HOUSTON, May 9, 2023
/PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company"
or "ICD") (NYSE: ICD) today reported financial results for the
three months ended March 31, 2023.
First quarter 2023 Highlights
- Net income, as defined below, of $12.0
thousand, or $0.00 per diluted
share.
- Adjusted net income, as defined below, of $2.4 million, or $0.14 per diluted share.
- Adjusted EBITDA, as defined below, of $21.4 million, representing an approximate 16%
sequential improvement from the fourth quarter of 2022.
- Adjusted net debt, as defined below, of $193.9 million.
- 19.4 average rigs working during the quarter.
- Fully burdened margin per day of $15,665 representing an approximate 8% sequential
improvement from the fourth quarter of 2022.
In the first quarter of 2023, the Company reported revenues of
$63.8 million, net income of
$12.0 thousand, or $0.00 per diluted share, adjusted net income
(defined below) of $2.4 million, or
$0.14 per diluted share, and adjusted
EBITDA (defined below) of $21.4
million. These results compare to revenues of
$35.0 million, a net loss of
$58.8 million, or $5.20 per diluted share, 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, and revenues of $60.3 million,
net income of $3.5 million, or
$0.20 per diluted share, adjusted net
loss of $0.1 million, or $0.01 per share, and adjusted EBITDA of
$18.5 million in the fourth quarter
of 2022.
Chief Executive Officer Anthony
Gallegos commented, "First quarter 2023 proved to be another
record quarter for ICD from an earnings, EBITDA, revenue per day
and margin per day perspective. The first quarter was also
pivotal for ICD from a strategic capital allocation
perspective. Our 21st rig was completed during the quarter
and commenced operations in early April in the Permian Basin.
As this will be our last rig reactivation until market conditions
improve, progress towards our free cash flow and net debt reduction
targets has accelerated. In fact, we improved our net working
capital position by $11.7 million
during the first quarter and since the end of the first quarter, we
have already repaid $3 million of
outstanding debt and expect this trend to continue as we plan to
utilize free cash flow to reduce overall net debt.
Looking forward, overall demand for pad optimal super spec rigs
remains strong. Our plan to transition rigs from the natural
gas-directed Haynesville market to customers in the oil-directed
Permian market is underway. Our expectations are that these
relocations and redeployments will occur over the second and third
quarters of 2023. Today, we have two rigs that have already
relocated and recommenced operations, and we have three additional
rigs that have physically relocated and for which we are evaluating
contracting opportunities for late-May to mid-June deployments.
For our rigs remaining in the Haynesville, we successfully
extended contracts expiring during the first and early second
quarters for two rigs, with our other rigs operating under contract
terms that extend beyond the second quarter. Depending upon
interplay between the Haynesville and Permian markets later this
year and overall market demand, any of these rigs could be
candidates to relocate to the Permian Basin. Overall, while
these rig relocations take place, we expect our average rigs
earning revenue during the second quarter of 2023 will decline to
approximately 17 to 18 rigs while our reported margin per day will
remain consistent with first quarter levels, excluding transition
costs."
Quarterly Operational Results
In the first quarter of 2023, operating days increased
sequentially by 2% compared to the fourth quarter of 2022.
The Company's marketed fleet operated at 75% utilization and
recorded 1,744 revenue days, compared to 1,463 revenue days in the
first quarter of 2022, and 1,704 revenue days in the fourth quarter
of 2022.
Operating revenues in the first quarter of 2023 totaled
$63.8 million, compared to
$35.0 million in the first quarter of
2022 and $60.3 million in the fourth
quarter of 2022. Revenue per day in the first quarter of 2023
was $34,870, compared to $21,823 in the first quarter of 2022 and
$32,778 in the fourth quarter of
2022. The sequential increase quarter over quarter in revenue
per day was driven by higher dayrates on contract renewals.
Operating costs in the first quarter of 2023 totaled
$37.5 million, compared to
$27.2 million in the first quarter of
2022 and $36.0 million in the fourth
quarter of 2022. Fully burdened operating costs were
$19,205 per day in the first quarter
of 2023, compared to $16,069 in the
first quarter of 2022 and $18,261 in
the fourth quarter of 2022. Sequential increases in operating
costs per day were driven primarily by increased repair and
maintenance costs.
Fully burdened rig operating margins in the first quarter of
2023 were $15,665 per day, compared
to $5,754 per day in the first
quarter of 2022 and $14,517 per day
in the fourth quarter of 2022. The Company currently expects
per day operating margins in the second quarter of 2023 to remain
consistent with first quarter levels, excluding transition costs
associated with the relocation of rigs from the Haynesville to the
Permian Basin. Transition costs incurred during the first
quarter of 2023 were $0.6
million.
Selling, general and administrative expenses in the first
quarter of 2023 were $6.7 million
(including $1.8 million of non-cash
compensation), compared to $5.2
million (including $1.0
million of non-cash compensation) in the first quarter of
2022 and $7.7 million (including
$1.9 million of non-cash
compensation) in the fourth quarter of 2022. Cash selling,
general and administrative expenses decreased sequentially during
the quarter due to lower incentive compensation expense and lower
new hire costs. Stock-based incentive compensation expense
increased marginally due to awards granted in the first quarter of
2023.
During the first quarter of 2023, the Company recorded interest
expense of $8.7 million, including
$2.4 million relating to non-cash
amortization of debt discount and debt issuance costs. The
Company has excluded this non-cash amortization when presenting
adjusted net income (loss). The Company elected to pay
in-kind on March 31, 2023
$11.6 million interest under its
Convertible Notes.
Drilling Operations Update
The Company exited the first quarter with 19 rigs operating,
with our 21st rig commencing operations in early
April 2023. Overall, the Company's
operating rig count averaged 19.4 rigs during the quarter.
The Company's backlog of drilling contracts with original terms of
six months or longer is $56.3
million. This backlog excludes rigs operating on short
term pad-to-pad drilling contracts with original terms of less than
six months. All of this backlog is expected to be realized in
2023.
Capital Expenditures and Liquidity Update
Cash outlays for capital expenditures in the first quarter of
2023, net of asset sales and recoveries, were $18.1 million. This included $16.2 million associated with prior period
deliveries.
The Company had net working capital of $11.4 million, representing a $11.7 million improvement from December 31, 2022.
As of March 31, 2023, the Company had cash on hand of
$6.7 million and a revolving line of
credit with availability of $15.4
million. The Company reported adjusted net debt as of
March 31, 2023 of $193.9
million, consisting of the full amount of the outstanding
Convertible Notes and outstanding borrowings under the Company's
revolving line of credit.
Conference Call Details
A conference call for investors will be held today, May 9, 2023, at 11:00 a.m.
Central Time (12:00 p.m. Eastern
Time) to discuss the Company's first quarter 2023
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 4286553.
The replay will be available until May 16,
2023.
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 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
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023
|
|
December 31, 2022
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
6,715
|
|
$
|
5,326
|
|
Accounts receivable,
net of allowance for credit losses of $31 and zero,
respectively
|
|
|
41,838
|
|
|
39,775
|
|
Inventories
|
|
|
1,543
|
|
|
1,508
|
|
Assets held for
sale
|
|
|
—
|
|
|
325
|
|
Prepaid expenses and
other current assets
|
|
|
3,871
|
|
|
4,736
|
|
Total current
assets
|
|
|
53,967
|
|
|
51,670
|
|
Property, plant and
equipment, net
|
|
|
378,703
|
|
|
376,084
|
|
Other long-term assets,
net
|
|
|
2,389
|
|
|
1,960
|
|
Total
assets
|
|
$
|
435,059
|
|
$
|
429,714
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current portion of
long-term debt (1)
|
|
$
|
2,071
|
|
$
|
2,485
|
|
Accounts
payable
|
|
|
26,954
|
|
|
31,946
|
|
Accrued
liabilities
|
|
|
13,549
|
|
|
17,608
|
|
Total current
liabilities
|
|
|
42,574
|
|
|
52,039
|
|
Long-term debt
(2)
|
|
|
163,901
|
|
|
143,223
|
|
Deferred income taxes,
net
|
|
|
12,253
|
|
|
12,266
|
|
Other long-term
liabilities
|
|
|
652
|
|
|
7,474
|
|
Total
liabilities
|
|
|
219,380
|
|
|
215,002
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value, 250,000,000 shares authorized; 14,147,486 and 13,698,851
shares issued, respectively, and 14,062,394 and 13,613,759 shares
outstanding, respectively
|
|
|
141
|
|
|
136
|
|
Additional paid-in
capital
|
|
|
618,556
|
|
|
617,606
|
|
Accumulated
deficit
|
|
|
(399,085)
|
|
|
(399,097)
|
|
Treasury stock, at
cost, 85,092 shares and 85,092 shares, respectively
|
|
|
(3,933)
|
|
|
(3,933)
|
|
Total stockholders'
equity
|
|
|
215,679
|
|
|
214,712
|
|
Total liabilities and
stockholders' equity
|
|
$
|
435,059
|
|
$
|
429,714
|
|
____________
|
|
(1)
|
As of March 31, 2023
and December 31, 2022, current portion of long-term debt includes
$2.1 million and $2.5 million, respectively, of finance lease
obligations.
|
|
|
|
(2)
|
As of March 31, 2023
and December 31, 2022, long-term debt includes $1.3 million and
$1.6 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,
|
|
|
2023
|
|
2022
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
63,756
|
|
$
|
34,991
|
|
$
|
60,259
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
37,460
|
|
|
27,165
|
|
|
35,950
|
|
Selling, general and
administrative
|
|
|
6,727
|
|
|
5,228
|
|
|
7,714
|
|
Depreciation and
amortization
|
|
|
10,854
|
|
|
9,751
|
|
|
10,724
|
|
Asset
impairment
|
|
|
—
|
|
|
—
|
|
|
350
|
|
(Gain) loss on
disposition of assets, net
|
|
|
(14)
|
|
|
(516)
|
|
|
469
|
|
Total costs and
expenses
|
|
|
55,027
|
|
|
41,628
|
|
|
55,207
|
|
Operating income
(loss)
|
|
|
8,729
|
|
|
(6,637)
|
|
|
5,052
|
|
Interest
expense
|
|
|
(8,719)
|
|
|
(4,675)
|
|
|
(8,570)
|
|
Loss on extinguishment
of debt
|
|
|
—
|
|
|
(46,347)
|
|
|
—
|
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
(1,857)
|
|
|
—
|
|
Income (loss) before
income taxes
|
|
|
10
|
|
|
(59,516)
|
|
|
(3,518)
|
|
Income tax
benefit
|
|
|
(2)
|
|
|
(720)
|
|
|
(6,979)
|
|
Net income
(loss)
|
|
$
|
12
|
|
$
|
(58,796)
|
|
$
|
3,461
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.00
|
|
$
|
(5.20)
|
|
$
|
0.25
|
|
Diluted
|
|
$
|
0.00
|
|
$
|
(5.20)
|
|
$
|
0.20
|
|
Weighted average number
of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
13,865
|
|
|
11,303
|
|
|
13,617
|
|
Diluted
|
|
|
13,881
|
|
|
11,303
|
|
|
51,880
|
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in
thousands)
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2023
|
|
2022
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
12
|
|
$
|
(58,796)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
10,854
|
|
|
9,751
|
|
Stock-based
compensation
|
|
|
1,672
|
|
|
731
|
|
Gain on disposition of
assets, net
|
|
|
(14)
|
|
|
(516)
|
|
Non-cash interest
expense
|
|
|
11,619
|
|
|
3,193
|
|
Non-cash loss on
extinguishment of debt
|
|
|
—
|
|
|
46,347
|
|
Amortization of
deferred financing costs
|
|
|
27
|
|
|
250
|
|
Amortization of
Convertible Notes issuance costs and debt discount
|
|
|
2,378
|
|
|
370
|
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
1,857
|
|
Deferred income
taxes
|
|
|
(13)
|
|
|
(727)
|
|
Credit loss
expense
|
|
|
31
|
|
|
60
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(2,094)
|
|
|
(2,079)
|
|
Inventories
|
|
|
(35)
|
|
|
(130)
|
|
Prepaid expenses and
other assets
|
|
|
324
|
|
|
386
|
|
Accounts payable and
accrued liabilities
|
|
|
(11,203)
|
|
|
(2,358)
|
|
Net cash provided by
(used in) operating activities
|
|
|
13,558
|
|
|
(1,661)
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment
|
|
|
(18,835)
|
|
|
(6,279)
|
|
Proceeds from the sale
of assets
|
|
|
748
|
|
|
589
|
|
Net cash used in
investing activities
|
|
|
(18,087)
|
|
|
(5,690)
|
|
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
|
|
|
11,321
|
|
|
1,500
|
|
Repayments under
Revolving ABL Credit Facility
|
|
|
(4,334)
|
|
|
(2)
|
|
Payment of merger
consideration
|
|
|
—
|
|
|
(2,902)
|
|
Proceeds from issuance
of common stock through at-the-market facility, net of issuance
costs
|
|
|
(34)
|
|
|
3,360
|
|
Taxes paid for vesting
of RSUs
|
|
|
(385)
|
|
|
(32)
|
|
Convertible debt
issuance costs
|
|
|
—
|
|
|
(6,601)
|
|
Payments for finance
lease obligations
|
|
|
(650)
|
|
|
(1,194)
|
|
Net cash provided by
financing activities
|
|
|
5,918
|
|
|
12,553
|
|
Net increase in cash
and cash equivalents
|
|
|
1,389
|
|
|
5,202
|
|
Cash and cash
equivalents
|
|
|
|
|
|
|
|
Beginning of
period
|
|
|
5,326
|
|
|
4,140
|
|
End of
period
|
|
$
|
6,715
|
|
$
|
9,342
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
419
|
|
$
|
4,262
|
|
Supplemental
disclosure of non-cash investing and financing
activities
|
|
|
|
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
|
$
|
(5,091)
|
|
$
|
(701)
|
|
Additions to property,
plant and equipment through finance leases
|
|
$
|
51
|
|
$
|
604
|
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
|
$
|
—
|
|
$
|
(7)
|
|
Initial embedded
derivative liability upon issuance of Convertible Notes
|
|
$
|
—
|
|
$
|
75,733
|
|
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
March 31, 2023 and 2022 and December 31, 2022. 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
|
|
|
March 31,
|
|
December 31,
|
|
|
2023
|
|
2022
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed rigs
end of period (1)
|
|
|
26
|
|
|
|
24
|
|
|
|
26
|
|
|
Rig operating days
(2)
|
|
|
1,744
|
|
|
|
1,463
|
|
|
|
1,704
|
|
|
Average number of
operating rigs (3)
|
|
|
19.4
|
|
|
|
16.3
|
|
|
|
18.5
|
|
|
Rig utilization
(4)
|
|
|
75
|
%
|
|
|
68
|
%
|
|
|
71
|
%
|
|
Average revenue per
operating day (5)
|
|
$
|
34,870
|
|
|
$
|
21,823
|
|
|
$
|
32,778
|
|
|
Average cost per
operating day (6)
|
|
$
|
19,205
|
|
|
$
|
16,069
|
|
|
$
|
18,261
|
|
|
Average rig margin per
operating day
|
|
$
|
15,665
|
|
|
$
|
5,754
|
|
|
$
|
14,517
|
|
|
__________________
|
|
(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 $3.0 million, $3.1 million and $4.4
million during the three months ended March 31, 2023 and 2022, and
December 31, 2022, 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 $3.0 million, $3.1
million and $4.4 million during the three months ended
March 31, 2023 and 2022, and December 31, 2022,
respectively; (ii) overhead costs of $0.4 million, $0.6 million and
$0.4 million during the three months ended March 31, 2023
and 2022, and December 31, 2022, respectively; and (iii)
rig decommissioning and transition costs of $0.6 million during the
three months ended March 31, 2023. There were no rig
decommissioning and transition costs for the three months ended
March 31, 2022 and December 31, 2022.
|
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 (excluding long-term capital leases)
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)
|
|
March 31, 2023
|
|
Convertible
Notes
|
|
$
|
181,785
|
|
Revolving ABL Credit
Facility
|
|
|
18,798
|
|
Less: Cash
|
|
|
(6,715)
|
|
Adjusted net
debt
|
|
$
|
193,868
|
|
Reconciliation of
Adjusted Net Debt to Reported Long-Term Debt:
|
|
|
|
|
|
(in
thousands)
|
|
March 31, 2023
|
|
Adjusted net
debt
|
|
$
|
193,868
|
|
Add back:
|
|
|
|
|
Cash
|
|
|
6,715
|
|
Long-term portion of
finance lease obligations
|
|
|
1,293
|
|
Less:
|
|
|
|
|
Debt discount, net of
amortization
|
|
|
(31,107)
|
|
Deferred issuance
costs, net of amortization
|
|
|
(6,868)
|
|
Total reported
long-term debt
|
|
$
|
163,901
|
|
Reconciliation of
Net Income (Loss) to Adjusted Net Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
|
March 31,
|
|
December 31,
|
|
|
2023
|
|
2022
|
|
2022
|
|
|
Amount
|
|
|
Amount
|
|
|
Amount
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
12
|
|
|
$
|
(58,796)
|
|
|
$
|
3,461
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
350
|
|
|
(Gain) loss on
disposition of assets, net (2)
|
|
|
(14)
|
|
|
|
(516)
|
|
|
|
469
|
|
|
Amortization of debt
discount - Convertible Notes
|
|
|
1,798
|
|
|
|
—
|
|
|
|
1,855
|
|
|
Amortization of
issuance costs - Convertible Notes
|
|
|
580
|
|
|
|
—
|
|
|
|
551
|
|
|
Loss on extinguishment
of debt (3)
|
|
|
—
|
|
|
|
46,347
|
|
|
|
—
|
|
|
Change in fair value of
embedded derivative liability (4)
|
|
|
—
|
|
|
|
1,857
|
|
|
|
—
|
|
|
Non-cash income tax
benefit related to deductibility of Convertible Note interest
(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,773)
|
|
|
Adjusted net income
(loss) - Basic
|
|
$
|
2,376
|
|
|
$
|
(11,108)
|
|
|
$
|
(87)
|
|
|
Add back dilutive
effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax interest
expense of Convertible Notes
|
|
|
4,622
|
|
|
|
—
|
|
|
|
—
|
|
|
Adjusted net income
(loss) - Diluted
|
|
$
|
6,998
|
|
|
$
|
(11,108)
|
|
|
$
|
(87)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
(loss) per share - Basic
|
|
$
|
0.17
|
|
|
$
|
(0.98)
|
|
|
$
|
(0.01)
|
|
|
Adjusted net income
(loss) per share - Diluted
|
|
$
|
0.14
|
|
|
$
|
(0.98)
|
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - Basic
|
|
|
13,865
|
|
|
|
11,303
|
|
|
|
13,617
|
|
|
Weighted average
number of common shares outstanding - Diluted
|
|
|
51,642
|
|
|
|
11,303
|
|
|
|
13,617
|
|
|
Reconciliation of
Net Income (Loss) to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
|
March 31,
|
|
December 31,
|
|
|
2023
|
|
2022
|
|
2022
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
12
|
|
$
|
(58,796)
|
|
$
|
3,461
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
|
|
(2)
|
|
|
(720)
|
|
|
(6,979)
|
|
Interest
expense
|
|
|
8,719
|
|
|
4,675
|
|
|
8,570
|
|
Depreciation and
amortization
|
|
|
10,854
|
|
|
9,751
|
|
|
10,724
|
|
Asset impairment
(1)
|
|
|
—
|
|
|
—
|
|
|
350
|
|
EBITDA
|
|
|
19,583
|
|
|
(45,090)
|
|
|
16,126
|
|
(Gain) loss on
disposition of assets, net (2)
|
|
|
(14)
|
|
|
(516)
|
|
|
469
|
|
Stock-based and
deferred compensation cost
|
|
|
1,838
|
|
|
977
|
|
|
1,890
|
|
Loss on extinguishment
of debt (3)
|
|
|
—
|
|
|
46,347
|
|
|
—
|
|
Change in fair value of
embedded derivative liability (4)
|
|
|
—
|
|
|
1,857
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
21,407
|
|
$
|
3,575
|
|
$
|
18,485
|
|
_______________
|
|
(1)
|
During the fourth
quarter of 2022, we impaired $0.4 million of drilling equipment
that was designated held for sale. We impaired the drilling
equipment to fair market value less cost to sell, recorded asset
impairment expense of $0.4 million and recorded $0.3 million of
assets held for sale.
|
|
|
|
(2)
|
Gain or loss on
disposition of assets, net represents recognition of the sale or
disposition of miscellaneous drilling equipment in each respective
period.
|
|
|
|
(3)
|
Loss on extinguishment
of debt in the first quarter of 2022 related to unamortized debt
issuance costs on our prior term loan facility, 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)
|
During the first
quarter of 2022, we recorded the change in fair value of embedded
derivative liability between the issuance date of the Convertible
Notes, March 18, 2022, and March 31, 2022.
|
|
|
|
(5)
|
During the fourth
quarter of 2022, the Company recorded non-cash income tax benefit
related to the determination of deductibility of the Convertible
Note interest.
|
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.
