HOUSTON, Aug. 4, 2022
/PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company"
or "ICD") (NYSE: ICD) today reported financial results for the
three months ended June 30, 2022.
Second quarter 2022 Highlights
- Net loss, as defined below, of $2.8
million, or $0.21 per
share.
- Adjusted net loss, as defined below, of $9.8 million, or $0.72 per share.
- Adjusted EBITDA, as defined below, of $9.2 million, representing an approximate 158%
sequential improvement from the first quarter of 2022.
- Adjusted net debt, as defined below, of $158.0 million.
- Marketed fleet utilization of 71%.
- Fully burdened margin of $8,946
per day, representing an approximate 56% sequential improvement
from the first quarter of 2022.
In the second quarter of 2022, the Company reported revenues of
$42.3 million, a net loss of
$2.8 million, or $0.21 per share, adjusted net loss (defined
below) of $9.8 million, or
$0.72 per share, and adjusted EBITDA
(defined below) of $9.2 million.
These results compare to revenues of $19.8
million, a net loss of $14.9
million, or $2.22 per share,
adjusted net loss of $14.6 million,
or $2.18 per share, and adjusted
EBITDA loss of $0.4 million in the
second quarter of 2021, and revenues of $35.0 million, a net loss of $58.8 million, or $5.20 per share, an adjusted net loss of
$11.1 million, or $0.98 per share, and adjusted EBITDA of
$3.6 million in the first quarter of
2022.
Chief Executive Officer Anthony
Gallegos commented, "I am extremely pleased with our
performance during the second quarter, on both a financial and
operational front. Sequential margin improvements of 56% drove
sequential EBITDA improvements of over 150%. Dayrates for ICD rigs
continue to increase with most ICD rigs now set to reprice one to
two additional times before year-end. Based on contracts in hand
and current spot prices, we expect to see incremental margin per
day improvements in the third quarter of approximately 14% and
further meaningful improvements in the fourth quarter as well. All
of this should drive meaningful EBITDA improvements through the
remainder of this year and into 2023.
Operationally, I believe the second quarter was pivotal for ICD.
We reactivated our 18th rig on schedule, and on budget, and it has
commenced operations in the Haynesville effective August 1, 2022 on a one-year contract with a
large independent. Our 19th rig is scheduled to reactivate at the
beginning of the fourth quarter and our 20th rig is scheduled to
reactivate late in the fourth quarter. We also have begun preparing
to reactivate our 21st rig early in the first quarter of 2023.
Based upon current spot dayrates for 300 series rigs, all of these
rigs should pay back their reactivation costs in one year or
less.
But more importantly, we completed all engineering work
necessary to convert the significant majority of our 200 series
rigs to 300 series specifications with very modest incremental
investments of approximately $650,000
per rig. Rigs meeting 300 series specifications are in the shortest
supply and command the highest dayrates, and we expect to earn less
than one-year paybacks on these conversions based upon dayrate
differentials today. These conversions require minimal rig downtime
and we plan to execute these conversions as our customer base
requires. Today, nine of our ten operating 200 series rigs are
eligible for this conversion, and we have already signed two
contracts for such conversions in the third and fourth quarters of
2022. In addition, six of our non-marketed rigs are eligible for
this conversion, and we have now added two of these rigs to our
marketed fleet, increasing our marketed fleet from 24 rigs to 26
rigs.
With this backdrop, I could not be more excited about ICD's
strategic positioning in this market dynamic. Our focus on
short-term, pad-to-pad contracts is allowing us to quickly convert
rapidly improving dayrate momentum into our reported results, and
we have now started to build our contractual backlog into 2023. Our
overall rig reactivation plan and schedule remains intact, and with
our 200-300 series conversion program announced, we have the
ability to offer from top to bottom what we believe is one of the
most competitive rig fleets in the industry. This is not only
driving improved financial performance, but continual high-grading
of our customer base. During the second quarter, we added two
additional large independents to our customer base, and today, of
our 18 operating rigs, approximately 80% are working for public
companies or the two largest private operators in the Permian and
Haynesville plays."
Quarterly Operational Results
In the second quarter of 2022, operating days increased
sequentially by 5% compared to the first quarter of 2022. The
Company's marketed fleet operated at 71% utilization and recorded
1,540 revenue days, compared to 1,077 revenue days in the second
quarter of 2021, and 1,463 revenue days in the first quarter of
2022.
Operating revenues in the second quarter of 2022 totaled
$42.3 million, compared to
$19.8 million in the second quarter
of 2021 and $35.0 million in the
first quarter of 2022. Revenue per day in the second quarter of
2022 was $24,875, compared to
$16,514 in the second quarter of 2021
and $21,823 in the first quarter of
2022. The sequential increase quarter over quarter in revenue per
day was driven by higher dayrates on contract renewals and
reactivated rigs.
Operating costs in the second quarter of 2022 totaled
$28.9 million, compared to
$17.0 million in the second quarter
of 2021 and $27.2 million in first
quarter of 2022. Fully burdened operating costs were $15,929 per day in the second quarter of 2022,
compared to $13,352 in the second
quarter of 2021 and $16,069 in the
first quarter of 2022. Sequential decreases in operating costs per
day were driven primarily by improved cost absorption, partially
offset by higher labor costs associated with increases in
field-level wages during the latter part of the second quarter of
2022.
Fully burdened rig operating margins in the second quarter of
2022 were $8,946 per day, compared to
$3,162 per day in the second quarter
of 2021 and $5,754 per day in the
first quarter of 2022. The Company currently expects per day
operating margins in the third quarter of 2022 to increase
sequentially approximately 14% compared to the second quarter of
2022, driven primarily by favorable dayrate momentum as well as
reactivation of the Company's 18th rig.
Selling, general and administrative expenses in the second
quarter of 2022 were $4.9 million
(including $0.7 million of non-cash
compensation), compared to $4.1
million (including $0.9
million of non-cash compensation) in the second quarter of
2021 and $5.2 million (including
$1.0 million of non-cash
compensation) in the first quarter of 2022. Cash selling, general
and administrative expenses continue to remain elevated due to
higher recruiting and onboarding expenses.
During the quarter, the Company recorded interest expense of
$8.2 million, including $2.0 million, or $0.15 per share, relating to non-cash
amortization of debt discount and debt issuance costs. The
Company has excluded these non-cash expenses when presenting
adjusted net income/loss per share. Following approval of
matters submitted to the Company's stockholders at the Company's
2022 Annual Meeting on June 8, 2022,
embedded derivative features within the Company's Senior Secured
PIK Toggle Convertible Notes due 2026 were deemed extinguished for
financial accounting purposes. As a result, during the second
quarter of 2022 the Company reclassified the conversion rate
feature ($69.2 million) of the
derivative liability on its balance sheet to additional paid-in
capital and recognized a non-cash gain on the extinguishment of the
PIK interest rate feature of $10.8
million. This non-cash gain was excluded when presenting
adjusted net income/loss per share.
The Company's forecasted effective tax rate was adjusted during
the second quarter of 2022, resulting in tax expense of
$2.2 million, or $0.16 per share, compared to a tax benefit during
the first quarter of 2022. Of this tax expense, $0.3 million relates to cash taxes, which are
attributable to state and local franchise taxes.
Drilling Operations Update
The Company exited the second quarter with 17 rigs operating,
with our 18th rig commencing operations August 1, 2022. Overall, the Company's operating
rig count averaged 16.9 rigs during the quarter. The Company's
backlog of drilling contracts with original terms of six months or
longer was $54.3 million as of
June 30, 2022. This backlog excludes
rigs operating on short term pad-to-pad drilling contracts.
Approximately 64% of this backlog is expected to be realized in
2022.
Capital Expenditures and Liquidity Update
Cash outlays for capital expenditures in the second quarter of
2022, net of asset sales and recoveries, were $4.5 million. This included $3.8 million associated with prior period
deliveries.
As of June 30, 2022, the Company had cash on hand of
$7.3 million, a revolving line of
credit with availability of $14.0
million, and $157.5 million
principal amount outstanding under its new convertible notes.
During the second quarter of 2022, the Company did not issue any
shares of its common stock through its at-the-market ("ATM")
offering program.
Conference Call Details
A conference call for investors will be held today, August 4, 2022, at 11:00
a.m. Central Time (12:00 p.m. Eastern
Time) to discuss the Company's second quarter 2022
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 8212928. The replay will
be available until August 11,
2022.
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.
Certain Defined Terms
Pad-Optimal, Super-Spec Rig is defined as an AC powered rig with
minimum 20,000ft racking capacity, 1500HP+ drawworks, 750,000lb
hookload, three high pressure pumps, four engines and
omni-directional walking system. Such rigs also include dual
fuel, hi-line power and drilling optimization software options.
300 Series Rigs are defined as a Pad-Optimal, Super-Spec rig
with the following additional characteristics: 25,000ft+ racking
capacity capable, and hi-torque top drive capable.
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 the Company's 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, 2022
|
|
December 31, 2021
|
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
7,294
|
|
$
|
4,140
|
Accounts
receivable
|
|
|
26,820
|
|
|
22,211
|
Inventories
|
|
|
1,377
|
|
|
1,171
|
Prepaid expenses and
other current assets
|
|
|
2,406
|
|
|
4,787
|
Total current
assets
|
|
|
37,897
|
|
|
32,309
|
Property, plant and
equipment, net
|
|
|
356,537
|
|
|
362,346
|
Other long-term assets,
net
|
|
|
2,115
|
|
|
2,449
|
Total
assets
|
|
$
|
396,549
|
|
$
|
397,104
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current portion of
long-term debt (1)
|
|
$
|
3,225
|
|
$
|
4,464
|
Accounts
payable
|
|
|
17,065
|
|
|
15,304
|
Accrued
liabilities
|
|
|
9,044
|
|
|
11,245
|
Accrued
interest
|
|
|
6,939
|
|
|
4,372
|
Current portion of
merger consideration payable to an affiliate
|
|
|
—
|
|
|
2,902
|
Total current
liabilities
|
|
|
36,273
|
|
|
38,287
|
Long-term debt
(2)
|
|
|
122,094
|
|
|
141,740
|
Deferred income taxes,
net
|
|
|
20,225
|
|
|
19,037
|
Other long-term
liabilities
|
|
|
1,977
|
|
|
2,811
|
Total
liabilities
|
|
|
180,569
|
|
|
201,875
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
Common stock, $0.01 par
value, 250,000,000 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
|
|
|
615,130
|
|
|
532,826
|
Accumulated
deficit
|
|
|
(395,363)
|
|
|
(333,776)
|
Treasury stock, at
cost, 81,846 shares and 81,846 shares, respectively
|
|
|
(3,923)
|
|
|
(3,923)
|
Total stockholders'
equity
|
|
|
215,980
|
|
|
195,229
|
Total liabilities and
stockholders' equity
|
|
$
|
396,549
|
|
$
|
397,104
|
(1) As of
June 30, 2022 and December 31, 2021, current
portion of long-term debt includes $3.2 million and $4.5 million,
respectively, of finance lease obligations.
|
|
(2) As of
June 30, 2022 and December 31, 2021, long-term
debt includes $1.6 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
|
|
Six Months Ended
|
|
|
June 30,
|
|
March 31,
|
|
June 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
42,313
|
|
$
|
19,817
|
|
$
|
34,991
|
|
$
|
77,304
|
|
$
|
35,359
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
28,904
|
|
|
17,040
|
|
|
27,165
|
|
|
56,069
|
|
|
31,581
|
Selling, general and
administrative
|
|
|
4,860
|
|
|
4,075
|
|
|
5,228
|
|
|
10,088
|
|
|
7,761
|
Depreciation and
amortization
|
|
|
9,848
|
|
|
9,516
|
|
|
9,751
|
|
|
19,599
|
|
|
19,505
|
Asset
impairment
|
|
|
—
|
|
|
250
|
|
|
—
|
|
|
—
|
|
|
293
|
(Gain) loss on
disposition of assets, net
|
|
|
(582)
|
|
|
31
|
|
|
(516)
|
|
|
(1,098)
|
|
|
(404)
|
Total costs and
expenses
|
|
|
43,030
|
|
|
30,912
|
|
|
41,628
|
|
|
84,658
|
|
|
58,736
|
Operating
loss
|
|
|
(717)
|
|
|
(11,095)
|
|
|
(6,637)
|
|
|
(7,354)
|
|
|
(23,377)
|
Interest
expense
|
|
|
(8,232)
|
|
|
(3,773)
|
|
|
(4,675)
|
|
|
(12,907)
|
|
|
(7,482)
|
Loss on extinguishment
of debt
|
|
|
—
|
|
|
—
|
|
|
(46,347)
|
|
|
(46,347)
|
|
|
—
|
Change in fair value of
embedded derivative liability
|
|
|
(2,408)
|
|
|
—
|
|
|
(1,857)
|
|
|
(4,265)
|
|
|
—
|
Realized gain on
extinguishment of derivative
|
|
|
10,765
|
|
|
—
|
|
|
—
|
|
|
10,765
|
|
|
—
|
Loss before income
taxes
|
|
|
(592)
|
|
|
(14,868)
|
|
|
(59,516)
|
|
|
(60,108)
|
|
|
(30,859)
|
Income tax expense
(benefit)
|
|
|
2,199
|
|
|
33
|
|
|
(720)
|
|
|
1,479
|
|
|
67
|
Net loss
|
|
$
|
(2,791)
|
|
$
|
(14,901)
|
|
$
|
(58,796)
|
|
$
|
(61,587)
|
|
$
|
(30,926)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.21)
|
|
$
|
(2.22)
|
|
$
|
(5.20)
|
|
$
|
(4.95)
|
|
$
|
(4.78)
|
Weighted average number
of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
13,590
|
|
|
6,714
|
|
|
11,303
|
|
|
12,453
|
|
|
6,466
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in thousands,
except par value and share data)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2022
|
|
2021
|
Cash flows from operating
activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(61,587)
|
|
$
|
(30,926)
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
19,599
|
|
|
19,505
|
Asset
impairment
|
|
|
—
|
|
|
293
|
Stock-based
compensation
|
|
|
1,203
|
|
|
1,217
|
Gain on disposition of
assets, net
|
|
|
(1,098)
|
|
|
(404)
|
Non-cash interest
expense
|
|
|
3,193
|
|
|
2,828
|
Loss on extinguishment
of debt
|
|
|
46,347
|
|
|
—
|
Amortization of
deferred financing costs
|
|
|
285
|
|
|
558
|
Amortization of
Convertible Notes issuance costs and debt discount
|
|
|
2,350
|
|
|
—
|
Change in fair value of
embedded derivative liability
|
|
|
4,265
|
|
|
—
|
Gain on extinguishment
of derivative
|
|
|
(10,765)
|
|
|
—
|
Deferred income
taxes
|
|
|
1,479
|
|
|
67
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(4,609)
|
|
|
(4,039)
|
Inventories
|
|
|
(206)
|
|
|
(39)
|
Prepaid expenses and
other assets
|
|
|
2,516
|
|
|
2,209
|
Accounts payable and
accrued liabilities
|
|
|
(509)
|
|
|
3,862
|
Net cash provided by
(used in) operating activities
|
|
|
2,463
|
|
|
(4,869)
|
Cash flows from investing
activities
|
|
|
|
|
|
|
Purchases of property,
plant and equipment
|
|
|
(12,125)
|
|
|
(4,295)
|
Proceeds from the sale
of assets
|
|
|
1,982
|
|
|
739
|
Net cash used in
investing activities
|
|
|
(10,143)
|
|
|
(3,556)
|
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
|
|
|
1,526
|
|
|
9
|
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
|
|
|
3,155
|
|
|
1,993
|
Proceeds from issuance
of common stock under purchase agreement
|
|
|
—
|
|
|
1,949
|
RSUs withheld for
taxes
|
|
|
(32)
|
|
|
(11)
|
Convertible debt
issuance costs
|
|
|
(7,057)
|
|
|
—
|
Payments for finance
lease obligations
|
|
|
(2,278)
|
|
|
(1,754)
|
Net cash provided by
financing activities
|
|
|
10,834
|
|
|
2,178
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
3,154
|
|
|
(6,247)
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning of
period
|
|
|
4,140
|
|
|
12,279
|
End of
period
|
|
$
|
7,294
|
|
$
|
6,032
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
4,493
|
|
$
|
3,406
|
Supplemental disclosure of non-cash investing and
financing activities
|
|
|
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
|
$
|
1,130
|
|
$
|
2,171
|
Additions to property,
plant and equipment through finance leases
|
|
$
|
1,367
|
|
$
|
632
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
|
$
|
(77)
|
|
$
|
—
|
Transfer of assets from
held and used to held for sale
|
|
$
|
—
|
|
$
|
(550)
|
Shares issued for
structuring fee
|
|
$
|
9,163
|
|
$
|
—
|
The following table provides various financial and operational
data for the Company's operations for the three months ended
June 30, 2022 and 2021 and
March 31, 2022 and the six months
ended June 30, 2022 and 2021. 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 the Company's 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,
|
|
March 31,
|
|
June 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed rigs
end of period (1)
|
|
|
24
|
|
|
|
24
|
|
|
|
24
|
|
|
|
24
|
|
|
|
24
|
|
Rig operating days
(2)
|
|
|
1,540
|
|
|
|
1,077
|
|
|
|
1,463
|
|
|
|
3,004
|
|
|
|
2,006
|
|
Average number of
operating rigs (3)
|
|
|
16.9
|
|
|
|
11.8
|
|
|
|
16.3
|
|
|
|
16.6
|
|
|
|
11.1
|
|
Rig utilization
(4)
|
|
|
71
|
%
|
|
|
49
|
%
|
|
|
68
|
%
|
|
|
69
|
%
|
|
|
46
|
%
|
Average revenue per
operating day (5)
|
|
$
|
24,875
|
|
|
$
|
16,514
|
|
|
$
|
21,823
|
|
|
$
|
23,388
|
|
|
$
|
16,028
|
|
Average cost per
operating day (6)
|
|
$
|
15,929
|
|
|
$
|
13,352
|
|
|
$
|
16,069
|
|
|
$
|
15,997
|
|
|
$
|
13,033
|
|
Average rig margin per
operating day
|
|
$
|
8,946
|
|
|
$
|
3,162
|
|
|
$
|
5,754
|
|
|
$
|
7,391
|
|
|
$
|
2,995
|
|
|
|
|
|
(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 out-of-pocket
costs paid by customers of $4.0 million, $2.0 million and $3.1
million during the three months ended June 30, 2022 and 2021, and
March 31, 2022, respectively, and $7.1 million and $3.2 million
during the six months ended June 30, 2022 and 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 $4.0 million, $2.0 million
and $3.1 million during the three months ended
June 30, 2022 and 2021, and March 31, 2022,
respectively, and $7.1 million and $3.2 million during the six
months ended June 30, 2022 and 2021, respectively; (ii)
overhead costs expensed due to reduced rig upgrade activity of $0.4
million, $0.4 million and $0.6 million during the three months
ended June 30, 2022 and 2021, and
March 31, 2022, respectively, and $1.0 million and $0.8
million during the six months ended June 30, 2022 and
2021, respectively; and (iii) rig reactivation costs, inclusive of
new crew training costs, of zero, $0.2 million and zero during the
three months ended June 30, 2022 and 2021, and
March 31, 2022, respectively, and zero and $1.3 million
during the six months ended June 30, 2022 and 2021,
respectively.
|
Non-GAAP Financial Measures
Adjusted net debt, adjusted net (loss) income, EBITDA and
adjusted EBITDA are supplemental non-GAAP financial measures that
are used by management and external users of the Company's
financial statements, such as industry analysts, investors, lenders
and rating agencies. In addition, adjusted EBITDA is
consistent with how EBITDA is calculated under the Company's credit
facility for purposes of determining the Company's compliance with
various financial covenants. The Company defines "adjusted
net debt" as long-term notes less cash. The Company defines
"adjusted net (loss) income" as net (loss) income before: asset
impairment, net; gain or loss on disposition of assets, net;
amortization of debt discount; amortization of issuance costs; gain
or loss on extinguishment of debt; change in fair value of embedded
derivative liability, gain on extinguishment of derivative and
other adjustments. The Company defines "EBITDA" as earnings
(or loss) before interest, taxes, depreciation and amortization,
and asset impairment, net and the Company defines "adjusted EBITDA"
as EBITDA before stock-based compensation, gain or loss on
disposition of assets, gain or loss on extinguishment of debt, gain
on extinguishment of derivative and other non-recurring items added
back to, or subtracted from, net income for purposes of calculating
EBITDA under the Company's 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 debt, adjusted net (loss)
income, EBITDA and adjusted EBITDA are useful because they allow
the Company's stockholders to more effectively evaluate the
Company's operating performance and compliance with various
financial covenants under the Company's credit facility and compare
the results of the Company's operations from period to period and
against the Company's peers without regard to the Company's
financing methods or capital structure or non-recurring, non-cash
transactions. The Company excludes 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 the Company's 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 the Company's 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. The Company's presentation of adjusted net debt,
adjusted net (loss) income, EBITDA and adjusted EBITDA should not
be construed as an inference that the Company's results will be
unaffected by unusual or non-recurring items. The Company's
computations of adjusted net debt, adjusted net (loss) income,
EBITDA and adjusted EBITDA may not be comparable to other similarly
titled measures of other companies.
Calculation of
Adjusted Net Debt:
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
June 30, 2022
|
Convertible
Notes
|
|
$
|
157,500
|
Revolving ABL Credit
Facility
|
|
|
7,824
|
Less: Cash
|
|
|
(7,294)
|
Adjusted Net Debt
|
|
$
|
158,030
|
Reconciliation of
Adjusted Net Debt to Reported Long-term Debt:
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
June 30, 2022
|
Adjusted Net
Debt
|
|
$
|
158,030
|
Add back:
|
|
|
|
Cash
|
|
|
7,294
|
Long-term portion of
finance lease obligations
|
|
|
1,559
|
Less:
|
|
|
|
Debt
discount
|
|
|
(36,114)
|
Deferred issuance
costs
|
|
|
(8,675)
|
Total reported long-term debt
|
|
$
|
122,094
|
Reconciliation of
Net Loss to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
March 31,
|
|
|
|
|
|
|
June 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
|
|
|
|
|
2022
|
|
2021
|
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
|
|
|
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,791)
|
|
$
|
(0.21)
|
|
$
|
(14,901)
|
|
$
|
(2.22)
|
|
$
|
(58,796)
|
|
$
|
(5.20)
|
|
|
|
|
|
|
$
|
(61,587)
|
|
$
|
(4.95)
|
|
$
|
(30,926)
|
|
$
|
(4.78)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment,
net
(1)
|
|
|
—
|
|
|
—
|
|
|
250
|
|
|
0.04
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
293
|
|
|
0.04
|
(Gain) loss on
disposition of assets,
net (2)
|
|
|
(582)
|
|
|
(0.04)
|
|
|
31
|
|
|
—
|
|
|
(516)
|
|
|
(0.05)
|
|
|
|
|
|
|
|
(1,098)
|
|
|
(0.09)
|
|
|
(404)
|
|
|
(0.06)
|
Amortization of
debt
discount
|
|
|
1,462
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
1,462
|
|
|
0.12
|
|
|
—
|
|
|
—
|
Amortization of
issuance costs
|
|
|
518
|
|
|
0.04
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
518
|
|
|
0.04
|
|
|
—
|
|
|
—
|
Loss on
extinguishment
of debt (3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,347
|
|
|
4.10
|
|
|
|
|
|
|
|
46,347
|
|
|
3.72
|
|
|
—
|
|
|
—
|
Change in fair value
of
embedded derivative
liability (4)
|
|
|
2,408
|
|
|
0.17
|
|
|
—
|
|
|
—
|
|
|
1,857
|
|
|
0.17
|
|
|
|
|
|
|
|
4,265
|
|
|
0.35
|
|
|
—
|
|
|
—
|
Gain on
extinguishment
of derivative (5)
|
|
|
(10,765)
|
|
|
(0.79)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
(10,765)
|
|
|
(0.86)
|
|
|
—
|
|
|
—
|
Adjusted net loss
|
|
$
|
(9,750)
|
|
$
|
(0.72)
|
|
$
|
(14,620)
|
|
$
|
(2.18)
|
|
$
|
(11,108)
|
|
$
|
(0.98)
|
|
|
|
|
|
|
$
|
(20,858)
|
|
$
|
(1.67)
|
|
$
|
(31,037)
|
|
$
|
(4.80)
|
Reconciliation of
Net Loss to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
March 31,
|
|
|
June 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
|
2022
|
|
2021
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,791)
|
|
$
|
(14,901)
|
|
$
|
(58,796)
|
|
|
$
|
(61,587)
|
|
$
|
(30,926)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
|
2,199
|
|
|
33
|
|
|
(720)
|
|
|
|
1,479
|
|
|
67
|
Interest
expense
|
|
|
8,232
|
|
|
3,773
|
|
|
4,675
|
|
|
|
12,907
|
|
|
7,482
|
Depreciation and
amortization
|
|
|
9,848
|
|
|
9,516
|
|
|
9,751
|
|
|
|
19,599
|
|
|
19,505
|
Asset impairment, net
(1)
|
|
|
—
|
|
|
250
|
|
|
—
|
|
|
|
—
|
|
|
293
|
EBITDA
|
|
|
17,488
|
|
|
(1,329)
|
|
|
(45,090)
|
|
|
|
(27,602)
|
|
|
(3,579)
|
(Gain) loss on
disposition of assets, net (2)
|
|
|
(582)
|
|
|
31
|
|
|
(516)
|
|
|
|
(1,098)
|
|
|
(404)
|
Stock-based and
deferred compensation cost
|
|
|
674
|
|
|
929
|
|
|
977
|
|
|
|
1,651
|
|
|
1,602
|
Loss on extinguishment
of debt (3)
|
|
|
—
|
|
|
—
|
|
|
46,347
|
|
|
|
46,347
|
|
|
—
|
Change in fair value of
embedded derivative liability (4)
|
|
|
2,408
|
|
|
—
|
|
|
1,857
|
|
|
|
4,265
|
|
|
—
|
Gain on extinguishment
of derivative (5)
|
|
|
(10,765)
|
|
|
—
|
|
|
—
|
|
|
|
(10,765)
|
|
|
—
|
Adjusted EBITDA
|
|
$
|
9,223
|
|
$
|
(369)
|
|
$
|
3,575
|
|
|
$
|
12,798
|
|
$
|
(2,381)
|
|
|
|
|
(1)
|
During the second
quarter of 2021, we impaired a damaged piece of drilling equipment
for $0.3 million, net of insurance recoveries.
|
(2)
|
Gain or loss on
disposition of assets, net represents the sale or disposition of
miscellaneous drilling equipment in each respective
period.
|
(3)
|
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.
|
(4)
|
Represents the change
in fair value of embedded derivative liability between March
31,2022 and June 8, 2022, March 18, 2022 and March 31, 2022, and
March 18, 2022 and June 8, 2022, respectively. The embedded
derivative liability was extinguished on June 8, 2022.
|
(5)
|
Represents the gain on
extinguishment of the PIK interest rate feature of the derivative
liability.
|
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.