HOUSTON, Aug. 1, 2019 /PRNewswire/ -- Independence
Contract Drilling, Inc. (the "Company") (NYSE: ICD) today reported
financial results for the three months ended June 30, 2019 and also announced that its Board
of Directors has authorized the Company to engage in a stock
repurchase program of up to $10
million.
Second Quarter 2019 Highlights
- Net loss of $12.9 million, or
$0.17 per share.
- Adjusted net loss, as defined below, of $5.5 million, or $0.07 per share. Adjusted net loss includes a
charge of $2.7 million, or
$0.03 per share, associated with a
tax rate adjustment described below.
- Adjusted EBITDA, as defined below, of $12.8 million.
- Net debt, excluding finance leases, of $119.7 million.
- Fleet utilization of 83.7%.
- Fully burdened margin of $6,713
per day.
In the second quarter of 2019, the Company reported revenues of
$52.9 million, a net loss of
$12.9 million, or $0.17 per share, adjusted net loss (defined
below) of $5.5 million, or
$0.07 per share, and adjusted EBITDA
(defined below) of $12.8
million. Included in net loss and adjusted net loss
during the quarter was a tax charge of $2.7
million, or $0.03 per share,
associated with a change in expected tax rate compared to the first
quarter of 2019 which resulted in a reversal of the tax benefit
recorded during the first quarter of 2019.
These results compare to revenues of $25.8 million, a net loss of $3.3 million, or $0.09 per share, adjusted net loss of
$3.2 million, or $0.08 per share, and adjusted EBITDA of
$5.0 million in the second quarter of
2018, revenues of $60.4 million, a
net loss of $2.4 million, or
$0.03 per share, an adjusted net
income of $2.9 million, or
$0.04 per share, and adjusted EBITDA
of $15.8 million in the first quarter
of 2019. Net income and adjusted net income during the first
quarter of 2019 included a tax benefit of $2.5 million, or $0.03 per share.
Chief Executive Officer Anthony
Gallegos commented, "Second quarter market conditions
softened more than original expectations as our customers increased
their focus on budget discipline in light of investor demands and
commodity price volatility. As a result, we exited the
quarter with 22 rigs operating in the field. Since exiting
the second quarter, we have seen improvement in our contracted AC
pad-optimal rig count and we expect to add more contracted rigs
during the third quarter. The rig releases experienced during the
second quarter caused higher and longer-than-expected, transitory
downtime and cost inefficiencies for our rig fleet during the
quarter.
Looking forward, we believe ICD is well positioned with a strong
balance sheet and liquidity position supporting our pad-optimal
fleet and relentless focus on safety, operational excellence, and
customer satisfaction. Our merger integration is complete,
and we are now seeing increased near-term customer high-grading
opportunities that were not available to the Company
pre-merger. We have reentered the Eagle Ford and expect
to add additional rigs to that market during the second half of
this year. We have exciting initiatives underway involving rig
conversions, upgrades, and technology that were all budgeted and
require minimal incremental capital outlays. These initiatives are
expected to generate significant free cash flow and value for ICD,
our customers, and our stockholders.
In light of current stock valuations and the fact that the
merger integration and associated costs are now behind us, I am
pleased to announce that our Board of Directors has authorized a
stock repurchase program of up to $10
million. We plan to make future capital allocation
decisions based on free cash flow generation and prioritizing
between stock repurchases, our most economic investment
opportunities within our existing fleet, and debt repayment."
Quarterly Operational Results
In the second quarter of 2019, the Company's fleet operated at
83.7% utilization and recorded 2,330 revenue days, compared to
99.3% utilization and 1,265 revenue days in the second quarter of
2018, and 94.8% utilization and 2,728 revenue days in the first
quarter of 2019.
Operating revenues in the second quarter of 2019 totaled
$52.9 million, compared to
$25.8 million in the second quarter
of 2018 and $60.4 million in the
first quarter of 2019. Second quarter 2019 revenues include
$0.5 million of early termination
revenue, and second quarter and first quarter 2019 revenues include
$46 thousand and $1.0 million, respectively, of non-cash
intangible revenue associated with the Sidewinder merger that
closed on October 1, 2018.
Excluding this early termination revenue and non-cash
revenue, revenue per day in the second quarter of 2019 was
$20,868, compared to $19,411 in the second quarter of 2018 and
$20,755 in the first quarter of
2019. Sequential revenue per day increases were driven by
higher dayrates from recontracting of older legacy contracts.
Operating costs in the second quarter of 2019 totaled
$37.5 million, compared to
$18.0 million in the second quarter
of 2018 and $39.3 million in the
first quarter of 2019. Fully burdened operating costs were
$14,155 per day in the second quarter
of 2019, compared to $13,034 in the
second quarter of 2018 and $13,302 in
the first quarter of 2019. Sequential increases in per day
operating costs were primarily the result of decreased operating
days and transitory personnel costs associated with the reduction
in operating rigs.
Fully burdened rig operating margins in the second quarter of
2019 were $6,713 per day, compared to
$6,377 per day in the second quarter
of 2018 and $7,453 per day in the
first quarter of 2019. Sequential reductions in margin per day were
associated with the transitory increases in cost per day.
Selling, general and administrative expenses in the second
quarter of 2019 were $3.0 million
(including $0.4 million of non-cash
stock-based compensation), compared to $3.5
million (including $0.7
million of non-cash stock-based compensation) in the second
quarter of 2018 and $4.5 million
(including $0.4 million of non-cash
stock-based compensation) in the first quarter of 2019.
Sequential decreases in SG&A were primarily associated with
continued merger synergy realization and reduced incentive
compensation accruals in light of reduced operating activity.
A tax charge of $2.7 million
($0.03 per share) was recorded in the
second quarter of 2019 as a result of applying the Company's
revised estimated annual tax rate to the year-to-date results. The
expected annual tax expense for 2019 consists of Louisiana and Texas tax.
During the second quarter of 2019, the Company incurred other
expenses of $0.3 million related to
costs associated with the resolution of non-recurring pre-IPO
litigation matters.
Drilling Operations Update
In light of market conditions, the Company elected during the
second quarter of 2019 to decommission the remaining three
operating SCR rigs in its fleet. All of these rigs ceased
operations by early July 2019. These rigs will not re-enter
the Company's marketed fleet until their conversions to AC
pad-optimal status are complete. As a result, the Company
recorded a $3.1 million non-cash
asset impairment during the quarter relating to equipment that will
be replaced. Long lead-time items for these conversions were
previously ordered, and the first conversion is scheduled for
completion at the end of the third quarter of 2019.
The Company's backlog of drilling contracts with original terms
of six months or longer is $84.2
million as of June 30, 2019,
representing 10.8 rig years of activity. Approximately 66% of
this backlog is expected to be realized during the remainder of
2019. The Company also has 4 rigs currently operating under
short-term contracts not included in this reported
backlog.
Capital Expenditures and Liquidity Update
The Company's capital expenditure budget for 2019, net of asset
sales and recoveries, remains $29
million. During the second quarter of 2019, cash
outlays for capital expenditures, net of asset sales and
recoveries, was $9.1 million.
Budgeted capital expenditures for the remainder of the year include
maintenance and ancillary equipment items, completion of budgeted
300 series upgrades, the first of which is scheduled for completion
during the third quarter of 2019, and items associated with
budgeted SCR conversions, the first of which is scheduled for
completion at the end of the third quarter of 2019.
As of June 30, 2019, the Company
had cash on hand of $10.3 million, no
amounts drawn on its $40 million
revolving credit facility, and $130
million principal amount outstanding under its term
loan. The term loan includes a fully committed $15 million accordion that remains undrawn and
fully available to the Company.
Conference Call Details
A conference call for investors will be held today, August 1, 2019, at 11:00
a.m. Central Time (12:00 p.m. Eastern
Time) to discuss the Company's second quarter 2019
results.
The call can be accessed live over the telephone by dialing
(855) 239-3115 or for international callers, (412) 542-4125.
A replay will be available shortly after the call and can be
accessed by dialing (877) 344-7529 or for international callers,
(412) 317-0088. The passcode for the replay is
10133851. The replay will be available until August 8, 2019.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging onto the Company's website at
www.icdrilling.com in the Investor Relations section. A
replay of the webcast will also be available for approximately 30
days following the call.
About Independence Contract Drilling, Inc.
Independence Contract Drilling provides land-based contract
drilling services for oil and natural gas producers in the United States. The Company constructs,
owns and operates a fleet of pad-optimal ShaleDriller rigs that are
specifically engineered and designed to accelerate its clients'
production profiles and cash flows from their most technically
demanding and economically impactful oil and gas properties. For
more information, visit www.icdrilling.com.
Forward-Looking Statements
This news release contains certain forward-looking statements
within the meaning of the federal securities laws. Words such as
"anticipated," "estimated," "expected," "planned," "scheduled,"
"targeted," "believes," "intends," "objectives," "projects,"
"strategies" and similar expressions are used to identify such
forward-looking statements. However, the absence of these words
does not mean that a statement is not forward-looking.
Forward-looking statements relating to Independence Contract
Drilling's operations are based on a number of expectations or
assumptions which have been used to develop such information and
statements but which may prove to be incorrect. These statements
are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict, and
there can be no assurance that actual outcomes and results will not
differ materially from those expected by management of Independence
Contract Drilling. For more information concerning factors that
could cause actual results to differ materially from those conveyed
in the forward-looking statements, please refer to the "Risk
Factors" section of the Company's Annual Report on Form 10-K, filed
with the SEC and the information included in subsequent amendments
and other filings. These forward-looking statements are based on
and include our expectations as of the date hereof. Independence
Contract Drilling does not undertake any obligation to update or
revise such forward-looking statements to reflect events or
circumstances that occur, or which Independence Contract Drilling
becomes aware of, after the date hereof.
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in thousands,
except par value and share data)
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
June 30,
2019
|
|
December 31,
2018
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
10,278
|
|
$
12,247
|
Accounts receivable,
net
|
35,862
|
|
41,987
|
Inventories
|
2,443
|
|
2,693
|
Assets held for
sale
|
13,796
|
|
19,711
|
Prepaid expenses and
other current assets
|
3,321
|
|
8,930
|
|
|
|
Total current
assets
|
65,700
|
|
85,568
|
Property, plant and
equipment, net
|
489,074
|
|
496,197
|
Goodwill
|
1,627
|
|
1,627
|
Other long-term
assets, net
|
2,212
|
|
1,470
|
|
|
|
Total
assets
|
$
558,613
|
|
$
584,862
|
Liabilities and
Stockholders' Equity
|
|
|
|
Liabilities
|
|
|
|
|
Current portion of
long-term debt (1)
|
$
1,161
|
|
$
587
|
|
Accounts
payable
|
19,606
|
|
16,312
|
|
Accrued
liabilities
|
16,057
|
|
29,219
|
|
Current portion of
contingent consideration
|
13,950
|
|
-
|
|
|
|
Total current
liabilities
|
50,774
|
|
46,118
|
|
Long-term debt
(2)
|
128,654
|
|
130,012
|
|
Contingent
consideration
|
-
|
|
15,748
|
|
Deferred income
taxes, net
|
1,132
|
|
774
|
|
Other long-term
liabilities
|
1,125
|
|
677
|
|
|
|
Total
liabilities
|
181,685
|
|
193,329
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Common stock, $0.01
par value, 200,000,000 shares authorized; 77,469,233 and 77,598,806 shares issued,
respectively, and 76,948,679 and
77,078,252 shares outstanding, respectively
|
769
|
|
771
|
|
Additional paid-in
capital
|
504,074
|
|
503,446
|
|
Accumulated
deficit
|
(124,869)
|
|
(109,638)
|
|
Treasury stock, at
cost, 520,554 shares
|
(3,046)
|
|
(3,046)
|
|
|
|
Total stockholders'
equity
|
376,928
|
|
391,533
|
|
|
|
Total liabilities and
stockholders' equity
|
$
558,613
|
|
$
584,862
|
|
|
(1)
|
Current portion of
long-term debt relates to the current portion of vehicle finance
and capital lease obligations.
|
|
|
(2)
|
As of June 30, 2019,
long-term debt includes $1.5 million of long-term vehicle finance
lease obligations. As of December 31, 2018, long-term debt
included $0.6 million of long-term vehicle capital lease
obligations.
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in thousands, except per share amounts)
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
52,879
|
|
$25,754
|
|
$
60,358
|
|
$113,237
|
|
$51,381
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
37,453
|
|
17,966
|
|
39,333
|
|
76,786
|
|
36,892
|
|
Selling, general and
administrative
|
3,008
|
|
3,495
|
|
4,545
|
|
7,553
|
|
6,974
|
|
Merger-related
expenses
|
1,287
|
|
443
|
|
1,081
|
|
2,368
|
|
443
|
|
Depreciation and
amortization
|
11,371
|
|
6,579
|
|
11,313
|
|
22,684
|
|
13,170
|
|
Asset impairment
(insurance recoveries), net
|
5,855
|
|
-
|
|
2,018
|
|
7,873
|
|
(35)
|
|
Loss (gain) on
disposition of assets, net
|
18
|
|
(333)
|
|
3,220
|
|
3,238
|
|
(415)
|
|
|
Total cost and
expenses
|
58,992
|
|
28,150
|
|
61,510
|
|
120,502
|
|
57,029
|
|
|
Operating
loss
|
(6,113)
|
|
(2,396)
|
|
(1,152)
|
|
(7,265)
|
|
(5,648)
|
Interest
expense
|
(3,592)
|
|
(938)
|
|
(3,761)
|
|
(7,353)
|
|
(1,881)
|
Other
expense
|
(255)
|
|
-
|
|
-
|
|
(255)
|
|
-
|
|
|
Loss before income
taxes
|
(9,960)
|
|
(3,334)
|
|
(4,913)
|
|
(14,873)
|
|
(7,529)
|
Income tax expense
(benefit)
|
2,898
|
|
(21)
|
|
(2,540)
|
|
358
|
|
(70)
|
|
|
Net loss
|
$(12,858)
|
|
$ (3,313)
|
|
$
(2,373)
|
|
$ (15,231)
|
|
$ (7,459)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
$
(0.17)
|
|
$ (0.09)
|
|
$
(0.03)
|
|
$
(0.20)
|
|
$ (0.20)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
75,692
|
|
38,253
|
|
75,692
|
|
75,692
|
|
38,188
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in
thousands)
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
(15,231)
|
|
$
(7,459)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
Depreciation and amortization
|
22,684
|
|
13,170
|
Asset impairment (insurance recoveries), net
|
7,873
|
|
(35)
|
Stock-based compensation
|
803
|
|
1,362
|
Loss (gain) on disposition of assets, net
|
3,238
|
|
(415)
|
Deferred income taxes
|
358
|
|
(70)
|
Amortization of deferred financing costs
|
406
|
|
185
|
Bad debt (recovery) expense
|
(42)
|
|
22
|
Changes in operating assets and liabilities
|
|
|
|
Accounts
receivable
|
6,167
|
|
(1,668)
|
Inventories
|
(61)
|
|
(136)
|
Prepaid
expenses and other assets
|
2,751
|
|
(951)
|
Accounts
payable and accrued liabilities
|
(8,953)
|
|
(539)
|
Net cash provided by operating activities
|
19,993
|
|
3,466
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Purchases of
property, plant and equipment
|
(23,344)
|
|
(13,023)
|
Proceeds from
insurance claims
|
1,000
|
|
-
|
Proceeds from the
sale of assets
|
3,912
|
|
327
|
Net cash used in investing activities
|
(18,432)
|
|
(12,696)
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Borrowings under ABL
Credit Facility
|
2,511
|
|
-
|
Repayments under ABL
Credit Facility
|
(5,077)
|
|
-
|
Borrowings under CIT
Credit Facility
|
-
|
|
27,441
|
Repayments under CIT
Credit Facility
|
-
|
|
(17,200)
|
Common stock issuance
costs
|
(177)
|
|
-
|
Purchase of treasury
stock
|
-
|
|
(350)
|
RSUs withheld for
taxes
|
-
|
|
(95)
|
Financing costs paid
under Term Loan Facility
|
(5)
|
|
-
|
Financing costs paid
under ABL Credit Facility
|
(12)
|
|
-
|
Financing costs paid
under CIT Credit Facility
|
-
|
|
(215)
|
Payments for finance
and capital lease obligations
|
(770)
|
|
(330)
|
Net cash (used in) provided by financing activities
|
(3,530)
|
|
9,251
|
Net (decrease) increase in cash and cash equivalents
|
(1,969)
|
|
21
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
Beginning of
period
|
12,247
|
|
2,533
|
End of
period
|
$
10,278
|
|
$
2,554
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash paid during the
period for interest
|
$
7,047
|
|
$
1,878
|
Supplemental
disclosure of non-cash investing and financing
activity
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
$
591
|
|
$
3,621
|
Additions to
property, plant and equipment through capital leases
|
$
2,223
|
|
$
309
|
Transfer of assets
from held and used to held for sale
|
$
(4,028)
|
|
$
-
|
Transfer from
inventory to fixed assets
|
$
(311)
|
|
$
-
|
The following table provides various financial and operational
data for the Company's operations for the three months ending
June 30, 2019 and 2018 and
March 31, 2019, and the six months
ending June 30, 2019 and 2018.
This information contains non-GAAP financial measures of the
Company's operating performance. The Company believes this
non-GAAP information is useful because it provides a means to
evaluate the operating performance of the Company on an ongoing
basis using criteria that are used by our management.
Additionally, it highlights operating trends and aids analytical
comparisons. However, this information has limitations and
should not be used as an alternative to operating income (loss) or
cash flow performance measures determined in accordance with GAAP,
as this information excludes certain costs that may affect the
Company's operating performance in future periods.
OTHER FINANCIAL
& OPERATING DATA
Unaudited
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Number of marketed
rigs end of period(1)
|
30
|
|
14
|
|
32
|
|
30
|
|
14
|
Rig operating
days(2)
|
2,330.2
|
|
1,264.7
|
|
2,728.1
|
|
5,058.3
|
|
2,524.1
|
Average number of
operating rigs(3)
|
25.6
|
|
13.9
|
|
30.3
|
|
27.9
|
|
13.9
|
Rig utilization
(4)
|
83.7%
|
|
99.3%
|
|
94.8%
|
|
89.3%
|
|
99.6%
|
Average revenue per
operating day (5)
|
$ 20,868
|
|
$ 19,411
|
|
$
20,755
|
|
$ 20,807
|
|
$ 19,233
|
Average cost per
operating day(6)
|
$ 14,155
|
|
$ 13,034
|
|
$
13,302
|
|
$ 13,695
|
|
$ 13,223
|
Average rig margin
per operating day
|
$
6,713
|
|
$
6,377
|
|
$
7,453
|
|
$
7,112
|
|
$
6,010
|
|
|
(1)
|
Number of marketed
rigs as of June 30, 2019 increased by 16 rigs as
compared to the number of marketed rigs as of June 30,
2018 as a result of the Sidewinder Merger. Marketed rigs
exclude idle rigs that will not be reactivated until upgrades or
conversions are complete.
|
|
|
(2)
|
Rig operating days
represent the number of days our rigs are earning revenue under a
contract during the period, including days that standby revenues
are earned.
|
|
|
(3)
|
Average number of
operating rigs is calculated by dividing the total number of rig
operating days in the period by the total number of calendar days
in the period.
|
|
|
(4)
|
Rig utilization is
calculated as rig operating days divided by the total number of
days our marketed drilling rigs are available during the applicable
period.
|
|
|
(5)
|
Average revenue per
operating day represents total contract drilling revenues earned
during the period divided by rig operating days in the
period. Excluded in calculating average revenue per operating
day are revenues associated with the reimbursement of (i)
out-of-pocket costs paid by customers of $3.7 million, $1.2 million
and $2.7 million during the three months ended June 30, 2019
and 2018, and March 31, 2019, respectively, and $6.4 million and
$2.8 million during the six months ended June 30, 2019 and
2018, respectively, (ii) revenues associated with the amortization
of intangible revenue acquired in the Sidewinder Merger of $46
thousand and $1.1 million during the three and six months
ended June 30, 2019, respectively, and (iii) early termination
revenues of $0.5 million and $0.5 million during the three and six
months ended June 30, 2019, respectively. The three and six
months ended June 30, 2018 did not include any intangible or early
termination revenues.
|
|
|
(6)
|
Average cost per
operating day represents operating costs incurred during the period
divided by rig operating days in the period. The following
costs are excluded in calculating average cost per operating day:
(i) out-of-pocket costs paid by customers of $3.7 million, $1.2
million and $2.7 million during the three months ended
June 30, 2019 and 2018, and March 31, 2019, respectively, and
$6.4 million and $2.8 million during the six months ended
June 30, 2019 and 2018, respectively, (ii) new crew training
costs of zero, $68 thousand and zero during the three months ended
June 30, 2019 and 2018, and March 31, 2019, respectively and
zero and $93 thousand during the six months ended June 30,
2019 and 2018, respectively, (iii) construction overhead costs
expensed due to reduced rig construction activity of $0.7 million,
$0.2 million and $0.3 million during the three months ended
June 30, 2019 and 2018, and March 31, 2019, respectively, and
$1.0 million and $0.6 million during the six months ended
June 30, 2019 and 2018, respectively, and (iv) rig
de-commissioning costs associated with stacking deactivated rigs of
$0.1 million and $0.1 million during the three and six months ended
June 30, 2019, respectively. The three and six months
ended June 30, 2018 and the three months ended March 31, 2019 did
not include any de-commissioning costs.
|
Non-GAAP Financial Measures
Adjusted net (loss) income, EBITDA and adjusted EBITDA are
supplemental non-GAAP financial measures that are used by
management and external users of our financial statements, such as
industry analysts, investors, lenders and rating agencies. In
addition, adjusted EBITDA is consistent with how EBITDA is
calculated under our credit facility for purposes of determining
our compliance with various financial covenants. We define
"EBITDA" as earnings (or loss) before interest, taxes,
depreciation, and amortization, and we define "adjusted EBITDA" as
EBITDA before stock-based compensation, non-cash asset impairments,
gains or losses on disposition of assets, and other non-recurring
items added back to, or subtracted from, net income for purposes of
calculating EBITDA under our credit facilities. Neither
adjusted net (loss) income, EBITDA or adjusted EBITDA is a measure
of net income as determined by U.S. generally accepted accounting
principles ("GAAP").
Management believes adjusted net (loss) income, EBITDA and
adjusted EBITDA are useful because they allow our stockholders to
more effectively evaluate our operating performance and compliance
with various financial covenants under our credit facility and
compare the results of our operations from period to period and
against our peers without regard to our financing methods or
capital structure or non-recurring, non-cash transactions. We
exclude the items listed above from net income (loss) in
calculating adjusted net (loss) income, EBITDA and adjusted EBITDA
because these amounts can vary substantially from company to
company within our industry depending upon accounting methods and
book values of assets, capital structures and the method by which
the assets were acquired. None of adjusted net (loss) income,
EBITDA or adjusted EBITDA should be considered an alternative to,
or more meaningful than, net income (loss), the most closely
comparable financial measure calculated in accordance with GAAP, or
as an indicator of our operating performance or liquidity. Certain
items excluded from adjusted net (loss) income, EBITDA and adjusted
EBITDA are significant components in understanding and assessing a
company's financial performance, such as a company's return on
assets, cost of capital and tax structure. Our presentation of
adjusted net (loss) income, EBITDA and adjusted EBITDA should not
be construed as an inference that our results will be unaffected by
unusual or non-recurring items. Our computations of adjusted
net (loss) income, EBITDA and adjusted EBITDA may not be comparable
to other similarly titled measures of other companies.
Reconciliation of
Net Loss to Adjusted Net (Loss) Income:
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
2018
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$ (12,858)
|
|
$(0.17)
|
|
$(3,313)
|
|
$(0.09)
|
|
$(2,373)
|
|
$ (0.03)
|
|
$(15,231)
|
|
$
(0.20)
|
|
$(7,459)
|
|
$ (0.20)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment
(insurance recoveries), net (1)
|
5,855
|
|
0.08
|
|
-
|
|
-
|
|
2,018
|
|
0.03
|
|
7,873
|
|
0.10
|
|
(35)
|
|
-
|
Loss (gain) on
disposition of assets, net(2)
|
18
|
|
-
|
|
(333)
|
|
-
|
|
3,220
|
|
0.04
|
|
3,238
|
|
0.04
|
|
(415)
|
|
(0.01)
|
Intangible
revenue(3)
|
(46)
|
|
-
|
|
-
|
|
-
|
|
(1,033)
|
|
(0.01)
|
|
(1,079)
|
|
(0.01)
|
|
-
|
|
-
|
Merger-related
expenses(4)
|
1,287
|
|
0.02
|
|
443
|
|
0.01
|
|
1,081
|
|
0.01
|
|
2,368
|
|
0.04
|
|
443
|
|
0.01
|
Other
expense
|
255
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
255
|
|
-
|
|
-
|
|
-
|
Adjusted net
(loss) income
|
$
(5,489)
|
|
$(0.07)
|
|
$(3,203)
|
|
$(0.08)
|
|
$
2,913
|
|
$
0.04
|
|
$
(2,576)
|
|
$
(0.03)
|
|
$(7,466)
|
|
$ (0.20)
|
Reconciliation of
Net Loss to EBITDA and Adjusted EBITDA:
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
2018
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Net loss
|
$(12,858)
|
|
$ (3,313)
|
|
$
(2,373)
|
|
$(15,231)
|
|
$ (7,459)
|
Add back:
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
2,898
|
|
(21)
|
|
(2,540)
|
|
358
|
|
(70)
|
Interest
expense
|
3,592
|
|
938
|
|
3,761
|
|
7,353
|
|
1,881
|
Depreciation and
amortization
|
11,371
|
|
6,579
|
|
11,313
|
|
22,684
|
|
13,170
|
Asset impairment
(insurance recoveries), net(1)
|
5,855
|
|
-
|
|
2,018
|
|
7,873
|
|
(35)
|
EBITDA
|
10,858
|
|
4,183
|
|
12,179
|
|
23,037
|
|
7,487
|
Loss (gain) on
disposition of assets, net(2)
|
18
|
|
(333)
|
|
3,220
|
|
3,238
|
|
(415)
|
Stock-based
compensation
|
416
|
|
718
|
|
387
|
|
803
|
|
1,362
|
Intangible
revenue(3)
|
(46)
|
|
-
|
|
(1,033)
|
|
(1,079)
|
|
-
|
Merger-related
expenses(4)
|
1,287
|
|
443
|
|
1,081
|
|
2,368
|
|
443
|
Other
expense
|
255
|
|
-
|
|
-
|
|
255
|
|
-
|
Adjusted
EBITDA
|
$
12,788
|
|
$
5,011
|
|
$
15,834
|
|
$
28,622
|
|
$
8,877
|
|
|
(1)
|
In the second quarter
of 2019, we recorded an impairment of $5.9 million to reflect (i) a
$3.1 million impairment of non-marketable SCR drilling equipment on
rigs that will be upgraded, (ii) a $1.1 million impairment of
drilling assets to be sold at auction in August 2019, (iii) a $0.2
million impairment of real property acquired in the Sidewinder
merger that is scheduled to be sold during the third quarter of
2019 and (iv) a $1.2 million impairment of miscellaneous drilling
equipment previously held for sale, but deemed unsalable in the
current market environment. In the first quarter of 2019, we
recorded a $2.0 million impairment of drilling assets that were
sold at auction in April 2019.
|
|
|
(2)
|
In the second quarter
of 2018, we recorded a gain on disposition of assets of $0.3
million, primarily due to a gain on the sale or disposition of
miscellaneous drilling equipment. In the first quarter of
2019, we recorded a loss on the disposition of assets of $3.2
million primarily related to the sale of certain surplus assets,
acquired in the Sidewinder merger, at auctions during the
quarter.
|
|
|
(3)
|
For the three and six
months ended June 30, 2019, and the three months ended March 31,
2019, we amortized intangible revenue related to an unfavorable
contract liability acquired in the Sidewinder merger.
|
|
|
(4)
|
For all periods
presented, we incurred costs directly associated with the
Sidewinder merger. These costs were primarily comprised of
severance, professional fees and other merger integration related
expenses.
|
INVESTOR CONTACTS:
Independence Contract Drilling, Inc.
E-mail inquiries to: Investor.relations@icdrilling.com
Phone inquiries: (281) 598-1211
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SOURCE Independence Contract Drilling, Inc.