HOUSTON, Aug. 3, 2023
/PRNewswire/ -- Independence Contract Drilling, Inc. (the
"Company" or "ICD") (NYSE: ICD) today reported financial results
for the three months ended June 30, 2023.
Second quarter 2023 Highlights
- Net loss, as defined below, of $4.2
million, or $0.30 per
share
- Adjusted net loss, as defined below, of $1.0 million, or $0.07 per share
- Adjusted EBITDA, as defined below, of $18.7 million
- Adjusted net debt, as defined below, of $191.2 million
- 15.0 average rigs working during the quarter, excluding two
average rigs earning revenue on an early termination basis
- Fully burdened margin per day of $15,462
In the second quarter of 2023, the Company reported revenues of
$56.4 million, net loss of
$4.2 million, or $0.30 per share, adjusted net loss (defined
below) of $1.0 million, or
$0.07 per share, and adjusted EBITDA
(defined below) of $18.7
million. These results compare to revenues of
$42.3 million, a net loss of
$2.8 million, or $0.21 per share, adjusted net loss of
$9.8 million, or $0.72 per share, and adjusted EBITDA of
$9.2 million in the second quarter of
2022, and revenues of $63.8 million,
net income of $12.0 thousand, or
$0.00 per diluted share, adjusted net
income of $2.4 million, or
$0.14 per diluted share, and adjusted
EBITDA of $21.4 million in the first
quarter of 2023.
Chief Executive Officer Anthony
Gallegos commented, "Second quarter 2023 results came in
ahead of expectations with respect to revenues, margin per day and
adjusted EBITDA. I am particularly pleased that overall
margins benefitted from sequential cost per day improvements given
the number of rigs we had in transition as we relocated rigs from
the Haynesville to our Permian market. We also made
significant progress towards our debt reduction goals. We
repaid $5.0 million of Convertible
Notes and reduced revolver borrowings by $5.3 million while at the same time increasing
our overall net working capital position.
Although the Permian market remains strong, the industry did see
a reduction in the overall Permian rig count during the second
quarter of 2023. In this environment, I am pleased that ICD
has already recontracted three rigs relocated from the Haynesville
and has improved our overall contracted Permian rig count since
year end. We expect further improvements during the back half of
this year. Looking forward, based upon contract negotiations
occurring today and assuming commodity prices remain constructive,
we expect the third quarter of 2023 to be the operating rig trough
for ICD with additional rig reactivations beginning in late third
quarter and during the fourth quarter."
Quarterly Operational Results
In the second quarter of 2023, operating days decreased
sequentially by 22% compared to the first quarter of 2023.
The Company's marketed fleet operated at 58% utilization and
recorded 1,369 revenue days, compared to 1,540 revenue days in the
second quarter of 2022, and 1,744 revenue days in the first quarter
of 2023. During the second quarter of 2023, the Company also
recognized early termination revenue of approximately $5.1 million on two average working rigs.
Operating revenues in the second quarter of 2023 totaled
$56.4 million, compared to
$42.3 million in the second quarter
of 2022 and $63.8 million in the
first quarter of 2023. Revenue per day in the second quarter
of 2023 was $34,467, compared to
$24,875 in the second quarter of 2022
and $34,870 in the first quarter of
2023. Revenue per day statistics exclude early termination
revenue recognized during the quarter.
Operating costs in the second quarter of 2023 totaled
$33.8 million, compared to
$28.9 million in the second quarter
of 2022 and $37.5 million in the
first quarter of 2023. Fully burdened operating costs were
$19,005 per day in the second quarter
of 2023, compared to $15,929 in the
second quarter of 2022 and $19,205 in
the first quarter of 2023. Sequential decreases in operating
cost per day were driven primarily by cost efficiencies associated
with rigs operating on a standby basis during the quarter and lower
personnel costs. Reported cost per day excludes
Haynesville-to-Permian rig transition costs of approximately
$0.6 million and $2.8 million in the first and second quarters of
2023, respectively.
Fully burdened rig operating margins in the second quarter of
2023 were $15,462 per day, compared
to $8,946 per day in the second
quarter of 2022 and $15,665 per day
in the first quarter of 2023. The Company currently expects
per day operating margins in the third quarter of 2023 to fall
approximately 8% sequentially driven primarily by lower average
dayrates as rigs recontract in the current market environment.
Selling, general and administrative expenses in the second
quarter of 2023 were $5.2 million
(including $1.3 million of non-cash
compensation), compared to $4.9
million (including $0.7
million of non-cash compensation) in the second quarter of
2022 and $6.7 million (including
$1.8 million of non-cash
compensation) in the first quarter of 2023. Cash selling,
general and administrative expenses decreased sequentially during
the quarter due to lower incentive compensation expense and lower
professional fees. Stock-based incentive compensation expense
increased sequentially due to awards granted in the first quarter
of 2023.
During the second quarter of 2023, the Company recorded interest
expense of $8.3 million, including
$1.2 million relating to non-cash
amortization of Convertible Note debt discount and debt issuance
costs. The Company has excluded this non-cash amortization
when presenting adjusted net income (loss). During the second
quarter of 2023, the Company redeemed $5.0
million of Convertible Notes at par plus accrued
interest.
Drilling Operations Update
The Company currently expects to operate between 13 and 14
average rigs during the third quarter of 2023 with two to three
additional reactivations occurring during the fourth quarter of
2023. The Company's backlog of drilling contracts with
original terms of six months or longer is $42.2 million. This backlog excludes rigs
operating on short term pad-to-pad drilling contracts with original
terms of less than six months.
Capital Expenditures and Liquidity Update
Cash outlays for capital expenditures in the second quarter of
2023, net of asset sales and recoveries, were $11.5 million. This included $11.1 million associated with prior period
deliveries.
The Company had net working capital of $12.4 million, representing a $1.0 million improvement from March 31, 2023.
As of June 30, 2023, the Company had cash on hand of
$5.6 million and a revolving line of
credit with availability of $13.5
million. The Company reported adjusted net debt as of
June 30, 2023 of $191.2
million, consisting of the full amount of the outstanding
Convertible Notes and outstanding borrowings under the Company's
revolving line of credit. Adjusted net debt also includes
$6.5 million of accrued interest at
quarter-end under the Company's Convertible Notes that the Company
has elected to pay in-kind when due on September 30, 2023.
Conference Call Details
A conference call for investors will be held today, August 3, 2023, at 11:00
a.m. Central Time (12:00 p.m. Eastern
Time) to discuss the Company's second 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 9447728.
The replay will be available until August
10, 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
|
|
|
|
|
|
|
|
|
|
June 30, 2023
|
|
December 31, 2022
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
5,584
|
|
$
|
5,326
|
|
Accounts
receivable
|
|
|
34,510
|
|
|
39,775
|
|
Inventories
|
|
|
1,663
|
|
|
1,508
|
|
Assets held for
sale
|
|
|
—
|
|
|
325
|
|
Prepaid expenses and
other current assets
|
|
|
2,732
|
|
|
4,736
|
|
Total current
assets
|
|
|
44,489
|
|
|
51,670
|
|
Property, plant and
equipment, net
|
|
|
372,226
|
|
|
376,084
|
|
Other long-term assets,
net
|
|
|
3,521
|
|
|
1,960
|
|
Total
assets
|
|
$
|
420,236
|
|
$
|
429,714
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current portion of
long-term debt (1)
|
|
$
|
1,947
|
|
$
|
2,485
|
|
Accounts
payable
|
|
|
18,301
|
|
|
31,946
|
|
Accrued
liabilities
|
|
|
11,813
|
|
|
17,608
|
|
Total current
liabilities
|
|
|
32,061
|
|
|
52,039
|
|
Long-term debt
(2)
|
|
|
155,235
|
|
|
143,223
|
|
Deferred income taxes,
net
|
|
|
11,895
|
|
|
12,266
|
|
Other long-term
liabilities
|
|
|
8,276
|
|
|
7,474
|
|
Total
liabilities
|
|
|
207,467
|
|
|
215,002
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value, 250,000,000 shares authorized; 14,150,819 and 13,698,851
shares issued, respectively, and 14,065,727 and 13,613,759 shares
outstanding, respectively
|
|
|
141
|
|
|
136
|
|
Additional paid-in
capital
|
|
|
619,807
|
|
|
617,606
|
|
Accumulated
deficit
|
|
|
(403,246)
|
|
|
(399,097)
|
|
Treasury stock, at
cost, 85,092 shares and 85,092 shares, respectively
|
|
|
(3,933)
|
|
|
(3,933)
|
|
Total stockholders'
equity
|
|
|
212,769
|
|
|
214,712
|
|
Total liabilities and
stockholders' equity
|
|
$
|
420,236
|
|
$
|
429,714
|
|
|
|
|
|
|
|
|
|
(1)
|
As of June
30, 2023 and December 31, 2022, current portion of long-term debt
includes $1.9 million and $2.5 million, respectively, of finance
lease obligations.
|
|
|
|
(2)
|
As of June
30, 2023 and December 31, 2022, long-term debt includes $1.8
million and $1.6 million, respectively, of long-term finance lease
obligations.
|
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in thousands,
except per share data)
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
March 31,
|
|
June 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
56,356
|
|
$
|
42,313
|
|
$
|
63,756
|
|
$
|
120,112
|
|
$
|
77,304
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
33,827
|
|
|
28,904
|
|
|
37,460
|
|
|
71,287
|
|
|
56,069
|
|
Selling, general and
administrative
|
|
|
5,224
|
|
|
4,860
|
|
|
6,727
|
|
|
11,951
|
|
|
10,088
|
|
Depreciation and
amortization
|
|
|
11,405
|
|
|
9,848
|
|
|
10,854
|
|
|
22,259
|
|
|
19,599
|
|
Loss (gain) on
disposition of assets, net
|
|
|
2,007
|
|
|
(582)
|
|
|
(14)
|
|
|
1,993
|
|
|
(1,098)
|
|
Total costs and
expenses
|
|
|
52,463
|
|
|
43,030
|
|
|
55,027
|
|
|
107,490
|
|
|
84,658
|
|
Operating income
(loss)
|
|
|
3,893
|
|
|
(717)
|
|
|
8,729
|
|
|
12,622
|
|
|
(7,354)
|
|
Interest
expense
|
|
|
(8,251)
|
|
|
(8,232)
|
|
|
(8,719)
|
|
|
(16,970)
|
|
|
(12,907)
|
|
Loss on extinguishment
of debt
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46,347)
|
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
(2,408)
|
|
|
—
|
|
|
—
|
|
|
(4,265)
|
|
Realized gain on
extinguishment of derivative
|
|
|
—
|
|
|
10,765
|
|
|
—
|
|
|
—
|
|
|
10,765
|
|
(Loss) income before
income taxes
|
|
|
(4,358)
|
|
|
(592)
|
|
|
10
|
|
|
(4,348)
|
|
|
(60,108)
|
|
Income tax (benefit)
expense
|
|
|
(197)
|
|
|
2,199
|
|
|
(2)
|
|
|
(199)
|
|
|
1,479
|
|
Net (loss)
income
|
|
$
|
(4,161)
|
|
$
|
(2,791)
|
|
$
|
12
|
|
$
|
(4,149)
|
|
$
|
(61,587)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.30)
|
|
$
|
(0.21)
|
|
$
|
0.00
|
|
$
|
(0.30)
|
|
$
|
(4.95)
|
|
Diluted
|
|
$
|
(0.30)
|
|
$
|
(0.21)
|
|
$
|
0.00
|
|
$
|
(0.30)
|
|
$
|
(4.95)
|
|
Weighted average number
of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,050
|
|
|
13,590
|
|
|
13,865
|
|
|
13,951
|
|
|
12,453
|
|
Diluted
|
|
|
14,050
|
|
|
13,590
|
|
|
13,881
|
|
|
13,951
|
|
|
12,453
|
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in
thousands)
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2023
|
|
2022
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,149)
|
|
$
|
(61,587)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
22,259
|
|
|
19,599
|
|
Stock-based
compensation
|
|
|
2,852
|
|
|
1,203
|
|
Loss (gain) on
disposition of assets, net
|
|
|
1,993
|
|
|
(1,098)
|
|
Non-cash interest
expense
|
|
|
11,619
|
|
|
3,193
|
|
Non-cash loss on
extinguishment of debt
|
|
|
—
|
|
|
46,347
|
|
Amortization of
deferred financing costs
|
|
|
55
|
|
|
285
|
|
Amortization of
Convertible Notes debt discount and issuance costs
|
|
|
3,546
|
|
|
2,350
|
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
4,265
|
|
Gain on extinguishment
of derivative
|
|
|
—
|
|
|
(10,765)
|
|
Deferred income
taxes
|
|
|
(371)
|
|
|
1,479
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
5,265
|
|
|
(4,609)
|
|
Inventories
|
|
|
(208)
|
|
|
(206)
|
|
Prepaid expenses and
other assets
|
|
|
157
|
|
|
2,516
|
|
Accounts payable and
accrued liabilities
|
|
|
(7,964)
|
|
|
(509)
|
|
Net cash provided by
operating activities
|
|
|
35,054
|
|
|
2,463
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment
|
|
|
(31,164)
|
|
|
(12,125)
|
|
Proceeds from the sale
of assets
|
|
|
1,546
|
|
|
1,982
|
|
Net cash used in
investing activities
|
|
|
(29,618)
|
|
|
(10,143)
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
Proceeds from issuance
of Convertible Notes
|
|
|
—
|
|
|
157,500
|
|
Payments to redeem
Convertible Notes
|
|
|
(5,000)
|
|
|
—
|
|
Repayments under Term
Loan Facility
|
|
|
—
|
|
|
(139,076)
|
|
Borrowings under
Revolving ABL Credit Facility
|
|
|
17,249
|
|
|
1,526
|
|
Repayments under
Revolving ABL Credit Facility
|
|
|
(15,560)
|
|
|
(2)
|
|
Payment of merger
consideration
|
|
|
—
|
|
|
(2,902)
|
|
Proceeds from issuance
of common stock through at-the-market facility, net of issuance
costs
|
|
|
(34)
|
|
|
3,155
|
|
Taxes paid for vesting
of RSUs
|
|
|
(389)
|
|
|
(32)
|
|
Convertible Notes
issuance costs
|
|
|
—
|
|
|
(7,057)
|
|
Payments for finance
lease obligations
|
|
|
(1,444)
|
|
|
(2,278)
|
|
Net cash (used in)
provided by financing activities
|
|
|
(5,178)
|
|
|
10,834
|
|
Net increase in cash
and cash equivalents
|
|
|
258
|
|
|
3,154
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
Beginning of
period
|
|
|
5,326
|
|
|
4,140
|
|
End of
period
|
|
$
|
5,584
|
|
$
|
7,294
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
1,138
|
|
$
|
4,493
|
|
Cash paid during the
period for taxes
|
|
$
|
639
|
|
$
|
—
|
|
Supplemental disclosure of non-cash investing and
financing activities
|
|
|
|
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
|
$
|
(11,092)
|
|
$
|
1,130
|
|
Additions to property,
plant and equipment through finance leases
|
|
$
|
1,359
|
|
$
|
1,367
|
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
|
$
|
(100)
|
|
$
|
(77)
|
|
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
June 30, 2023 and 2022 and March
31, 2023 and the six months ended June 30, 2023
and 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
|
|
Six Months Ended
|
|
|
June 30,
|
|
March 31,
|
|
June 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed rigs
end of period (1)
|
|
|
26
|
|
|
|
24
|
|
|
|
26
|
|
|
|
26
|
|
|
|
24
|
|
|
Rig operating days
(2)
|
|
|
1,369
|
|
|
|
1,540
|
|
|
|
1,744
|
|
|
|
3,113
|
|
|
|
3,004
|
|
|
Average number of
operating rigs (3)
|
|
|
15.0
|
|
|
|
16.9
|
|
|
|
19.4
|
|
|
|
17.2
|
|
|
|
16.6
|
|
|
Rig utilization
(4)
|
|
|
58
|
%
|
|
|
71
|
%
|
|
|
75
|
%
|
|
|
66
|
%
|
|
|
69
|
%
|
|
Average revenue per
operating day (5)
|
|
$
|
34,467
|
|
|
$
|
24,875
|
|
|
$
|
34,870
|
|
|
$
|
34,693
|
|
|
$
|
23,388
|
|
|
Average cost per
operating day (6)
|
|
$
|
19,005
|
|
|
$
|
15,929
|
|
|
$
|
19,205
|
|
|
$
|
19,117
|
|
|
$
|
15,997
|
|
|
Average rig margin per
operating day
|
|
$
|
15,462
|
|
|
$
|
8,946
|
|
|
$
|
15,665
|
|
|
$
|
15,576
|
|
|
$
|
7,391
|
|
|
|
|
|
|
|
|
|
|
(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. Rig operating days exclude rigs earning revenue
on an early termination basis. During the three months ended June
30, 2023 and 2022 and March 31, 2023, there were 97.9, 19.4 and
14.6 operating days in which we earned revenue on a standby basis,
respectively. During the six months ended June 30, 2023 and
2022, there were 112.5 and 23.2 operating days in which we earned
revenue on a standby basis, respectively. During the second quarter
ended June 30, 2023, the Company recognized $5.1 million of early
termination revenue.
|
|
|
|
(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 $4.0 million, $4.0 million
and $3.0 million during the three months ended
June 30, 2023 and 2022, and March 31, 2023,
respectively and $7.0 million and $7.1 million during the six
months ended June 30, 2023 and 2022, respectively and
(ii) early termination revenues of $5.1 million during the three
months ended June 30, 2023 and $5.1 million during the
six months ended June 30, 2023. There were no early
termination revenues during the three months ended June 30, 2022
and March 31, 2023 or the six months ended June 30,
2022.
|
|
|
|
(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, $4.0
million and $3.0 million during the three months ended
June 30, 2023 and 2022, and March 31, 2023,
respectively, and $7.0 million and $7.1 million during the six
months ended June 30, 2023 and 2022; (ii) overhead costs
of $0.9 million, $0.4 million and $0.4 million during the three
months ended June 30, 2023 and 2022, and
March 31, 2023, respectively, and $1.4 million and $1.0
million during the six months ended June 30, 2023 and
2022; and (iii) rig decommissioning and transition costs between
basins of $2.8 million, zero and $0.6 million during the three
months ended June 30, 2023 and 2022 and
March 31, 2023, respectively, and $3.4 million and zero
during the six months ended June 30, 2023 and 2022,
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 (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 (loss) 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, 2023
|
|
Convertible
Notes
|
|
$
|
176,785
|
|
Revolving ABL Credit
Facility
|
|
|
13,500
|
|
Accrued interest on
Convertible Notes that will be paid in-kind on September 30,
2023
|
|
|
6,464
|
|
Less: Cash
|
|
|
(5,584)
|
|
Adjusted net debt
|
|
$
|
191,165
|
|
Reconciliation of
Adjusted Net Debt to Reported Long-Term Debt:
|
|
|
|
|
|
(in thousands)
|
|
June 30, 2023
|
|
Adjusted net
debt
|
|
$
|
191,165
|
|
Add back:
|
|
|
|
|
Cash
|
|
|
5,584
|
|
Long-term portion of
finance lease obligations
|
|
|
1,757
|
|
Less:
|
|
|
|
|
Debt discount and
issuance costs, net of amortization
|
|
|
(36,807)
|
|
Issuance of additional
Convertible Notes for PIK interest due on September 30,
2023
|
|
|
(6,464)
|
|
Total reported long-term debt
|
|
$
|
155,235
|
|
Reconciliation of
Net (Loss) Income to Adjusted Net (Loss) Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
March 31,
|
|
|
June 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
|
2023
|
|
2022
|
|
|
Amount
|
|
Amount
|
|
Amount
|
|
|
Amount
|
|
Amount
|
|
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(4,161)
|
|
$
|
(2,791)
|
|
$
|
12
|
|
|
$
|
(4,149)
|
|
$
|
(61,587)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on
disposition of assets, net (1)
|
|
|
2,007
|
|
|
(582)
|
|
|
(14)
|
|
|
|
1,993
|
|
|
(1,098)
|
|
Amortization of debt
discount and issuance costs - Convertible Notes
|
|
|
1,168
|
|
|
1,980
|
|
|
2,378
|
|
|
|
3,546
|
|
|
1,980
|
|
Loss on extinguishment
of debt (2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
46,347
|
|
Change in fair value of
embedded derivative liability (3)
|
|
|
—
|
|
|
2,408
|
|
|
—
|
|
|
|
—
|
|
|
4,265
|
|
Gain on extinguishment
of derivative (4)
|
|
|
—
|
|
|
(10,765)
|
|
|
—
|
|
|
|
—
|
|
|
(10,765)
|
|
Adjusted net (loss) income -
Basic
|
|
$
|
(986)
|
|
$
|
(9,750)
|
|
$
|
2,376
|
|
|
$
|
1,390
|
|
$
|
(20,858)
|
|
Add back dilutive
effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax interest
expense of Convertible Notes
|
|
|
—
|
|
|
—
|
|
|
4,622
|
|
|
|
—
|
|
|
—
|
|
Adjusted net (loss) income -
Diluted
|
|
$
|
(986)
|
|
$
|
(9,750)
|
|
$
|
6,998
|
|
|
$
|
1,390
|
|
$
|
(20,858)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net (loss) income per share -
Basic
|
|
$
|
(0.07)
|
|
$
|
(0.72)
|
|
$
|
0.17
|
|
|
$
|
0.10
|
|
$
|
(1.67)
|
|
Adjusted net (loss) income per share -
Diluted
|
|
$
|
(0.07)
|
|
$
|
(0.72)
|
|
$
|
0.14
|
|
|
$
|
0.10
|
|
$
|
(1.67)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
- Basic
|
|
|
14,050
|
|
|
13,590
|
|
|
13,865
|
|
|
|
13,951
|
|
|
12,453
|
|
Weighted average number of common shares outstanding
- Diluted
|
|
|
14,050
|
|
|
13,590
|
|
|
51,642
|
|
|
|
13,983
|
|
$
|
12,453
|
|
Reconciliation of
Net Income (Loss) to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
March 31,
|
|
|
June 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
|
2023
|
|
2022
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(4,161)
|
|
$
|
(2,791)
|
|
$
|
12
|
|
|
$
|
(4,149)
|
|
$
|
(61,587)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
(197)
|
|
|
2,199
|
|
|
(2)
|
|
|
|
(199)
|
|
|
1,479
|
|
Interest
expense
|
|
|
8,251
|
|
|
8,232
|
|
|
8,719
|
|
|
|
16,970
|
|
|
12,907
|
|
Depreciation and
amortization
|
|
|
11,405
|
|
|
9,848
|
|
|
10,854
|
|
|
|
22,259
|
|
|
19,599
|
|
EBITDA
|
|
|
15,298
|
|
|
17,488
|
|
|
19,583
|
|
|
|
34,881
|
|
|
(27,602)
|
|
Loss (gain) on
disposition of assets, net (1)
|
|
|
2,007
|
|
|
(582)
|
|
|
(14)
|
|
|
|
1,993
|
|
|
(1,098)
|
|
Stock-based and
deferred compensation cost
|
|
|
1,346
|
|
|
674
|
|
|
1,838
|
|
|
|
3,184
|
|
|
1,651
|
|
Loss on extinguishment
of debt (2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
46,347
|
|
Change in fair value of
embedded derivative liability (3)
|
|
|
—
|
|
|
2,408
|
|
|
—
|
|
|
|
—
|
|
|
4,265
|
|
Gain on extinguishment
of derivative (4)
|
|
|
—
|
|
|
(10,765)
|
|
|
—
|
|
|
|
—
|
|
|
(10,765)
|
|
Adjusted EBITDA
|
|
$
|
18,651
|
|
$
|
9,223
|
|
$
|
21,407
|
|
|
$
|
40,058
|
|
$
|
12,798
|
|
|
|
|
|
|
|
|
(1)
|
Loss or gain on
disposition of assets, net represents recognition of the sale or
disposition of miscellaneous drilling equipment in each respective
period.
|
|
|
|
(2)
|
Loss on extinguishment
of debt in the six months ended June 30, 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.
|
|
|
|
(3)
|
Represents the change
in fair value of embedded derivative liability between March 31,
2022 and June 8, 2022 and March 18, 2022 and June 8, 2022,
respectively. The embedded derivative liability was
extinguished on June 8, 2022.
|
|
|
|
(4)
|
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.
