So Accommodating! Oil States International Sets Civeo Spinoff For May 30th

Oil States International’s (OIS) board of directors approved the spinoff of its accommodations business, Civeo Corporation. The new company will trade on the NYSE under the ticker ‘CVEO’ and OIS shareholders will receive 2 shares of CVEO for every OIH share owned. The distribution is expected to take place on May 30th to shareholders as of the close on May 21st, although a ‘When Issued’ market is expected to start ‘on or about’ May 19th.

Civeo provides housing and other accommodations for workers in offsite locations such as the Canada’s oil sands and Australia’s mines. The company’s revenues and other financial metrics declined a bit in 2013 vs. 2012 and I would expect some volatility in the future given the ties to commodity prices. Additionally, the company does most of its business in foreign countries such as Canada and Australia so there is some foreign exchange risk as well. As part of the transaction, Civeo will pay its parent company a $750m cash dividend funded by a 5 year term loan. Although OIS doesn’t currently have a dividend in place, Civeo expects to pay out $0.13 per share quarterly. A new leadership team has been announced and OIS’ current EVP of Accommodations, Bradley Dobson, will become President and CEO of the new company while PWC’s Frank Steininger will become EVP, CFO and Treasurer. One title apparently isn’t enough for anyone these days.

Looking ahead, Civeo is studying the possible conversion to REIT status however, there is no guarantee that they will pursue this option or ultimately be approved by the IRS. Either way, the culmination of the spin represents a victory for activist and large OIS shareholder (~11%) Jana Partners who pushed for the move. It’s also a win for David Einhorn who highlighted the company at last year’s Sohn Conference and owns ~5% of its shares. Although the stock has run up a bit since the announcement, many still believe there is more to go, especially if Civeo can obtain REIT status. For additional information on the company, check out its recently amended Form 10 filing, this recent company presentation and our earlier coverage on the topic.

Disclosure: Author holds no position in any stock mentioned.