HOUSTON, Feb. 28,
2024 /PRNewswire/ -- Independence Contract
Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today reported
financial results for the three and twelve months ended
December 31, 2023.
Fourth quarter 2023 Highlights
- Net loss of $26.0 million, or
$1.84 per share
- Adjusted net loss, as defined below, of $8.6 million, or $0.61 per share
- Adjusted EBITDA, as defined below, of $9.9 million, including $2.1 million of costs associated with rig
reactivations and transitions
- Adjusted net debt, as defined below, of $179.1 million
- 14.9 average rigs working during the quarter
- Fully burdened margin per day of $12,313
In the fourth quarter of 2023, the Company reported revenues of
$45.8 million, net loss of
$26.0 million, or $1.84 per share, adjusted net loss (defined
below) of $8.6 million, or
$0.61 per share, and adjusted EBITDA
(defined below) of $9.9
million. These results compare to 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, and revenues of $44.2
million, net loss of $7.6
million, or $0.54 per share,
adjusted net loss of $5.2 million, or
$0.37 per share, and adjusted EBITDA
of $12.9 million in the third quarter
of 2023.
For the year ended December 31,
2023, the Company reported revenues of $210.1 million, a net loss of $37.7 million, or $2.69 per share, an adjusted net loss of
$12.5 million, or $0.89 per share, and adjusted EBITDA of
$62.8 million. This compares to
revenues of $186.7 million, a net
loss of $65.3 million, or
$5.01 per share, an adjusted net loss
of $25.7 million, or $1.98 per share, and adjusted EBITDA of
$43.8 million for the year ended
December 31, 2022.
Chief Executive Officer Anthony
Gallegos commented, "In spite of the market headwinds in
2023 associated with a declining overall rig count in our target
markets, fiscal 2023 represented a period of significant
accomplishments for ICD. In the Permian basin, while the
overall rig count in this basin declined 15% in 2023, ICD grew its
Permian rig count by more than 40% as we successfully transitioned
a substantial portion of our Haynesville rigs into this market
during the year. Our backlog of term contracts also increased
at year end as we recently signed several attractive contracts with
Permian operators, including two multi-year contracts.
During fiscal 2023, we also accelerated our 200-to-300 Series
conversion program, delivering four conversions during the year and
completing a fifth in January of 2024. Today, we only have
one operating 200 Series rig that has not yet been converted, and
we have budgeted for that conversion to occur later in 2024
depending upon customer requirements. On the technology side,
as we exited 2023, over half of our operating rigs were earning
revenue from some sort of technology bundle, and based upon
customer demand, we expect this percentage to increase during
2024.
Looking forward into 2024, we expect to see more opportunities
for ICD to drive incremental demand for our drilling rigs, even in
an overall flat rig count in our target markets. Near term
rig reactivations will likely be limited to rig replacement
opportunities in the Permian basin, but we will also continue to
evaluate opportunities in adjacent markets. With the
expectations for a flatter near-term environment, we have
compressed our 2024 capital expenditure budget, net of disposals,
to $18.2 million, and our cash
SG&A budget to $15.3
million. Strategically, although our Convertible Notes
do not mature until March 2026, the
refinancing window for these Convertible Notes will open later this
year, and we want to be proactive in starting the process to begin
reviewing potential refinancing and other strategic
opportunities. Thus, our Board has appointed a special
committee of independent directors to begin this review and
evaluation process."
Quarterly Operational Results
In the fourth quarter of 2023, operating days increased
sequentially by 11% compared to the third quarter of 2023.
The Company's marketed fleet operated at 57% utilization and
recorded 1,370 revenue days, compared to 1,704 revenue days in the
fourth quarter of 2022, and 1,229 revenue days in the third quarter
of 2023. During the third quarter of 2023, the Company also
recognized early termination revenue of approximately $0.7 million. There was no early
termination revenue recognized during the fourth quarter of 2023 or
the fourth quarter of 2022.
Operating revenues in the fourth quarter of 2023 totaled
$45.8 million, compared to
$60.3 million in the fourth quarter
of 2022 and $44.2 million in the
third quarter of 2023. Revenue per day in the fourth quarter
of 2023 was $31,508, compared to
$32,778 in the fourth quarter of 2022
and $32,925 in the third quarter of
2023. Sequential decreases in revenue per day were primarily
due to expiration and repricing of higher dayrate term contracts
originally entered into during fiscal 2022. Revenue per day
statistics exclude early termination revenue recognized during the
quarter.
Operating costs in the fourth quarter of 2023 totaled
$31.5 million, compared to
$36.0 million in the fourth quarter
of 2022 and $27.5 million in the
third quarter of 2023. Fully burdened operating costs were
$19,195 per day in the fourth quarter
of 2023, compared to $18,261 in the
fourth quarter of 2022 and $18,920 in
the third quarter of 2023. Reported cost per day excludes
reactivation costs of $2.1 million in
the fourth quarter of 2023 and Haynesville-to-Permian rig
transition costs of approximately $0.8
million in the third quarter of 2023. There were no
reactivation costs or rig transition costs in the fourth quarter of
2022.
Fully burdened rig operating margins in the fourth quarter of
2023 were $12,313 per day, compared
to $14,517 per day in the fourth
quarter of 2022 and $14,005 per day
in the third quarter of 2023. The Company currently expects
per day operating margins in the first quarter of 2024 to fall
approximately 12% to 14% sequentially driven primarily by lower
average dayrates as rigs recontract in the current market
environment.
Selling, general and administrative expenses in the fourth
quarter of 2023 were $5.7 million
(including $1.2 million of non-cash
compensation), compared to $7.7
million (including $1.9
million of non-cash compensation) in the fourth quarter of
2022 and $6.9 million (including
$2.0 million of non-cash
compensation) in the third quarter of 2023. Cash selling,
general and administrative expenses decreased sequentially due to a
$1.1 million charge in the third
quarter of 2023 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 fourth quarter of 2023, the Company recorded interest
expense of $9.8 million, including
$2.6 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 fourth quarter
of 2023, the Company redeemed $5.0
million of Convertible Notes at par plus accrued
interest.
During the fourth quarter of 2023, the Company reviewed its idle
equipment and recorded an impairment charge of $14.7 million associated with equipment and
capital spares that it determined would no longer be utilized by
the Company's marketed fleet of 26 rigs.
Drilling Operations Update
The Company currently expects to operate approximately 15 net
average rigs during the first quarter of 2024, with several rigs
transitioning between customers during the quarter. The
Company's backlog of drilling contracts with original terms of six
months or longer is $82.9
million. Approximately 75% of this backlog expires in
2024. 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 fourth quarter of
2023, net of asset sales and recoveries, were $2.7 million. The Company's capital
expenditure budget for 2024, net of disposals, is approximately
$18.2 million.
As of December 31, 2023, the Company had cash on hand
of $5.6 million and a revolving line
of credit with availability of $20.6
million, and net working capital of $3.0 million. The Company reported adjusted net
debt as of December 31, 2023 of $179.1 million, consisting of the full amount of
the outstanding Convertible Notes and outstanding borrowings under
the Company's revolving line of credit.
The refinancing window under the Indenture governing the
Company's PIK Toggle Convertible Notes due 2026 opens September 18, 2024. In this regard, ICD's
Board of Directors has decided to initiate a formal review process
to begin evaluating alternatives with respect to refinancing these
Convertible Notes and any other strategic opportunities that
present themselves in connection with this evaluation and has
formed a committee of independent directors for that purpose.
There can be no assurance that this process will result in the
Company pursuing any particular transaction or strategic
outcome.
Conference Call Details
A conference call for investors will be held today, February 28, 2024, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's
fourth quarter and year end 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 4798268.
The replay will be available until February
28, 2024.
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
|
|
|
|
December 31, 2023
|
|
December 31, 2022
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
5,565
|
|
$
|
5,326
|
|
Accounts
receivable
|
|
|
31,695
|
|
|
39,775
|
|
Inventories
|
|
|
1,557
|
|
|
1,508
|
|
Assets held for
sale
|
|
|
—
|
|
|
325
|
|
Prepaid expenses and
other current assets
|
|
|
4,759
|
|
|
4,736
|
|
Total current
assets
|
|
|
43,576
|
|
|
51,670
|
|
Property, plant and
equipment, net
|
|
|
348,193
|
|
|
376,084
|
|
Other long-term assets,
net
|
|
|
2,908
|
|
|
1,960
|
|
Total
assets
|
|
$
|
394,677
|
|
$
|
429,714
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current portion of
long-term debt (1)
|
|
$
|
1,226
|
|
$
|
2,485
|
|
Accounts
payable
|
|
|
22,990
|
|
|
31,946
|
|
Accrued
liabilities
|
|
|
16,371
|
|
|
17,608
|
|
Total current
liabilities
|
|
|
40,587
|
|
|
52,039
|
|
Long-term debt, net
(2)
|
|
|
154,549
|
|
|
143,223
|
|
Deferred income taxes,
net
|
|
|
9,761
|
|
|
12,266
|
|
Other long-term
liabilities
|
|
|
8,201
|
|
|
7,474
|
|
Total
liabilities
|
|
|
213,098
|
|
|
215,002
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value, 250,000,000 shares authorized; 14,523,124 and
13,698,851
shares issued,
respectively, and 14,425,864 and 13,613,759 shares outstanding,
respectively
|
|
|
144
|
|
|
136
|
|
Additional paid-in
capital
|
|
|
622,169
|
|
|
617,606
|
|
Accumulated
deficit
|
|
|
(436,794)
|
|
|
(399,097)
|
|
Treasury stock, at
cost, 97,260 shares and 85,092 shares, respectively
|
|
|
(3,940)
|
|
|
(3,933)
|
|
Total stockholders'
equity
|
|
|
181,579
|
|
|
214,712
|
|
Total liabilities and
stockholders' equity
|
|
$
|
394,677
|
|
$
|
429,714
|
|
|
|
|
|
|
|
|
|
(1)
|
As of December 31, 2023
and December 31, 2022, current portion of long-term debt includes
$1.2 million and $2.5 million, respectively, of finance lease
obligations.
|
|
|
|
(2)
|
As of December 31, 2023
and December 31, 2022, long-term debt includes $1.7 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
|
|
Year Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
45,830
|
|
$
|
60,259
|
|
$
|
44,164
|
|
$
|
210,106
|
|
$
|
186,710
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
31,472
|
|
|
35,950
|
|
|
27,494
|
|
|
130,253
|
|
|
123,399
|
|
Selling, general and
administrative
|
|
|
5,683
|
|
|
7,714
|
|
|
6,865
|
|
|
24,499
|
|
|
24,809
|
|
Depreciation and
amortization
|
|
|
11,055
|
|
|
10,724
|
|
|
10,229
|
|
|
43,543
|
|
|
40,443
|
|
Asset impairment,
net
|
|
|
14,655
|
|
|
350
|
|
|
250
|
|
|
14,905
|
|
|
350
|
|
(Gain) loss on
disposition of assets, net
|
|
|
(501)
|
|
|
469
|
|
|
(1,454)
|
|
|
38
|
|
|
(196)
|
|
Other
expense
|
|
|
585
|
|
|
—
|
|
|
—
|
|
|
585
|
|
|
—
|
|
Total costs and
expenses
|
|
|
62,949
|
|
|
55,207
|
|
|
43,384
|
|
|
213,823
|
|
|
188,805
|
|
Operating (loss)
income
|
|
|
(17,119)
|
|
|
5,052
|
|
|
780
|
|
|
(3,717)
|
|
|
(2,095)
|
|
Interest
expense
|
|
|
(9,763)
|
|
|
(8,570)
|
|
|
(9,222)
|
|
|
(35,955)
|
|
|
(29,575)
|
|
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
|
|
|
(26,882)
|
|
|
(3,518)
|
|
|
(8,442)
|
|
|
(39,672)
|
|
|
(71,517)
|
|
Income tax
benefit
|
|
|
(932)
|
|
|
(6,979)
|
|
|
(844)
|
|
|
(1,975)
|
|
|
(6,196)
|
|
Net (loss)
income
|
|
$
|
(25,950)
|
|
$
|
3,461
|
|
$
|
(7,598)
|
|
$
|
(37,697)
|
|
$
|
(65,321)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.84)
|
|
$
|
0.25
|
|
$
|
(0.54)
|
|
$
|
(2.69)
|
|
$
|
(5.01)
|
|
Diluted
|
|
$
|
(1.84)
|
|
$
|
0.20
|
|
$
|
(0.54)
|
|
$
|
(2.69)
|
|
$
|
(5.01)
|
|
Weighted average number
of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,072
|
|
|
13,617
|
|
|
14,071
|
|
|
14,012
|
|
|
13,026
|
|
Diluted
|
|
|
14,072
|
|
|
51,880
|
|
|
14,071
|
|
|
14,012
|
|
|
13,026
|
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in
thousands)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2023
|
|
2022
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,697)
|
|
$
|
(65,321)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
43,543
|
|
|
40,443
|
|
Asset impairment,
net
|
|
|
14,905
|
|
|
350
|
|
Stock-based
compensation
|
|
|
5,671
|
|
|
4,644
|
|
Loss (gain) on
disposition of assets, net
|
|
|
38
|
|
|
(196)
|
|
Non-cash interest
expense
|
|
|
25,029
|
|
|
15,859
|
|
Non-cash loss on
extinguishment of debt
|
|
|
—
|
|
|
46,347
|
|
Amortization of
deferred financing costs
|
|
|
111
|
|
|
346
|
|
Amortization of
Convertible Notes debt discount and issuance costs
|
|
|
8,534
|
|
|
6,714
|
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
4,265
|
|
Gain on extinguishment
of derivative
|
|
|
—
|
|
|
(10,765)
|
|
Deferred income
taxes
|
|
|
(2,505)
|
|
|
(6,771)
|
|
Non-cash cost to obtain
revenue contract
|
|
|
585
|
|
|
—
|
|
Credit loss
expense
|
|
|
1,177
|
|
|
256
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
6,318
|
|
|
(17,820)
|
|
Inventories
|
|
|
(249)
|
|
|
(365)
|
|
Prepaid expenses
and other assets
|
|
|
(1,380)
|
|
|
266
|
|
Accounts payable
and accrued liabilities
|
|
|
(3,058)
|
|
|
10,325
|
|
Net cash provided by
operating activities
|
|
|
61,022
|
|
|
28,577
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment
|
|
|
(40,655)
|
|
|
(43,047)
|
|
Proceeds from the sale
of assets
|
|
|
4,438
|
|
|
4,552
|
|
Proceeds from insurance
claims
|
|
|
—
|
|
|
191
|
|
Net cash used in
investing activities
|
|
|
(36,217)
|
|
|
(38,304)
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
Proceeds from issuance
of Convertible Notes
|
|
|
—
|
|
|
157,500
|
|
Payments to redeem
Convertible Notes
|
|
|
(15,000)
|
|
|
—
|
|
Repayments under Term
Loan Facility
|
|
|
—
|
|
|
(139,076)
|
|
Borrowings under
Revolving ABL Credit Facility
|
|
|
34,672
|
|
|
5,589
|
|
Repayments under
Revolving ABL Credit Facility
|
|
|
(40,983)
|
|
|
(78)
|
|
Payment of merger
consideration
|
|
|
—
|
|
|
(2,902)
|
|
Proceeds from issuance
of common stock through at-the-market facility, net of issuance
costs
|
|
|
—
|
|
|
3,038
|
|
Purchase of treasury
stock
|
|
|
(7)
|
|
|
(10)
|
|
Taxes paid for vesting
of RSUs
|
|
|
(668)
|
|
|
(10)
|
|
Convertible Notes
issuance costs
|
|
|
—
|
|
|
(6,986)
|
|
Financing costs paid
under Revolving ABL Credit Facility
|
|
|
—
|
|
|
(341)
|
|
Payments for finance
lease obligations
|
|
|
(2,580)
|
|
|
(5,811)
|
|
Net cash (used in)
provided by financing activities
|
|
|
(24,566)
|
|
|
10,913
|
|
Net increase in cash
and cash equivalents
|
|
|
239
|
|
|
1,186
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
Beginning of
year
|
|
|
5,326
|
|
|
4,140
|
|
End of year
|
|
$
|
5,565
|
|
$
|
5,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
2,358
|
|
$
|
5,084
|
|
Cash paid during the
period for taxes
|
|
$
|
804
|
|
$
|
—
|
|
Supplemental disclosure of non-cash investing and
financing activities
|
|
|
|
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
|
$
|
(8,093)
|
|
$
|
11,686
|
|
Additions to property,
plant and equipment through finance leases
|
|
$
|
2,161
|
|
$
|
4,440
|
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
|
$
|
(513)
|
|
$
|
(281)
|
|
Transfer of assets from
held and used to held for sale
|
|
$
|
—
|
|
$
|
(325)
|
|
Initial embedded
derivative liability upon issuance of Convertible Notes
|
|
$
|
—
|
|
$
|
75,733
|
|
Extinguishment of
embedded derivative liability
|
|
$
|
—
|
|
$
|
(69,232)
|
|
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
December 31, 2023 and 2022 and
September 30, 2023 and the year ended
December 31, 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
|
|
Year Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed rigs
end of period
|
|
|
26
|
|
|
|
26
|
|
|
|
26
|
|
|
|
26
|
|
|
|
26
|
|
|
Rig operating days
(1)
|
|
|
1,370
|
|
|
|
1,704
|
|
|
|
1,229
|
|
|
|
5,711
|
|
|
|
6,308
|
|
|
Average number of
operating rigs (2)
|
|
|
14.9
|
|
|
|
18.5
|
|
|
|
13.4
|
|
|
|
15.7
|
|
|
|
17.3
|
|
|
Rig utilization
(3)
|
|
|
57
|
%
|
|
|
71
|
%
|
|
|
51
|
%
|
|
|
60
|
%
|
|
|
70
|
%
|
|
Average revenue per
operating day (4)
|
|
$
|
31,508
|
|
|
$
|
32,778
|
|
|
$
|
32,925
|
|
|
$
|
33,548
|
|
|
$
|
27,258
|
|
|
Average cost per
operating day (5)
|
|
$
|
19,195
|
|
|
$
|
18,261
|
|
|
$
|
18,920
|
|
|
$
|
19,093
|
|
|
$
|
16,940
|
|
|
Average rig margin per
operating day
|
|
$
|
12,313
|
|
|
$
|
14,517
|
|
|
$
|
14,005
|
|
|
$
|
14,455
|
|
|
$
|
10,318
|
|
|
|
|
|
|
|
|
|
|
(1)
|
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
December 31, 2023 and 2022 and
September 30, 2023, there were 21.3, 3.1 and 92.3
operating days in which we earned revenue on a standby basis,
respectively. During the year ended
December 31, 2023 and 2022, there were 226.1 and 30.8
operating days in which we earned revenue on a standby basis,
respectively. During the three and twelve months ended December 31,
2023, the Company recognized $5.9 million of early termination
revenue. There was no early termination revenue recognized
during the twelve months ended December 31, 2022.
|
|
|
|
(2)
|
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.
|
|
|
|
(3)
|
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.
|
|
|
|
(4)
|
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 $2.7 million, $4.4 million
and $3.0 million during the three months ended
December 31, 2023 and 2022, and
September 30, 2023, respectively and $12.6 million and
$14.8 million during the year ended December 31, 2023 and
2022, respectively and (ii) early termination revenues of zero,
zero and $0.7 million three months ended
December 31, 2023 and 2022, and
September 30, 2023, respectively, and $5.9 million and
zero during the year ended December 31, 2023 and 2022,
respectively.
|
|
|
|
(5)
|
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 $2.7 million, $4.4
million and $3.0 million during the three months ended
December 31, 2023 and 2022, and
September 30, 2023, respectively, and $12.6 million and
$14.8 million during the year ended December 31, 2023 and
2022; (ii) overhead costs of $0.5 million, $0.4 million and $0.4
million during the three months ended December 31, 2023
and 2022, and September 30, 2023, respectively, and $2.2
million and $1.8 million during the year ended
December 31, 2023 and 2022; (iii) reactivation costs of
$2.1 million, zero and zero during the three months ended
December 31, 2023 and 2022, and
September 30, 2023, respectively, and $2.1 million and
zero during the year ended December 31, 2023 and 2022;
and (iv) rig decommissioning and transition costs between basins of
zero, zero and $0.8 million during the three months ended
December 31, 2023 and 2022 and
September 30, 2023, respectively, and $4.3 million and
zero during the year ended December 31, 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)
|
|
December 31, 2023
|
|
Convertible
Notes
|
|
$
|
179,209
|
|
Revolving ABL Credit
Facility
|
|
|
5,500
|
|
Less: Cash
|
|
|
(5,565)
|
|
Adjusted net debt
|
|
$
|
179,144
|
|
|
Reconciliation of
Adjusted Net Debt to Reported Long-Term Debt:
|
|
|
|
|
|
(in thousands)
|
|
December 31, 2023
|
|
Adjusted net
debt
|
|
$
|
179,144
|
|
Add back:
|
|
|
|
|
Cash
|
|
|
5,565
|
|
Long-term portion of
finance lease obligations
|
|
|
1,659
|
|
Less:
|
|
|
|
|
Debt discount and
issuance costs, net of amortization
|
|
|
(31,819)
|
|
Total reported long-term debt
|
|
$
|
154,549
|
|
Reconciliation of
Net (Loss) Income to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
September 30,
|
|
|
|
December 31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
|
|
2023
|
|
2022
|
|
|
Amount
|
|
Amount
|
|
Amount
|
|
|
|
Amount
|
|
Amount
|
|
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(25,950)
|
|
$
|
3,461
|
|
$
|
(7,598)
|
|
|
|
$
|
(37,697)
|
|
$
|
(65,321)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment, net
(1)
|
|
|
14,655
|
|
|
350
|
|
|
250
|
|
|
|
|
14,905
|
|
|
350
|
|
(Gain) loss on
disposition of assets, net (2)
|
|
|
(501)
|
|
|
469
|
|
|
(1,454)
|
|
|
|
|
38
|
|
|
(196)
|
|
Amortization of debt
discount and issuance costs - Convertible Notes
|
|
|
2,567
|
|
|
2,406
|
|
|
2,420
|
|
|
|
|
8,534
|
|
|
6,347
|
|
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)
|
|
|
585
|
|
|
—
|
|
|
1,147
|
|
|
|
|
1,732
|
|
|
—
|
|
Non-cash income tax
benefit related to deductibility of Convertible Note interest
(7)
|
|
|
—
|
|
|
(6,773)
|
|
|
—
|
|
|
|
|
—
|
|
|
(6,773)
|
|
Adjusted net loss
|
|
$
|
(8,644)
|
|
$
|
(87)
|
|
$
|
(5,235)
|
|
|
|
$
|
(12,488)
|
|
$
|
(25,746)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net loss per share
|
|
$
|
(0.61)
|
|
$
|
(0.01)
|
|
$
|
(0.37)
|
|
|
|
$
|
(0.89)
|
|
$
|
(1.98)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net (Loss) Income to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
September 30,
|
|
|
|
December 31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
|
|
2023
|
|
2022
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(25,950)
|
|
$
|
3,461
|
|
$
|
(7,598)
|
|
|
|
$
|
(37,697)
|
|
$
|
(65,321)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
|
|
(932)
|
|
|
(6,979)
|
|
|
(844)
|
|
|
|
|
(1,975)
|
|
|
(6,196)
|
|
Interest
expense
|
|
|
9,763
|
|
|
8,570
|
|
|
9,222
|
|
|
|
|
35,955
|
|
|
29,575
|
|
Depreciation and
amortization
|
|
|
11,055
|
|
|
10,724
|
|
|
10,229
|
|
|
|
|
43,543
|
|
|
40,443
|
|
Asset impairment, net
(1)
|
|
|
14,655
|
|
|
350
|
|
|
250
|
|
|
|
|
14,905
|
|
|
350
|
|
EBITDA
|
|
|
8,592
|
|
|
16,126
|
|
|
11,259
|
|
|
|
|
54,731
|
|
|
(1,149)
|
|
(Gain) loss on
disposition of assets, net (2)
|
|
|
(501)
|
|
|
469
|
|
|
(1,454)
|
|
|
|
|
38
|
|
|
(196)
|
|
Stock-based and
deferred compensation cost
|
|
|
1,201
|
|
|
1,890
|
|
|
1,953
|
|
|
|
|
6,338
|
|
|
5,251
|
|
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)
|
|
|
585
|
|
|
—
|
|
|
1,147
|
|
|
|
|
1,732
|
|
|
—
|
|
Adjusted EBITDA
|
|
$
|
9,877
|
|
$
|
18,485
|
|
$
|
12,905
|
|
|
|
$
|
62,839
|
|
$
|
43,753
|
|
|
|
|
|
|
|
|
|
(1)
|
During the three months
ended December 31, 2023, we recorded an asset impairment charge of
$14.7 million relating to idle equipment and capital spares. During
the three months ended September 30, 2023, we impaired a damaged
piece of drilling equipment for $0.3 million, net of insurance
recoveries. During the three months ended December 31, 2022,
we impaired $0.4 million of drilling equipment that was designated
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 twelve months ended December 31, 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.
|
|
|
|
(7)
|
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.
