, also negatively impacted pricing. With falling Brent Crude and WTI oil prices, WCS also fell. WCS prices in the first quarter of 2016 averaged $20.26 per barrel compared to $27.82 in the fourth quarter of 2015 and $35.03 in the first quarter of 2015. The WCS Differential narrowed from $13.25 per barrel at the end of the fourth quarter of 2015 to $13.15 per barrel at the end of the first quarter of 2016. Prices began to increase in March 2016, and as of April 22, 2016, the WTI price was $42.68 and the WCS price was $29.78, resulting in a WCS Differential of $12.90.

There remains a significant risk that prices in the Canadian oil sands could continue to deteriorate or remain at current depressed levels for an extended period of time, and the discount between WCS crude prices and WTI crude prices could widen. The continuation of these depressed price levels has negatively impacted exploration, development, maintenance and production spending and activity by Canadian operators and, therefore, demand for our services in 2016. Our Canadian oil sands customers could continue to delay maintenance spending and additional investments in their oil sands assets as well.

In Australia, approximately 80% of our rooms are located in the Bowen Basin and primarily serve met coal mines in that region. Met coal pricing and growth in production in the Bowen Basin region is influenced by levels of global steel production. Global steel production has decreased 3.6% during the first three months of 2016 compared to the same period in 2015. Furthermore, Chinese steel production decreased 3.2% for the first three months of 2016, and accordingly, Chinese demand for imported steel inputs, such as met coal and iron ore, has continued to decrease during 2016 compared to prior periods. Because of this, coupled with the fact that Australian met coal output has decreased 1% during 2016 compared to 2015, met coal prices have decreased materially from over $160 per metric tonne at the beginning of 2013 to approximately $81.00 per metric tonne in the first quarter of 2016. As of April 22, 2016, contract met coal prices were approximately $84.00 per metric tonne. We expect the historically low contract price of met coal to continue to negatively impact occupancy at our Bowen Basin villages throughout 2016. Depressed met coal prices have led to the implementation of cost control measures by our customers, some coal mine closures and delays in the start-up of new coal mining projects in Australia. A continued depressed met coal price will impact our customers’ future capital spending programs. Long-term demand for steel will be driven by increased steel consumption per capita in developing economies, such as China and India, whose current consumption per capita is a fraction of developed countries.

Natural gas and WTI crude oil prices, discussed above, have an impact on the demand for our U.S. accommodations. Prices for natural gas in the U.S. averaged $1.98 per mcf in the first quarter of 2016, a 29% decrease over the average price in the first quarter of 2015. U.S. natural gas production has continued to outpace demand recently, which has caused prices to continue to be weak relative to historical prices. These weaker prices are expected to continue. At these levels, it is uneconomic to increase development in several domestic, gas-focused basins. If natural gas production growth continues to surpass demand in the U.S. and/or the supply of natural gas were to increase, whether the supply comes from conventional or unconventional production or associated natural gas production from oil wells, prices for natural gas could be constrained for an extended period and result in fewer rigs drilling for natural gas in the near-term.

Recent WTI crude, WCS crude, met coal and natural gas pricing trends are as follows:

___________

Overview

As noted above, demand for our services is primarily tied to the outlook for crude oil and met coal prices. Other factors that can affect our business and financial results include the general global economic environment and regulatory changes in Canada, Australia, the U.S. and other markets.

Our business is predominantly located in northern Alberta, Canada and Queensland, Australia, and we derive most of our business from resource companies who are developing and producing oil sands and met coal resources and, to a lesser extent, other hydrocarbon and mineral resources. More than three-fourths of our revenue is generated by our large-scale lodge and village facilities. Where traditional accommodations and infrastructure are insufficient, inaccessible or not cost effective, our lodge and village facilities provide comprehensive accommodations services similar to those found in an urban hotel. We typically contract our facilities to our customers on a fee per day basis that covers lodging and meals and that is based on the duration of their needs which can range from several weeks to several years.

Generally, our customers are making multi-billion dollar investments to develop their prospects, which have estimated reserve lives ranging from ten years to in excess of thirty years. Consequently, these investments are dependent on those customers’ longer-term view of commodity demand and prices. Announcements of certain new and expanded oil sands projects can create the opportunity to extend existing accommodations contracts and incremental contracts for us in Canada. There have been few new or expanded projects announced in recent months.

With the current commodity price environment and expected demand, concerns about take-away capacity out of the Canadian oil sands region and continued high costs including labor costs, the current outlook for Canadian oil sands activity has continued to deteriorate in 2016. Although we are currently the primary third-party accommodations provider for the two major construction projects in the Canadian oil sands region, the Fort Hills project and the Kearl project, outlook for additional major oil sands construction projects is limited. Oil sands operators are looking to reduce their costs and capital spending, limiting the demand for accommodations like we provide. As a result, we experienced materially lower revenues and earnings from our Canadian operations in the first quarter of 2016 compared to the first quarter of 2015 and expect this trend to continue for the rest of 2016.

We began expansion of our room count in Kitimat, British Columbia during the second half of 2015 to support potential liquefied natural gas (LNG) projects on the west coast of British Columbia. We were awarded a contract with LNG Canada for the provision of open lodge rooms and associated services. To support this contract, we have developed a new accommodations facility, named Sitka Lodge, which includes private washrooms, recreational facilities and other amenities. This lodge currently has 386 rooms with the potential to expand to serve future accommodations demand in the region.

We expanded our Australian room capacity in 2012 and 2013 to meet increasing demand, notably in the Bowen Basin in Queensland and in the Gunnedah Basin in New South Wales to support coal production, and in Western Australia to support LNG and other energy-related projects. In early 2013, a confluence of low met coal pricing, additional carbon and mining taxes on our Australian accommodations customers and several years of cost inflation caused several of our customers to curtail or cease production from higher cost mines and delay or materially reduce their growth plans. This has negatively affected our ability to expand our room count and has led to a decrease in occupancy levels. Despite the repeal of carbon and mining taxes, continued concerns about China’s economy, which significantly influences the global demand for steel, and therefore, met coal, the outlook for met coal demand continues to be negative. As a result, our Australian business experienced lower occupancy levels throughout 2015, and this trend is continuing in 2016.

Exchange rates between the U.S. dollar and each of the Canadian dollar and the Australian dollar influence our U.S. dollar reported financial results. Our business has historically derived the vast majority of its revenues and operating income in Canada and Australia. These revenues and profits are translated into U.S. dollars for U.S. Generally Accepted Accounting Principles (U.S. GAAP) financial reporting purposes. The Canadian dollar was valued at an average exchange rate of U.S. $0.73 for the first quarter of 2016 compared to U.S. $0.81 for the first quarter of 2015, a decrease of approximately 10%. The Canadian dollar was valued at an exchange rate of $0.77 on March 31, 2016 and $0.72 on December 31, 2015. The Australian dollar was valued at an average exchange rate of U.S. $0.72 for the first quarter of 2016 compared to U.S. $0.79 for the first quarter of 2015, a decrease of approximately 8%. The Australian dollar was valued at an exchange rate of $0.77 on March 31, 2016 and $0.73 on December 31, 2015. These fluctuations of the Canadian and Australian dollars have had and will continue to have an impact on the translation of earnings generated from our Canadian and Australian subsidiaries and, therefore, our financial results.

We continue to monitor the global economy, the demand for crude oil, met coal and natural gas and the resultant impact on the capital spending plans of our customers in order to plan our business. We currently expect that our 2016 capital expenditures will total approximately $30 million, compared to 2015 capital expenditures of $62 million. Please see “Liquidity and Capital Resources” below for further discussion of 2016 capital expenditures.

Results of Operations

Unless otherwise indicated, discussion of results for the three-month period ended March 31, 2016 is based on a comparison to the corresponding period of 2015.

Consolidated Results of Operations

We reported net loss attributable to Civeo for the first quarter of 2016 of $26.8 million, or $0.25 per diluted share. As further discussed below, net loss included (1) an $8.4 million pre-tax loss ($5.5 million after-tax, or $0.05 per diluted share) resulting from the impairment of fixed assets, included in Impairment expense below and (2) a $1.0 million pre-tax loss ($0.7 million after-tax, or $0.01 per diluted share) from costs incurred in connection with the Redomicile Transaction, included in Selling, general and administrative (SG&A) expense below.

These results compare to net loss attributable to Civeo for the first quarter of 2015 of $16,000, or $0.00 per diluted share. As further discussed below, net loss included (1) a $3.8 million pre-tax loss ($2.4 million after-tax, or $0.02 per diluted share) resulting from the impairment of fixed assets, included in Impairment expense below and (2) a $1.1 million pre-tax loss ($0.8 million after-tax, or $0.01 per diluted share) from costs incurred in connection with the Redomicile Transaction, included in SG&A expense below.

Revenues. Consolidated revenues decreased $76.0 million, or 44%, in the first quarter of 2016 compared to the first quarter of 2015. This decline was largely driven by decreases in Canada and Australia, due to lower occupancy, as well as weaker Canadian and Australian dollars in 2016 compared to 2015. Please see the discussion of segment results of operations below for further description.

Cost of Sales and Services. Our consolidated cost of sales decreased $37.0 million, or 36%, in the first quarter of 2016 compared to the first quarter of 2015, primarily due to decreases in occupancy in both Canada and Australia, as well as the weaker Canadian and Australian dollars in 2016 compared to 2015. Please see the discussion of segment results of operations below for further description.

Selling, General and Administrative Expenses. SG&A expense decreased $3.6 million, or 21%, in the first quarter of 2016 compared to the first quarter of 2015. This decrease was primarily due to reduced compensation as a result of workforce reductions in 2015, lower incentive compensation accruals when compared to 2015, lower bad debt reserves when compared to 2015, and the impact of the weaker Canadian and Australian dollars.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased $8.9 million, or 21%, in the first quarter of 2016 compared to the first quarter of 2015, primarily due to reduced depreciation expense resulting from impairments recorded in 2015 as well as the impact of the weaker Canadian and Australian dollars.

Impairment Expense. We recorded pre-tax impairment expense of $8.4 million in 2016 related to the impairment of fixed assets in our U.S. segment, due to a continued reduction of U.S. drilling activity in the Bakken Shale region. We recorded pre-tax impairment expense of $2.7 million in 2015 related to a decision to sell our U.S. manufacturing facility. As a result, the facility was classified as held for sale at March 31, 2015, and its carrying value was reduced to expected proceeds less cost to sell.

Operating Income. Consolidated operating income decreased $31.1 million, or 637%, in the first quarter of 2016 compared to the first quarter of 2015, primarily due to lower occupancy levels in Canada and Australia as well as the weaker Canadian and Australian dollars.

Interest Expense and Interest Income, net. Net interest expense increased by $0.7 million, or 15%, in the first quarter of 2016 compared to the first quarter of 2015 primarily due to decreased interest income due to lower average cash balances in 2016 as compared to 2015 and the 2016 write-off of $0.3 million of debt issuance costs associated with the Amended Credit Facility. This was offset by decreased interest expense associated with lower amounts outstanding under the Amended Credit Facility in the first quarter of 2016 as compared to the first quarter of 2015.

Income Tax Provision. Our income tax benefit for the three months ended March 31, 2016 totaled $4.6 million, or 14.6% of pretax income, compared to income tax expense of $1.2 million, or 83.4% of pretax income, for the three months ended March 31, 2015. The decrease in the effective tax rate from the prior year was largely the result of a change in the earnings mix between different tax jurisdictions. In addition, 2016 and 2015 include discrete items totaling $0.9 million and $0.5 million, respectively.       

Other Comprehensive Income (Loss). Other comprehensive loss decreased $140.4 million in the first quarter of 2016 compared to the first quarter of 2015, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar increased 7% in the first quarter of 2016 compared to a 9% decrease in the first quarter of 2015. The Australian dollar exchange rate compared to the U.S. dollar increased 5% in the first quarter of 2016 compared to a 7% decrease in the first quarter of 2015.

Segment Results of Operations – Canadian Segment

Our Canadian segment reported revenues in the first quarter of 2016 that were $51.4 million, or 44%, lower than the first quarter of 2015. The weakening of the average exchange rates for the Canadian dollar relative to the U.S. dollar by 10% in the first quarter of 2016 compared to the first quarter of 2015 resulted in a $7.0 million year-over-year reduction in revenues. In addition, excluding the impact of the weaker Canadian exchange rates, the segment experienced a 31% decline in lodge revenues, primarily due to reduced occupancy and lower room rates.

Our Canadian segment cost of sales and services decreased $25.9 million, or 35%, in the first quarter of 2016 compared to the first quarter of 2015 due to lower occupancy, as well as the weakening of the average exchange rates.

Our Canadian segment gross margin as a percentage of revenues decreased from 37% in the first quarter of 2015 to 27% in the first quarter of 2016 primarily due to lower contracted room rates and occupancy in Canada.

Segment Results of Operations – Australian Segment

Our Australian segment reported revenues in the first quarter of 2016 that were $16.3 million, or 39%, lower than the first quarter of 2015. The weakening of the average exchange rates for Australian dollars relative to the U.S. dollar by 8% in the first quarter of 2016 compared to the first quarter of 2015 resulted in a $2.3 million year-over-year reduction in revenues. Excluding the impact of the weaker Australian exchange rates, the segment experienced a 34% decline in revenues due to lower occupancy levels in the first quarter of 2016 compared to the first quarter of 2015, primarily as a result of the continued slowdown in mining activity.

Our Australian segment cost of sales decreased $5.2 million, or 29%, in the first quarter of 2016 compared to the first quarter of 2015. The decrease was driven by lower occupancy levels as well as the weakening of the Australian dollar.

Our Australian segment gross margin as a percentage of revenues decreased to 51% in the first quarter of 2016 from 58% in the first quarter of 2015. This was primarily driven by reduced take or pay revenues on expired contracts and lower occupancy compared to the first quarter of 2015.

Segment Results of Operations – U.S. Segment

Our U.S. segment reported revenues in the first quarter of 2016 that were $8.2 million, or 67%, lower than the first quarter of 2015. The reduction was primarily due to lower U.S. drilling activity in the Bakken, Rockies and Texas markets and decreased sales in our offshore business.

Our U.S. cost of sales decreased $5.9 million, or 51%, in the first quarter of 2016 compared to the first quarter of 2015. The decrease was driven by overall lower activity levels.

Our U.S. segment gross margin as a percentage of revenues decreased from 6% in the first quarter of 2015 to (41)% in the first quarter of 2016, primarily due to overall lower activity levels.

Liquidity and Capital Resources

Our primary liquidity needs are to fund capital expenditures, which in the past have included expanding and improving our accommodations, developing new lodges and villages and purchasing or leasing land under our land banking strategy, and for general working capital needs. In addition, capital has been used to repay debt, fund strategic business acquisitions and pay dividends. Historically, our primary sources of funds have been available cash, cash flow from operations and borrowings under our credit facility. The following table summarizes our consolidated liquidity position as of March 31, 2016 and December 31, 2015:

Cash totaling $11.3 million was provided by operations during the first quarter of 2016, compared to $48.9 million provided by operations during the first quarter of 2015. The decrease in operating cash flow in 2016 compared to 2015 was primarily due to lower revenue resulting from occupancy levels in lodges and villages. During the first quarter of 2016 and 2015, $1.3 million and $0.8 million, respectively, was provided by working capital.

Cash was used in investing activities during the three months ended March 31, 2016 in the amount of $3.5 million, compared to cash used in investing activities during the three months ended March 31, 2015 in the amount of $9.6 million. Capital expenditures totaled $4.8 million and $10.7 million during the three months ended March 31, 2016 and 2015, respectively. Capital expenditures in the first quarter of 2016 consisted primarily of investments in an enterprise information system, and maintenance capital expenditures in the first quarter of 2015 consisted principally of costs for the construction and installation of assets for our lodges primarily in support of Canadian oil sands projects.

We expect our capital expenditures for 2016 to be approximately $30 million, which excludes any expenditures for unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts. Whether planned expenditures will actually be spent in 2016 depends on industry conditions, project approvals and schedules, customer room commitments and project and construction timing. We expect to fund these capital expenditures with available cash, cash flow from operations and borrowings under our Amended Credit Facility.

Net cash of $13.0 million was used by financing activities during the three months ended March 31, 2016 due to repayments of term loan borrowings of $29.1 million offset by net revolver borrowings of $18.1 million. Net cash of $0.5 million was provided by financing activities during the three months ended March 31, 2015 due to proceeds from the issuance of common stock associated with exercises of options.

The following table summarizes the changes in debt outstanding during the first quarter of 2016 (in thousands):

We believe that cash on hand and cash flow from operations will be sufficient to meet our liquidity needs in the coming twelve months. If our plans or assumptions change, or are inaccurate, or if we make acquisitions, we may need to raise additional capital. Acquisitions have been, and our management believes acquisitions will continue to be, an element of our business strategy. The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend upon our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, such additional debt service requirements could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders. In addition, in some cases, we may incur costs to acquire land and/or construct assets without securing a customer contract or prior to finalization of an accommodations contract with a customer. If the contract is not obtained or delayed, the resulting impact could result in an impairment of the related investment.

Credit Facility and Long Term Debt

On February 18, 2016, the Second Amendment (Second Amendment) to the Credit Facility (together with all amendments, the Amended Credit Facility) became effective, which provided for the following: