ICD Independence Contract Drilling Inc

INDEPENDENCE CONTRACT DRILLING, INC.

Unaudited

(in thousands, except par value and share data)

CONSOLIDATED BALANCE SHEETS

March 31, 2022

December 31, 2021

Assets

Cash and cash equivalents

$

9,342

$

4,140

Accounts receivable, net of allowance of $0.1 million and zero, respectively

24,231

22,211

Inventories

1,301

1,171

Prepaid expenses and other current assets

4,549

4,787

          Total current assets

39,423

32,309

Property, plant and equipment, net

358,760

362,346

Other long-term assets, net

2,201

2,449

          Total assets

$

400,384

$

397,104

Liabilities and Stockholders' Equity

Liabilities

     Current portion of long-term debt (1)

$

3,902

$

4,464

     Accounts payable

18,829

15,304

     Accrued liabilities

10,545

15,617

     Current portion of merger consideration payable to an affiliate

—

2,902

          Total current liabilities

33,276

38,287

     Long-term debt (2)

120,099

141,740

     Derivative liability

77,589

—

     Deferred income taxes, net

18,310

19,037

     Other long-term liabilities

1,894

2,811

          Total liabilities

251,168

201,875

          Commitments and contingencies

Stockholders' equity

     Common stock, $0.01 par value, 50,000,000 shares authorized; 13,698,851 and 10,287,931
      shares issued, respectively, and 13,617,005 and 10,206,085 shares outstanding, respectively

136

102

     Additional paid-in capital

545,575

532,826

     Accumulated deficit

(392,572)

(333,776)

     Treasury stock, at cost, 81,846 shares and 81,846 shares, respectively

(3,923)

(3,923)

          Total stockholders' equity

149,216

195,229

          Total liabilities and stockholders' equity

$

400,384

$

397,104

(1)

As of March 31, 2022 and December 31, 2021, current portion of long-term debt includes $3.9 million and $4.5 million, respectively, of finance lease obligations. 

(2)

As of March 31, 2022 and December 31, 2021, long-term debt includes $1.3 million and $1.3 million, respectively, of long-term finance lease obligations. 

INDEPENDENCE CONTRACT DRILLING, INC.

Unaudited

(in thousands, except par value and share data)

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

March 31, 

December 31, 

2022

2021

2021

Revenues

$

34,991

$

15,542

$

28,561

Costs and expenses

     Operating costs

27,165

14,541

24,047

     Selling, general and administrative

5,228

3,686

3,870

     Depreciation and amortization

9,751

9,989

9,671

     Asset impairment

—

43

25

     Gain on disposition of assets, net

(516)

(435)

(63)

     Other expense

—

—

150

          Total costs and expenses

41,628

27,824

37,700

          Operating loss

(6,637)

(12,282)

(9,139)

 Interest expense

(4,675)

(3,709)

(3,899)

 Loss on extinguishment of debt

(46,347)

—

—

 Change in fair value of embedded derivative liability

(1,857)

—

—

          Loss before income taxes

(59,516)

(15,991)

(13,038)

 Income tax (benefit) expense

(720)

34

18,446

          Net loss

$

(58,796)

$

(16,025)

$

(31,484)

Loss per share:

     Basic and diluted

$

(5.20)

$

(2.58)

$

(3.23)

Weighted average number of common shares outstanding:

     Basic and diluted

11,303

6,215

9,743

INDEPENDENCE CONTRACT DRILLING, INC.

Unaudited

(in thousands, except par value and share data)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 

2022

2021

Cash flows from operating activities

Net loss

$

(58,796)

$

(16,025)

Adjustments to reconcile net loss to net cash used in operating activities

     Depreciation and amortization

9,751

9,989

     Asset impairment

—

43

     Stock-based compensation

731

537

     Gain on disposition of assets, net

(516)

(435)

     Non-cash interest expense

3,193

—

     Loss on extinguishment of debt

46,347

—

     Amortization of deferred financing costs

250

279

     Amortization of Convertible Notes issuance costs and debt discount

370

—

     Change in fair value of embedded derivative liability

1,857

—

     Deferred income taxes

(727)

34

     Bad debt expense

60

—

     Changes in operating assets and liabilities

          Accounts receivable

(2,079)

(317)

          Inventories

(130)

(33)

          Prepaid expenses and other assets

386

323

          Accounts payable and accrued liabilities

(2,358)

(685)

               Net cash used in operating activities

(1,661)

(6,290)

Cash flows from investing activities

Purchases of property, plant and equipment

(6,279)

(1,742)

Proceeds from the sale of assets

589

654

          Net cash used in investing activities

(5,690)

(1,088)

Cash flows from financing activities

Proceeds from issuance of convertible debt

157,500

—

Repayments under Term Loan Facility

(139,076)

—

Borrowings under Revolving ABL Credit Facility

1,500

—

Repayments under Revolving ABL Credit Facility

(2)

(8)

Payment of merger consideration

(2,902)

—

Proceeds from issuance of common stock through at-the-market facility, net of issuance costs

3,360

521

Proceeds from issuance of common stock under purchase agreement

—

874

RSUs withheld for taxes

(32)

(11)

Convertible debt issuance costs

(6,601)

—

Payments for finance lease obligations

(1,194)

(837)

     Net cash provided by financing activities

12,553

539

     Net increase (decrease) in cash and cash equivalents

5,202

(6,839)

Cash and cash equivalents

Beginning of period

4,140

12,279

End of period

$

9,342

$

5,440

Three Months Ended March 31, 

2022

2021

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$

4,262

$

3,171

Supplemental disclosure of non-cash investing and financing activities

Change in property, plant and equipment purchases in accounts payable

$

(701)

$

70

Additions to property, plant and equipment through finance leases

$

604

$

376

Extinguishment of finance lease obligations from sale of assets classified as finance leases

$

(7)

$

—

Transfer of assets from held and used to held for sale

$

—

$

(550)

Shares issued for structuring fee

$

9,163

$

—

OTHER FINANCIAL & OPERATING DATA

Unaudited

Three Months Ended

March 31, 

December 31, 

2022

2021

2021

Number of marketed rigs end of period (1)

24

24

24

Rig operating days (2)

1,463

929

1,378

Average number of operating rigs (3)

16.3

10.3

15.0

Rig utilization (4)

68

%

43

%

62

%

Average revenue per operating day (5)

$

21,823

$

15,465

$

19,042

Average cost per operating day (6)

$

16,069

$

12,663

$

15,504

Average rig margin per operating day

$

5,754

$

2,802

$

3,538

(1)

Marketed rigs exclude idle rigs that will not be reactivated unless market conditions materially improve.

(2)

Rig operating days represent the number of days the Company's rigs are earning revenue under a contract during the period, including days that standby revenue is 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 the Company's 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 $3.1 million, $1.2 million and $2.3 million during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively.

(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 $3.1 million, $1.2 million and $2.3 million during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively; (ii) overhead costs expensed due to reduced rig upgrade activity of $0.6 million, $0.5 million and $0.4 million during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively; and (iii) rig reactivation costs, inclusive of new crew training costs, of zero, $1.1 million and zero during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively.

Reconciliation of Net Loss to Adjusted Net Loss:

(Unaudited)

Three Months Ended

March 31, 

December 31, 

2022

2021

2021

Amount

Per Share

Amount

Per Share

Amount

Per Share

(in thousands)

Net loss

$

(58,796)

$

(5.20)

$

(16,025)

$

(2.58)

$

(31,484)

$

(3.23)

Add back:

     Asset impairment (1)

—

—

43

0.01

25

—

     Gain on disposition of assets, net (2)

(516)

(0.05)

(435)

(0.07)

(63)

(0.01)

     Purchase agreement costs (3)

—

—

—

—

150

0.02

     Non-cash income tax expense related to IRC Section 382 limitation (4)

—

—

—

—

18,192

1.87

     Loss on extinguishment of debt (5)

46,347

4.10

—

—

—

—

     Change in fair value of embedded derivative liability (6)

1,857

0.17

—

—

—

—

Adjusted net loss

$

(11,108)

$

(0.98)

$

(16,417)

$

(2.64)

$

(13,180)

$

(1.35)

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA:

(Unaudited)

Three Months Ended

March 31, 

December 31, 

2022

2021

2021

(in thousands)

Net loss

$

(58,796)

$

(16,025)

$

(31,484)

Add back:

     Income tax (benefit) expense

(720)

34

18,446

     Interest expense

4,675

3,709

3,899

     Depreciation and amortization

9,751

9,989

9,671

     Asset impairment (1)

—

43

25

EBITDA

(45,090)

(2,250)

557

     Gain on disposition of assets, net (2)

(516)

(435)

(63)

     Stock-based and deferred compensation cost

977

673

808

     Purchase agreement costs (3)

—

—

150

     Loss on extinguishment of debt (5)

46,347

—

—

     Change in fair value of embedded derivative liability (6)

1,857

—

—

Adjusted EBITDA

$

3,575

$

(2,012)

$

1,452

(1)

In the first quarter of 2021, the Company recorded an asset impairment of $43 thousand related to the pending sale of one of our field location facilities.

(2)

In the first quarter of 2022 and 2021, and the fourth quarter of 2021, the Company recorded gains on the disposition of miscellaneous drilling equipment in the respective quarter.

(3)

Purchase agreement costs were recorded in the fourth quarter of 2021 in connection with the Company's committed equity line of credit.

(4)

During the fourth quarter of 2021, the Company recorded non-cash income tax expense related to the inability to utilize net operating loss ("NOL") deferred tax assets to offset deferred tax losses due to an IRC Section 382 change in ownership occurring in October 2021 and the limitations therefrom placed upon the NOLs.

(5)

Loss on extinguishment of debt related to Term Loan unamortized debt issuance costs, non-cash structuring fees settled in shares to the affiliates of our prior Term Loan facility and the fair value of the embedded derivatives attributable to the affiliates of our prior Term Loan facility in the first quarter of 2022.

(6)

Represents the change in fair value of embedded derivative liability between the issuance date of the Convertible Notes and March 31, 2022.

(in thousands)

March 31, 2022

     Convertible Notes

$

157,500

     Revolving ABL Credit Facility

7,798

     Convertible Notes issuance costs

(8,893)

     Convertible Notes debt discount

(37,576)

     Finance lease obligations

1,270

Total long-term debt

$

120,099