HOUSTON, Nov. 1, 2023
/PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company"
or "ICD") (NYSE: ICD) today reported financial results for the
three months ended September 30, 2023.
Third quarter 2023 Highlights
- Net loss, as defined below, of $7.6
million, or $0.54 per
share
- Adjusted net loss, as defined below, of $5.2 million, or $0.37 per share
- Adjusted EBITDA, as defined below, of $12.9 million
- Adjusted net debt, as defined below, of $183.2 million
- 13.4 average rigs working during the quarter
- Fully burdened margin per day of $14,005
In the third quarter of 2023, the Company reported revenues of
$44.2 million, net loss of
$7.6 million, or $0.54 per share, adjusted net loss (defined
below) of $5.2 million, or
$0.37 per share, and adjusted EBITDA
(defined below) of $12.9
million. These results compare to revenues of
$49.1 million, a net loss of
$7.2 million, or $0.53 per share, adjusted net loss of
$4.8 million, or $0.35 per share, and adjusted EBITDA of
$12.5 million in the third quarter of
2022, and revenues of $56.4 million,
net loss of $4.2 million, or
$0.30 per share, adjusted net loss of
$1.0 million, or $0.07 per share, and adjusted EBITDA of
$18.7 million in the second quarter
of 2023.
Chief Executive Officer Anthony
Gallegos commented, "The third quarter of 2023 represented
an inflection point for ICD. First and most important, the
third quarter represents the low point for ICD operating
utilization driven by the most recent commodity downturn. The
quarter also represented the end of the transition of rigs from our
Haynesville to our Permian market and the elevated rig churn
associated with repositioning our fleet with customers with longer
term drilling programs. While these items weighed on our
second and third quarter financial results, we believe the
transition of rigs between basins and customers has positioned ICD
well for the remainder of 2023 and fiscal 2024.
During the third quarter, we saw increased opportunities for
incremental rig reactivations beginning in the fourth quarter of
2023. From these opportunities we have secured contract
awards for two incremental rigs commencing mid-fourth quarter, and
we are pursuing additional reactivation opportunities for late
fourth quarter and early 2024 start. While we are
experiencing increased competition and associated dayrate pressure
on these early-cycle reactivations, ICD's success so far is being
driven by increased demand for rigs with our 300 series
specifications. In this regard, we completed two additional
200-to-300 series conversions during the third quarter, have
already completed a third conversion in the fourth quarter, and are
working on additional contract opportunities that would justify
additional conversions over the next three to six months.
I am also pleased that we continued making progress toward our
debt reduction goals during the third quarter, repaying an
additional $5.0 million of principal
on our convertible notes at quarter end, and reducing overall
adjusted net debt by $8.0
million."
Quarterly Operational Results
In the third quarter of 2023, operating days decreased
sequentially by 10% compared to the second quarter of 2023.
The Company's marketed fleet operated at 51% utilization and
recorded 1,229 revenue days, compared to 1,601 revenue days in the
third quarter of 2022, and 1,369 revenue days in the second quarter
of 2023. During the third and second quarter of 2023, the Company
also recognized early termination revenue of approximately
$0.7 million and $5.1 million, respectively.
Operating revenues in the third quarter of 2023 totaled
$44.2 million, compared to
$49.1 million in the third quarter of
2022 and $56.4 million in the second
quarter of 2023. Revenue per day in the third quarter of 2023
was $32,925, compared to $28,646 in the third quarter of 2022 and
$34,467 in the second quarter of
2023. Revenue per day statistics exclude early termination
revenue recognized during the quarter.
Operating costs in the third quarter of 2023 totaled
$27.5 million, compared to
$31.4 million in the third quarter of
2022 and $33.8 million in the second
quarter of 2023. Fully burdened operating costs were
$18,920 per day in the third quarter
of 2023, compared to $17,305 in the
third quarter of 2022 and $19,005 in
the second quarter of 2023. Reported cost per day excludes
Haynesville-to-Permian rig transition costs of approximately
$0.8 million and $2.8 million in the third and second quarter of
2023, respectively.
Fully burdened rig operating margins in the third quarter of
2023 were $14,005 per day, compared
to $11,341 per day in the third
quarter of 2022 and $15,462 per day
in the second quarter of 2023. The Company currently expects
per day operating margins in the fourth quarter of 2023 to fall
approximately 14% sequentially driven primarily by lower average
dayrates as rigs recontract in the current market environment and
higher costs associated with reactivation expenses.
Selling, general and administrative expenses in the third
quarter of 2023 were $6.9 million
(including $2.0 million of non-cash
compensation), compared to $7.0
million (including $1.7
million of non-cash compensation) in the third quarter of
2022 and $5.2 million (including
$1.3 million of non-cash
compensation) in the second quarter of 2023. Cash selling,
general and administrative expenses increased sequentially due to a
$1.1 million charge associated with
modification and extension of an existing drilling contract with a
customer, which has been excluded in the Company's calculation of
adjusted net loss per share and adjusted EBITDA.
During the third quarter of 2023, the Company recorded interest
expense of $9.2 million, including
$2.4 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 loss. During the third 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 approximately 14.5
average rigs during the fourth quarter of 2023 and exit 2023 with
17 to 18 rigs under contract. The Company's backlog of
drilling contracts with original terms of six months or longer is
$46.8 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 third quarter of
2023, net of asset sales and recoveries, were $3.9 million.
As of September 30, 2023, the Company had cash on hand
of $6.0 million and a revolving line
of credit with availability of $15.7
million, and net working capital of $5.8 million. The Company reported adjusted net
debt as of September 30, 2023 of $183.2 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, November 1, 2023, at 11:00
a.m. Central Time (12:00 p.m. Eastern
Time) to discuss the Company's third 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 5494884.
The replay will be available until November
8, 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
|
|
|
|
|
|
|
|
|
|
September 30, 2023
|
|
December 31, 2022
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
6,044
|
|
$
|
5,326
|
|
Accounts
receivable
|
|
|
26,874
|
|
|
39,775
|
|
Inventories
|
|
|
1,877
|
|
|
1,508
|
|
Assets held for
sale
|
|
|
—
|
|
|
325
|
|
Prepaid expenses and
other current assets
|
|
|
1,854
|
|
|
4,736
|
|
Total current
assets
|
|
|
36,649
|
|
|
51,670
|
|
Property, plant and
equipment, net
|
|
|
366,263
|
|
|
376,084
|
|
Other long-term assets,
net
|
|
|
3,199
|
|
|
1,960
|
|
Total
assets
|
|
$
|
406,111
|
|
$
|
429,714
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current portion of
long-term debt (1)
|
|
$
|
1,405
|
|
$
|
2,485
|
|
Accounts
payable
|
|
|
17,275
|
|
|
31,946
|
|
Accrued
liabilities
|
|
|
12,128
|
|
|
17,608
|
|
Total current
liabilities
|
|
|
30,808
|
|
|
52,039
|
|
Long-term debt, net
(2)
|
|
|
156,336
|
|
|
143,223
|
|
Deferred income taxes,
net
|
|
|
10,869
|
|
|
12,266
|
|
Other long-term
liabilities
|
|
|
1,642
|
|
|
7,474
|
|
Total
liabilities
|
|
|
199,655
|
|
|
215,002
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value, 250,000,000 shares authorized; 14,169,942 and 13,698,851
shares issued, respectively, and 14,084,850 and 13,613,759 shares
outstanding, respectively
|
|
|
141
|
|
|
136
|
|
Additional paid-in
capital
|
|
|
621,092
|
|
|
617,606
|
|
Accumulated
deficit
|
|
|
(410,844)
|
|
|
(399,097)
|
|
Treasury stock, at
cost, 85,092 shares and 85,092 shares, respectively
|
|
|
(3,933)
|
|
|
(3,933)
|
|
Total stockholders'
equity
|
|
|
206,456
|
|
|
214,712
|
|
Total liabilities and
stockholders' equity
|
|
$
|
406,111
|
|
$
|
429,714
|
|
____________________
|
|
(1) As of September 30, 2023
and December 31, 2022, current portion of long-term debt includes
$1.4 million and $2.5 million, respectively, of finance lease
obligations.
|
|
(2) As of
September 30, 2023 and December 31, 2022,
long-term debt includes $1.5 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
|
|
Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
44,164
|
|
$
|
49,147
|
|
$
|
56,356
|
|
$
|
164,276
|
|
$
|
126,451
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
27,494
|
|
|
31,379
|
|
|
33,827
|
|
|
98,781
|
|
|
87,448
|
|
Selling, general and
administrative
|
|
|
6,865
|
|
|
7,007
|
|
|
5,224
|
|
|
18,816
|
|
|
17,096
|
|
Depreciation and
amortization
|
|
|
10,229
|
|
|
10,120
|
|
|
11,405
|
|
|
32,488
|
|
|
29,719
|
|
Asset impairment,
net
|
|
|
250
|
|
|
—
|
|
|
—
|
|
|
250
|
|
|
—
|
|
(Gain) loss on
disposition of assets, net
|
|
|
(1,454)
|
|
|
433
|
|
|
2,007
|
|
|
539
|
|
|
(665)
|
|
Total costs and
expenses
|
|
|
43,384
|
|
|
48,939
|
|
|
52,463
|
|
|
150,874
|
|
|
133,598
|
|
Operating income
(loss)
|
|
|
780
|
|
|
208
|
|
|
3,893
|
|
|
13,402
|
|
|
(7,147)
|
|
Interest
expense
|
|
|
(9,222)
|
|
|
(8,098)
|
|
|
(8,251)
|
|
|
(26,192)
|
|
|
(21,005)
|
|
Loss on extinguishment
of debt
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46,347)
|
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,265)
|
|
Realized gain on
extinguishment of derivative
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,765
|
|
Loss before income
taxes
|
|
|
(8,442)
|
|
|
(7,890)
|
|
|
(4,358)
|
|
|
(12,790)
|
|
|
(67,999)
|
|
Income tax (benefit)
expense
|
|
|
(844)
|
|
|
(696)
|
|
|
(197)
|
|
|
(1,044)
|
|
|
783
|
|
Net loss
|
|
$
|
(7,598)
|
|
$
|
(7,194)
|
|
$
|
(4,161)
|
|
$
|
(11,746)
|
|
$
|
(68,782)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.54)
|
|
$
|
(0.53)
|
|
$
|
(0.30)
|
|
$
|
(0.84)
|
|
$
|
(5.36)
|
|
Weighted average number
of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
14,071
|
|
|
13,590
|
|
|
14,050
|
|
|
13,992
|
|
|
12,836
|
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in
thousands)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
2023
|
|
2022
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,746)
|
|
$
|
(68,782)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
32,488
|
|
|
29,719
|
|
Asset impairment,
net
|
|
|
250
|
|
|
—
|
|
Stock-based
compensation
|
|
|
4,639
|
|
|
2,976
|
|
Loss (gain) on
disposition of assets, net
|
|
|
539
|
|
|
(665)
|
|
Non-cash interest
expense
|
|
|
18,202
|
|
|
15,859
|
|
Non-cash loss on
extinguishment of debt
|
|
|
—
|
|
|
46,347
|
|
Amortization of
deferred financing costs
|
|
|
83
|
|
|
320
|
|
Amortization of
Convertible Notes debt discount and issuance costs
|
|
|
5,967
|
|
|
4,310
|
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
4,265
|
|
Gain on extinguishment
of derivative
|
|
|
—
|
|
|
(10,765)
|
|
Deferred income
taxes
|
|
|
(1,397)
|
|
|
354
|
|
Credit loss
expense
|
|
|
1,177
|
|
|
256
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
11,724
|
|
|
(12,012)
|
|
Inventories
|
|
|
(419)
|
|
|
(291)
|
|
Prepaid expenses and
other assets
|
|
|
1,330
|
|
|
2,098
|
|
Accounts payable and
accrued liabilities
|
|
|
(9,289)
|
|
|
208
|
|
Net cash provided by
operating activities
|
|
|
53,548
|
|
|
14,197
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment
|
|
|
(36,635)
|
|
|
(22,286)
|
|
Proceeds from the sale
of assets
|
|
|
3,135
|
|
|
2,749
|
|
Net cash used in
investing activities
|
|
|
(33,500)
|
|
|
(19,537)
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
Proceeds from issuance
of Convertible Notes
|
|
|
—
|
|
|
157,500
|
|
Payments to redeem
Convertible Notes
|
|
|
(10,000)
|
|
|
—
|
|
Repayments under Term
Loan Facility
|
|
|
—
|
|
|
(139,076)
|
|
Borrowings under
Revolving ABL Credit Facility
|
|
|
23,540
|
|
|
1,576
|
|
Repayments under
Revolving ABL Credit Facility
|
|
|
(30,351)
|
|
|
(28)
|
|
Payment of merger
consideration
|
|
|
—
|
|
|
(2,902)
|
|
Proceeds from issuance
of common stock through at-the-market facility, net of issuance
costs
|
|
|
(34)
|
|
|
3,038
|
|
Taxes paid for vesting
of RSUs
|
|
|
(389)
|
|
|
(32)
|
|
Convertible Notes
issuance costs
|
|
|
—
|
|
|
(7,230)
|
|
Financing costs paid
under Revolving ABL Credit Facility
|
|
|
—
|
|
|
(266)
|
|
Payments for finance
lease obligations
|
|
|
(2,096)
|
|
|
(3,814)
|
|
Net cash (used in)
provided by financing activities
|
|
|
(19,330)
|
|
|
8,766
|
|
Net increase in cash
and cash equivalents
|
|
|
718
|
|
|
3,426
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
Beginning of
period
|
|
|
5,326
|
|
|
4,140
|
|
End of
period
|
|
$
|
6,044
|
|
$
|
7,566
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
1,940
|
|
$
|
4,745
|
|
Cash paid during the
period for taxes
|
|
$
|
739
|
|
$
|
—
|
|
Supplemental disclosure of non-cash investing and
financing activities
|
|
|
|
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
|
$
|
(11,806)
|
|
$
|
9,015
|
|
Additions to property,
plant and equipment through finance leases
|
|
$
|
1,482
|
|
$
|
3,250
|
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
|
$
|
(324)
|
|
$
|
(163)
|
|
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
September 30, 2023 and 2022 and June 30, 2023 and the nine months ended
September 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
|
|
Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed rigs
end of period (1)
|
|
|
26
|
|
|
|
26
|
|
|
|
26
|
|
|
|
26
|
|
|
|
26
|
|
|
Rig operating days
(2)
|
|
|
1,229
|
|
|
|
1,601
|
|
|
|
1,369
|
|
|
|
4,341
|
|
|
|
4,604
|
|
|
Average number of
operating rigs (3)
|
|
|
13.4
|
|
|
|
17.4
|
|
|
|
15.0
|
|
|
|
15.9
|
|
|
|
16.9
|
|
|
Rig utilization
(4)
|
|
|
51
|
%
|
|
|
70
|
%
|
|
|
58
|
%
|
|
|
61
|
%
|
|
|
69
|
%
|
|
Average revenue per
operating day (5)
|
|
$
|
32,925
|
|
|
$
|
28,646
|
|
|
$
|
34,467
|
|
|
$
|
34,193
|
|
|
$
|
25,216
|
|
|
Average cost per
operating day (6)
|
|
$
|
18,920
|
|
|
$
|
17,305
|
|
|
$
|
19,005
|
|
|
$
|
19,061
|
|
|
$
|
16,452
|
|
|
Average rig margin per
operating day
|
|
$
|
14,005
|
|
|
$
|
11,341
|
|
|
$
|
15,462
|
|
|
$
|
15,131
|
|
|
$
|
8,764
|
|
|
____________________
|
|
(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 September 30, 2023 and 2022 and
June 30, 2023, there were 92.3, 4.6 and 97.9 operating
days in which we earned revenue on a standby basis,
respectively. During the nine months ended
September 30, 2023 and 2022, there were 204.8 and 27.8
operating days in which we earned revenue on a standby basis,
respectively. During the three and nine months ended September 30,
2023, the Company recognized $0.7 million and $5.9 million of early
termination revenue, respectively.
|
|
|
(3) Average
number of operating rigs is calculated by dividing the total number
of rig operating days in the period by the total number of calendar
days in the period.
|
|
|
(4) Rig
utilization is calculated as rig operating days divided by the
total number of days the Company's marketed drilling rigs are
available during the applicable period.
|
|
|
(5) Average
revenue per operating day represents total contract drilling
revenues earned during the period divided by rig operating days in
the period. Excluded in calculating average revenue per
operating day are revenues associated with the reimbursement of (i)
out-of-pocket costs paid by customers of $3.0 million, $3.3 million
and $4.0 million during the three months ended
September 30, 2023 and 2022, and June 30, 2023,
respectively and $10.0 million and $10.3 million during the nine
months ended September 30, 2023 and 2022, respectively
and (ii) early termination revenues of $0.7 million and $5.1
million during the three months ended September 30, 2023
and June 30, 2023, respectively, and $5.9 million during the nine
months ended September 30, 2023. There were no
early termination revenues during the three and nine months ended
September 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 $3.0
million, $3.3 million and $4.0 million during the three months
ended September 30, 2023 and 2022, and
June 30, 2023, respectively, and $10.0 million and $10.3
million during the nine months ended September 30, 2023
and 2022; (ii) overhead costs of $0.4 million, $0.4 million and
$0.9 million during the three months ended
September 30, 2023 and 2022, and June 30, 2023,
respectively, and $1.8 million and $1.4 million during the nine
months ended September 30, 2023 and 2022; and (iii) rig
decommissioning and transition costs between basins of $0.8
million, zero and $2.8 million during the three months ended
September 30, 2023 and 2022 and June 30, 2023,
respectively, and $4.3 million and zero during the nine months
ended September 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)
|
|
September 30, 2023
|
|
Convertible
Notes
|
|
$
|
184,209
|
|
Revolving ABL Credit
Facility
|
|
|
5,000
|
|
Less: Cash
|
|
|
(6,044)
|
|
Adjusted net debt
|
|
$
|
183,165
|
|
|
Reconciliation of
Adjusted Net Debt to Reported Long-Term Debt:
|
|
|
|
|
|
(in thousands)
|
|
September 30, 2023
|
|
Adjusted net
debt
|
|
$
|
183,165
|
|
Add back:
|
|
|
|
|
Cash
|
|
|
6,044
|
|
Long-term portion of
finance lease obligations
|
|
|
1,514
|
|
Less:
|
|
|
|
|
Debt discount and
issuance costs, net of amortization
|
|
|
(34,387)
|
|
Total reported long-term debt
|
|
$
|
156,336
|
|
Reconciliation of
Net Loss to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
|
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
|
2023
|
|
2022
|
|
|
Amount
|
|
Amount
|
|
Amount
|
|
|
Amount
|
|
Amount
|
|
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,598)
|
|
$
|
(7,194)
|
|
$
|
(4,161)
|
|
|
$
|
(11,746)
|
|
$
|
(68,782)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment, net
(1)
|
|
|
250
|
|
|
—
|
|
|
—
|
|
|
|
250
|
|
|
—
|
|
(Gain) loss on
disposition of assets, net (2)
|
|
|
(1,454)
|
|
|
433
|
|
|
2,007
|
|
|
|
539
|
|
|
(665)
|
|
Amortization of debt
discount and issuance costs - Convertible Notes
|
|
|
2,420
|
|
|
1,960
|
|
|
1,168
|
|
|
|
5,967
|
|
|
3,940
|
|
Loss on extinguishment
of debt (3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
46,347
|
|
Change in fair value of
embedded derivative liability (4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
4,265
|
|
Gain on extinguishment
of derivative (5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(10,765)
|
|
Charge related to
contract modification (6)
|
|
|
1,147
|
|
|
—
|
|
|
—
|
|
|
|
1,147
|
|
|
—
|
|
Adjusted net loss
|
|
$
|
(5,235)
|
|
$
|
(4,801)
|
|
$
|
(986)
|
|
|
$
|
(3,843)
|
|
$
|
(25,660)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net loss per share
|
|
$
|
(0.37)
|
|
$
|
(0.35)
|
|
$
|
(0.07)
|
|
|
$
|
(0.27)
|
|
$
|
(2.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Loss to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
|
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
|
2023
|
|
2022
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,598)
|
|
$
|
(7,194)
|
|
$
|
(4,161)
|
|
|
$
|
(11,746)
|
|
$
|
(68,782)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
(844)
|
|
|
(696)
|
|
|
(197)
|
|
|
|
(1,044)
|
|
|
783
|
|
Interest
expense
|
|
|
9,222
|
|
|
8,098
|
|
|
8,251
|
|
|
|
26,192
|
|
|
21,005
|
|
Depreciation and
amortization
|
|
|
10,229
|
|
|
10,120
|
|
|
11,405
|
|
|
|
32,488
|
|
|
29,719
|
|
Asset impairment, net
(1)
|
|
|
250
|
|
|
—
|
|
|
—
|
|
|
|
250
|
|
|
—
|
|
EBITDA
|
|
|
11,259
|
|
|
10,328
|
|
|
15,298
|
|
|
|
46,140
|
|
|
(17,275)
|
|
(Gain) loss on
disposition of assets, net (2)
|
|
|
(1,454)
|
|
|
433
|
|
|
2,007
|
|
|
|
539
|
|
|
(665)
|
|
Stock-based and
deferred compensation cost
|
|
|
1,953
|
|
|
1,709
|
|
|
1,346
|
|
|
|
5,137
|
|
|
3,361
|
|
Loss on extinguishment
of debt (3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
46,347
|
|
Change in fair value of
embedded derivative liability (4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
4,265
|
|
Gain on extinguishment
of derivative (5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(10,765)
|
|
Charge related to
contract modification (6)
|
|
|
1,147
|
|
|
—
|
|
|
—
|
|
|
|
1,147
|
|
|
—
|
|
Adjusted EBITDA
|
|
$
|
12,905
|
|
$
|
12,470
|
|
$
|
18,651
|
|
|
$
|
52,963
|
|
$
|
25,268
|
|
____________________
|
|
(1) Asset
impairment, net, represents impairment of a damaged piece of
drilling equipment, net of insurance recoveries.
|
|
|
(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 nine months ended September 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.
|
|
|
(4)
Represents the change in fair value of embedded derivative
liability between March 18, 2022 and June 8, 2022. 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.
|
|
|
(6)
Represents a contract modification and extension with a
customer.
|
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.
