HOUSTON, Feb. 28, 2020 /PRNewswire/ --Independence
Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today
reported financial results for the three and twelve months ended
December 31, 2019.
Fourth Quarter 2019 Highlights
- Net loss of $35.0 million, or
$0.47 per share.
- Adjusted net loss, as defined below, of $7.7 million, or $0.10 per share.
- Adjusted EBITDA, as defined below, of $7.2 million.
- Net debt, excluding finance leases and net of deferred
financing costs, of $122.3
million.
- Marketed fleet utilization of 77%.
- Fully burdened margin of $5,534
per day.
In the fourth quarter of 2019, the Company reported revenues of
$45.3 million, a net loss of
$35.0 million, or $0.47 per share, adjusted net loss (defined
below) of $7.7 million, or
$0.10 per share, and adjusted EBITDA
(defined below) of $7.2
million. These results compare to revenues of
$62.8 million, a net loss of
$8.6 million, or $0.11 per share, adjusted net income of
$1.0 million, or $0.01 per share, and adjusted EBITDA of
$16.0 million in the fourth quarter
of 2018, revenues of $45.1 million, a
net loss of $10.5 million, or
$0.14 per share, an adjusted net loss
of $7.9 million, or $0.10 per share, and adjusted EBITDA of
$7.7 million in the third quarter of
2019.
For the year ended December 31,
2019, the Company reported revenues of $203.6 million, a net loss of $60.8 million, or $0.81 per share, an adjusted net loss of
$18.1 million, or $0.24 per share, and adjusted EBITDA of
$43.4 million. This compares to
revenues of $142.6 million, a net
loss of $20.0 million, or
$0.42 per share, an adjusted net loss
of $8.3 million, or $0.17 per share, and adjusted EBITDA of
$31.9 million for the year ended
December 31, 2018.
Chief Executive Officer Anthony
Gallegos commented, "The fourth quarter of 2019 reflected a
continued period of strategic market positioning for ICD. We
successfully added drilling optimization software to three of our
operating rigs during the quarter, completed two strategic rig
upgrades, and exited the quarter enhancing our industry's efforts
to address ESG concerns by utilizing bi-fuel systems on
approximately half of our operating rigs. For the quarter,
expected rig count gains and increasing momentum in the Permian
were offset slightly by weakness in the Haynesville where depressed
natural gas prices caused several key customers to alter planned
drilling programs entering 2020.
As we enter 2020, I believe ICD is very well positioned
notwithstanding the visibility challenges facing our
industry. Strength in our Permian operations is allowing ICD
to relocate and recontract rigs from the Haynesville gas plays,
which despite creating some near-term choppiness for our operating
rig count, allows us to continue high-grading our customer base and
maintain contract utilization. Against this backdrop, our
Board of Directors has approved a capital budget of $10.2 million for 2020, which reflects ICD's
commitment to generating free cash flow, with a laser focus on
costs and support infrastructure."
Quarterly Operational Results
In the fourth quarter of 2019, the Company's marketed fleet
operated at 77% utilization and recorded 1,984 revenue days,
compared to 96% utilization and 2,818 revenue days in the fourth
quarter of 2018, and 76% utilization and 1,943 revenue days in the
third quarter of 2019. During the third quarter of 2019, the
Company removed three SCR rigs from
its marketed fleet.
Operating revenues in the fourth quarter of 2019 totaled
$45.3 million, compared to
$62.8 million in the fourth quarter
of 2018 and $45.1 million in the
third quarter of 2019. Revenues in the fourth quarter 2019
and third quarter of 2019 included early termination revenues of
$0.6 million and $0.3 million, respectively. Excluding this
early termination revenue, revenue per day in the fourth quarter of
2019 was $20,241, compared to
$20,433 in the fourth quarter of 2018
and $20,559 in the third quarter of
2019. Sequential revenue per day declines were driven by lower
dayrates on contract renewals.
Operating costs in the fourth quarter of 2019 totaled
$33.9 million, compared to
$39.9 million in the fourth quarter
of 2018 and $34.2 million in the
third quarter of 2019. Fully burdened operating costs were
$14,707 per day in the fourth quarter
of 2019, compared to $12,932 in the
fourth quarter of 2018 and $14,914 in
the third quarter of 2019. Sequential decreases in per day
operating cost were due to reduced transitory costs between rig
contracts offset by higher repair and maintenance cost during the
fourth quarter of 2019.
Fully burdened rig operating margins in the fourth quarter of
2019 were $5,534 per day, compared to
$7,501 per day in the fourth quarter
of 2018 and $5,645 per day in the
third quarter of 2019.
Selling, general and administrative expenses in the fourth
quarter of 2019 were $4.7 million
(including $0.5 million of non-cash
stock-based compensation). Included in selling, general and
administrative costs during the fourth quarter of 2019 was a
$0.5 million (or $0.01 per share) charge associated with a bad
debt reserve placed upon a receivable relating to a 2018 contract
for which the collection process has not yet been completed.
Excluding this charge, selling general and administrative expenses
in the fourth quarter of 2019 were $4.2
million (including $0.5
million of non-cash stock-based compensation expense).
This compares to selling, general and administrative expenses of
$5.0 million (including $0.2 million of non-cash stock-based
compensation) in the fourth quarter of 2018 and $3.8 million (including $0.6 million of non-cash stock-based
compensation) in the third quarter of 2019. Sequential
increases in selling, general and administrative expenses were
associated with higher incentive compensation accruals compared to
third quarter 2019 levels.
Impairment Charge
During the fourth quarter of 2019, the Company recorded
impairments totaling $25.9 million
relating primarily to obsolete equipment and its plan to sell or
otherwise dispose of legacy rigs and related component equipment
acquired in the Sidewinder combination that will not be utilized in
the Company's pad-optimal drilling fleet.
Drilling Operations Update
The Company exited the fourth quarter with 21 rigs earning
revenues under drilling contracts and currently has 22 rigs under
contract. The Company's backlog of drilling contracts with
original terms of six months or longer was $51.5 million as of December 31, 2019, representing 6.9 rig years of
activity. Approximately 100% of this backlog is expected to
be realized during the remainder of 2020. The Company also
has six 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 2020, before asset
sales and recoveries is $10.2
million. The Company had $5.9
million of assets classified as held for sale at
December 31, 2019. During the
fourth quarter of 2019, cash outlays for capital expenditures, net
of asset sales and recoveries, were $2.2
million.
As of December 31, 2019, the
Company had cash on hand of $5.2
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.
1-for-20 Reverse Stock Split
Following approval by the Company's stockholders, the Company's
Board of Directors has approved a 1-for-20 reverse stock split of
the Company's common stock. The reverse split will be
effective at 5:00 p.m. Eastern Time
on March 11, 2020 (the "Effective
Time"), and the Company's common stock will begin trading on a
split-adjusted basis on the New York Stock Exchange as of the
market open on March 12, 2020.
The reverse stock split reduces the number of issued and
outstanding shares of the Company's common stock from approximately
77,523,973 and 76,241,045 shares, respectively to approximately
3,876,199 and 3,812,052 shares, respectively.
The reverse stock split affects all issued and outstanding
shares of the Company's common stock and shares held in treasury,
as well as the number of shares of common stock available for
issuance under the Company's stock incentive plans and outstanding
awards subject to those plans. The reverse stock split affects all
stockholders uniformly and will not alter any stockholder's
percentage interest in the Company's outstanding common stock,
except for adjustments that may result from the treatment of
fractional shares as described below.
No fractional shares will be issued as a result of the reverse
stock split. The Company will pay to record holders cash in lieu of
any fractional shares, which amount will be determined based on the
average closing market price of the pre-split shares of ICD common
stock on the New York Stock Exchange ("NYSE") (or if the pre-split
shares of ICD common stock do not remain listed thereon, on the
principal securities exchange or quotation service for the
pre-split shares of ICD common stock, as determined by the
Company's Board of Directors of ICD (the "Board")), for the ten
trading days immediately preceding the day of the Effective Time,
with payment for each whole post-split share of ICD common stock
equal to 1/20th of the average closing price of one share of the
pre-split shares of ICD common stock on the NYSE (or if the
pre-split shares of ICD common stock do not remain listed thereon,
on the principal securities exchange or quotation service for the
pre-split shares of ICD common stock, as determined by the
Board).
In connection with the reverse stock split, the Company's
certificate of incorporation will also be amended to reduce the
authorized number of shares of the Company's common stock from
200,000,000 shares to 50,000,000 shares.
Conference Call Details
A conference call for investors will be held today, February 28, 2020, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss the Company's
fourth quarter and year end 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
10138717. The replay will be available until March 6, 2020.
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
|
|
|
|
|
|
|
|
December 31,
2019
|
|
December 31,
2018
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
$
5,206
|
|
$
12,247
|
Accounts receivable,
net
|
35,834
|
|
41,987
|
Inventories
|
2,325
|
|
2,693
|
Assets held for
sale
|
8,740
|
|
19,711
|
Prepaid expenses and
other current assets
|
4,640
|
|
8,930
|
|
|
|
|
|
Total current
assets
|
56,745
|
|
85,568
|
Property, plant and
equipment, net
|
457,530
|
|
496,197
|
Goodwill
|
|
-
|
|
1,627
|
Other long-term
assets, net
|
2,726
|
|
1,470
|
|
|
|
|
|
Total
assets
|
$
517,001
|
|
$
584,862
|
Liabilities and
Stockholders' Equity
|
|
|
|
Liabilities
|
|
|
|
|
|
Current portion of
long-term debt (1)
|
$
3,685
|
|
$
587
|
|
Accounts
payable
|
22,674
|
|
16,312
|
|
Accrued
liabilities
|
16,368
|
|
29,219
|
|
Merger consideration
payable to an affiliate
|
3,022
|
|
-
|
|
Current portion of
contingent consideration
|
2,814
|
|
-
|
|
|
|
|
|
Total current
liabilities
|
48,563
|
|
46,118
|
|
Long-term debt
(2)
|
134,941
|
|
130,012
|
|
Contingent
consideration
|
-
|
|
15,748
|
|
Deferred income
taxes, net
|
652
|
|
774
|
|
Other long-term
liabilities
|
1,249
|
|
677
|
|
|
|
|
|
Total
liabilities
|
185,405
|
|
193,329
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Common stock, $0.01
par value, 200,000,000 shares authorized; 77,523,973 and 77,598,806 shares issued,
respectively, and 76,241,045 and 77,078,252 shares
outstanding, respectively
|
762
|
|
771
|
|
Additional paid-in
capital
|
505,107
|
|
503,446
|
|
Accumulated
deficit
|
(170,426)
|
|
(109,638)
|
|
Treasury stock, at
cost, 1,282,928 and 520,554 shares, respectively
|
(3,847)
|
|
(3,046)
|
|
|
|
|
|
Total stockholders'
equity
|
331,596
|
|
391,533
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
517,001
|
|
$
584,862
|
|
|
(1)
|
Current portion of
long-term debt relates to the current portion of finance and
capital lease obligations.
|
|
|
(2)
|
As of December 31,
2019, long-term debt includes $7.5 million of long-term finance
lease obligations. As of December 31, 2018, long-term debt
included $0.6 million of long-term capital lease
obligations.
|
INDEPENDENCE
CONTRACT DRILLING, INC.
|
Unaudited
|
(in thousands,
except per share amounts)
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
45,292
|
|
$
62,789
|
|
$
45,073
|
|
$
203,602
|
|
$
142,609
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
33,881
|
|
39,908
|
|
34,246
|
|
144,913
|
|
95,220
|
|
Selling, general and
administrative
|
4,743
|
|
5,030
|
|
3,755
|
|
16,051
|
|
15,907
|
|
Merger-related
expenses
|
10
|
|
11,270
|
|
320
|
|
2,698
|
|
13,646
|
|
Depreciation and
amortization
|
11,529
|
|
10,890
|
|
11,154
|
|
45,367
|
|
30,891
|
|
Asset impairment,
net
|
25,909
|
|
(371)
|
|
1,966
|
|
35,748
|
|
25
|
|
Loss (gain) on
disposition of assets, net
|
1,440
|
|
(65)
|
|
265
|
|
4,943
|
|
(740)
|
|
Other
expense
|
-
|
|
-
|
|
122
|
|
377
|
|
-
|
|
|
|
|
|
Total cost and
expenses
|
77,512
|
|
66,662
|
|
51,828
|
|
250,097
|
|
154,949
|
|
|
|
|
|
Operating
loss
|
(32,220)
|
|
(3,873)
|
|
(6,755)
|
|
(46,495)
|
|
(12,340)
|
Interest
expense
|
(3,502)
|
|
(4,513)
|
|
(3,560)
|
|
(14,415)
|
|
(7,562)
|
|
|
|
|
|
Loss before income
taxes
|
(35,722)
|
|
(8,386)
|
|
(10,315)
|
|
(60,910)
|
|
(19,902)
|
Income tax (benefit)
expense
|
(712)
|
|
211
|
|
232
|
|
(122)
|
|
91
|
|
|
|
|
|
Net loss
|
$
(35,010)
|
|
$
(8,597)
|
|
$
(10,547)
|
|
$
(60,788)
|
|
$
(19,993)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
$
(0.47)
|
|
$
(0.11)
|
|
$
(0.14)
|
|
$
(0.81)
|
|
$
(0.42)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic and
Diluted
|
75,094
|
|
75,692
|
|
75,405
|
|
75,471
|
|
47,580
|
INDEPENDENCE
CONTRACT DRILLING, INC.
|
Unaudited
|
(in
thousands)
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Twelve Months
Ended December 31,
|
|
2019
|
|
2018
|
|
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
(60,788)
|
|
$
(19,993)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
Depreciation and amortization
|
45,367
|
|
30,891
|
Asset impairment, net
|
35,748
|
|
25
|
Stock-based compensation
|
1,871
|
|
4,829
|
Loss (gain) on disposition of assets, net
|
4,943
|
|
(740)
|
Amortization of deferred rent
|
-
|
|
105
|
Deferred income taxes
|
(122)
|
|
91
|
Amortization of deferred financing costs
|
814
|
|
492
|
Write-off of deferred financing costs
|
-
|
|
856
|
Bad debt expense
|
459
|
|
22
|
Changes in operating assets and liabilities
|
|
|
|
Accounts
receivable
|
5,695
|
|
(1,022)
|
Inventories
|
(349)
|
|
250
|
Prepaid
expenses and other assets
|
1,473
|
|
(4,681)
|
Accounts
payable and accrued liabilities
|
(7,190)
|
|
5,010
|
Net cash provided by operating activities
|
27,921
|
|
16,135
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Cash acquired in
Sidewinder Merger
|
-
|
|
10,743
|
Purchases of
property, plant and equipment
|
(38,320)
|
|
(37,550)
|
Proceeds from
insurance claims
|
1,000
|
|
257
|
Proceeds from the
sale of assets
|
8,951
|
|
1,303
|
Net cash used in investing activities
|
(28,369)
|
|
(25,247)
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Borrowings under Term
Loan Facility
|
-
|
|
130,000
|
Borrowings under
Revolving Credit Facilities
|
4,511
|
|
55,732
|
Repayments under
Revolving Credit Facilities
|
(7,077)
|
|
(101,707)
|
Repayment of
Sidewinder debt
|
-
|
|
(58,512)
|
Common stock issuance
costs
|
(177)
|
|
-
|
Purchase of treasury
stock
|
(809)
|
|
(1,180)
|
RSUs withheld for
taxes
|
(34)
|
|
(710)
|
Financing costs paid
under Term Loan Facility
|
(5)
|
|
(3,371)
|
Financing costs paid
under Revolving Credit Facilities
|
(22)
|
|
(790)
|
Payments for finance
and capital lease obligations
|
(2,980)
|
|
(636)
|
Net cash (used in) provided by financing activities
|
(6,593)
|
|
18,826
|
Net (decrease) increase in cash and cash equivalents
|
(7,041)
|
|
9,714
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
Beginning of
year
|
12,247
|
|
2,533
|
End of
year
|
$
5,206
|
|
$
12,247
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash paid during the
year for interest
|
$
13,974
|
|
$
3,202
|
Supplemental
disclosure of non-cash investing and financing
activity
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
$
1,607
|
|
$
1,175
|
Additions to
property, plant and equipment through finance and capital
leases
|
$
13,143
|
|
$
601
|
Transfer of assets
from held and used to held for sale
|
$
(18,506)
|
|
$
-
|
Transfer from
inventory to fixed assets
|
$
(406)
|
|
$
-
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
$
(249)
|
|
$
-
|
Additions to
property, plant and equipment through tenant allowance on leasehold
improvement
|
$
-
|
|
$
694
|
Sidewinder Merger
consideration
|
$
-
|
|
$
231,617
|
The following table provides various financial and operational
data for the Company's operations for the three months ending
December 31, 2019 and 2018 and
September 30, 2019, and the twelve
months ending December 31, 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
|
|
Twelve Months
Ended
|
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed
rigs end of period(1)
|
|
29
|
|
32
|
|
29
|
|
29
|
|
32
|
Rig operating
days(2)
|
|
1,984
|
|
2,818
|
|
1,943
|
|
8,985
|
|
6,687
|
Average number of
operating rigs(3)
|
|
21.6
|
|
30.6
|
|
21.1
|
|
24.6
|
|
18.3
|
Rig utilization
(4)
|
|
77%
|
|
96%
|
|
76%
|
|
83%
|
|
98%
|
Average revenue per
operating day (5)
|
|
$
20,241
|
|
$
20,433
|
|
$
20,559
|
|
$
20,628
|
|
$
20,001
|
Average cost per
operating day(6)
|
|
$
14,707
|
|
$
12,932
|
|
$
14,914
|
|
$
14,202
|
|
$
13,053
|
Average rig margin
per operating day
|
|
$
5,534
|
|
$
7,501
|
|
$
5,645
|
|
$
6,426
|
|
$
6,948
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Number of marketed
rigs as of December 31, 2019 decreased by three rigs as
compared to the number of marketed rigs as of December 31,
2018. 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 $4.5 million, $3.2 million
and $4.8 million during the three months ended December 31,
2019 and 2018, and September 30, 2019, respectively, and $15.8
million and $6.8 million during the twelve months ended
December 31, 2019 and 2018, respectively, (ii) revenues
associated with the amortization of intangible revenue acquired in
the Sidewinder Merger of $1.1 million during the twelve months
ended December 31, 2019, and $2.0 million and $2.0
million during the three and twelve months ended December 31,
2018, respectively, and (iii) early termination revenues of $0.6
million and $0.3 million during the three months ended December 31,
2019, and September 30, 2019, respectively, and $1.4 million during
the twelve months ended December 31, 2019. The three and twelve
months ended December 31, 2018 did not include any 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 $4.5 million, $3.2
million and $4.8 million during the three months ended
December 31, 2019 and 2018, and September 30, 2019,
respectively, and $15.8 million and $6.8 million during the twelve
months ended December 31, 2019 and 2018, respectively, (ii)
new crew training costs of $0.2 million, zero and $0.1 million
during the three months ended December 31, 2019 and 2018, and
September 30, 2019, respectively, and $0.3 million and $0.1 million
during the twelve months ended December 31, 2019 and 2018,
respectively, (iii) construction overhead costs expensed due to
reduced rig construction activity of zero, $0.3 million and $0.2
million during the three months ended December 31, 2019 and 2018,
and September 30, 2019, respectively, and $1.1 million and $1.0
million during the twelve months ended December 31, 2019 and 2018,
respectively, and (iv) rig de-commissioning costs associated with
stacking deactivated rigs of zero, zero and $0.2 million during the
three months ended December 31, 2019 and 2018, and
September 30, 2019, respectively, and $0.2 million and zero
during the twelve months ended December 31, 2019, and 2018,
respectively.
|
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
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
2018
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$ (35,010)
|
|
$ (0.47)
|
|
$
(8,597)
|
|
$(0.11)
|
|
$(10,547)
|
|
$ (0.14)
|
|
$(60,788)
|
|
$
(0.81)
|
|
$ (19,993)
|
|
$ (0.42)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment, net
(1)
|
25,909
|
|
0.35
|
|
(371)
|
|
(0.01)
|
|
1,966
|
|
0.04
|
|
35,748
|
|
0.47
|
|
25
|
|
-
|
Loss (gain) on
disposition of assets, net(2)
|
1,440
|
|
0.02
|
|
(65)
|
|
-
|
|
265
|
|
-
|
|
4,943
|
|
0.07
|
|
(740)
|
|
(0.02)
|
Intangible
revenue(3)
|
-
|
|
-
|
|
(2,044)
|
|
(0.03)
|
|
-
|
|
-
|
|
(1,079)
|
|
(0.01)
|
|
(2,044)
|
|
(0.04)
|
Merger-related
expenses(4)
|
10
|
|
-
|
|
11,270
|
|
0.15
|
|
320
|
|
-
|
|
2,698
|
|
0.04
|
|
13,646
|
|
0.29
|
Write-off of deferred
financing costs(5)
|
-
|
|
-
|
|
856
|
|
0.01
|
|
-
|
|
-
|
|
-
|
|
-
|
|
856
|
|
0.02
|
Other
expense
|
-
|
|
-
|
|
-
|
|
-
|
|
122
|
|
-
|
|
377
|
|
-
|
|
-
|
|
-
|
Adjusted net
(loss) income
|
$
(7,651)
|
|
$ (0.10)
|
|
$
1,049
|
|
$ 0.01
|
|
$
(7,874)
|
|
$ (0.10)
|
|
$(18,101)
|
|
$
(0.24)
|
|
$
(8,250)
|
|
$ (0.17)
|
Reconciliation of
Net Loss to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
2018
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
(35,010)
|
|
$
(8,597)
|
|
$
(10,547)
|
|
$
(60,788)
|
|
$
(19,993)
|
Add back:
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
(712)
|
|
211
|
|
232
|
|
(122)
|
|
91
|
Interest
expense
|
3,502
|
|
4,513
|
|
3,560
|
|
14,415
|
|
7,562
|
Depreciation and
amortization
|
11,529
|
|
10,890
|
|
11,154
|
|
45,367
|
|
30,891
|
Asset impairment,
net(1)
|
25,909
|
|
(371)
|
|
1,966
|
|
35,748
|
|
25
|
EBITDA
|
5,218
|
|
6,646
|
|
6,365
|
|
34,620
|
|
18,576
|
Loss (gain) on
disposition of assets, net(2)
|
1,440
|
|
(65)
|
|
265
|
|
4,943
|
|
(740)
|
Stock-based
compensation
|
486
|
|
240
|
|
582
|
|
1,871
|
|
2,438
|
Intangible
revenue(3)
|
-
|
|
(2,044)
|
|
-
|
|
(1,079)
|
|
(2,044)
|
Merger-related
expenses(4)
|
10
|
|
11,270
|
|
320
|
|
2,698
|
|
13,646
|
Other
expense
|
-
|
|
-
|
|
122
|
|
377
|
|
-
|
Adjusted
EBITDA
|
$
7,154
|
|
$
16,047
|
|
$
7,654
|
|
$
43,430
|
|
$
31,876
|
|
|
(1)
|
In the fourth quarter
of 2019, we recorded impairments totaling $25.9 million relating
primarily to our decision to remove two rigs from our marketed, or
to-be-marketed fleet, as well as a plan to sell or otherwise
dispose of rigs and related component equipment, much of which was
acquired in connection with the Sidewinder Merger. In the third
quarter of 2019, we impaired 100% of the goodwill recorded in
connection with the Sidewinder Merger. In the fourth quarter
of 2018, we recorded insurance recoveries, net of impairments of
$0.6 million on the Galayda facility water damage incurred during
Hurricane Harvey after receiving a proof of loss letter from our
insurance carrier, offset by an increased impairment of $0.2
million related to increased estimated costs to sell the Galayda
facility.
|
|
|
(2)
|
In the fourth quarter
of 2019, and 2018 and the third quarter of 2019, we recorded a
loss, gain and loss, respectively, of $1.4 million, $0.1 million
and $0.3 million, respectively, on disposition of assets primarily
due to a loss or gain on the sale or disposition of miscellaneous
drilling equipment in the respective quarter.
|
|
|
(3)
|
We amortized $1.1
million of intangible revenue related to an unfavorable contract
liability acquired in the Sidewinder Merger for the year ended
December 31, 2019, and $2.0 million for the three months and the
year ended December 31, 2018.
|
|
|
(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.