HOUSTON, Nov. 1, 2022
/PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company"
or "ICD") (NYSE: ICD) today reported financial results for the
three months ended September 30, 2022.
Third quarter 2022 Highlights
- Net loss, as defined below, of $7.2
million, or $0.53 per
share.
- Adjusted net loss, as defined below, of $4.8 million, or $0.35 per share.
- Adjusted EBITDA, as defined below, of $12.5 million, representing an approximate 35%
sequential improvement from the second quarter of 2022.
- Adjusted net debt, as defined below, of $170.4 million.
- 17.4 average rigs working during the quarter.
- Fully burdened margin per day of $11,341 representing an approximate 27%
sequential improvement from the second quarter of 2022.
In the third quarter of 2022, the Company reported revenues of
$49.1 million, a net loss of
$7.2 million, or $0.53 per share, adjusted net loss (defined
below) of $4.8 million, or
$0.35 per share, and adjusted EBITDA
(defined below) of $12.5
million. These results compare to revenues of
$24.0 million, a net loss of
$4.3 million, or $0.59 per share, adjusted net loss of
$13.7 million, or $1.87 per share, and adjusted EBITDA loss of
$0.7 million in the third quarter of
2021, and revenues of $42.3 million,
a net loss of $2.8 million, or
$0.21 per share, an 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.
Chief Executive Officer Anthony
Gallegos commented, "ICD achieved significant progress
towards its rig reactivation, rig margin and adjusted EBITDA goals
during the third quarter of 2022. The Company achieved
quarterly revenue per day and margin per day records during the
quarter, buoyed by continued penetration of our 300 series rigs and
our marketing strategy of patiently waiting to seek longer-term
contracts. All of this drove sequential improvements in
quarterly adjusted EBITDA of 35%.
Against a backdrop of greater general macroeconomic uncertainty,
market conditions for the Company's services have continued to
tighten as overall supply and demand fundamentals driven by
historically low underinvestment over the past decade have
outweighed general economic headwinds. During the quarter, we
began to strategically sign longer-term contracts and have
increased our quarter-end backlog by 87% compared to the second
quarter. More importantly, our backlog extending into 2023 is
priced at levels that we expect will generate revenue per day over
20% higher than our reported third quarter revenue per day levels
and margin per day over 55% higher than third quarter levels.
In addition, we still have the majority of our fleet on
shorter-term contracts that will reprice during the fourth quarter
of 2022 or the first quarter of 2023.
With this backdrop, we expect to see further sequential
improvements in revenues and margin per day during the remainder of
this year and into 2023. Our current expectations are that fourth
quarter margin per day will exceed reported third quarter levels
between 10% and 15%, and first quarter 2023 margin per day will
exceed reported third quarter levels between 28% and 32%. Given
pricing already imbedded in our 2023 backlog, we are excited about
further opportunities for margin expansion beyond these
periods.
Operationally, our rig reactivations remain on schedule and our
200-to-300-series conversion program has commenced with our first
conversion in process. Our 19th rig mobilized for operations
at the end of October and our 20th rig is scheduled for
mobilization at the end of the fourth quarter. Both of these
reactivations are pursuant to one-year contracts at leading edge
dayrates where expected margins will earn back reactivation costs
well within the contract terms. Looking forward into 2023, we
are marketing our 21st rig for mobilization early-to-mid first
quarter of 2023 and our 22nd rig for the end of the first quarter
or early second quarter of 2023."
Quarterly Operational Results
In the third quarter of 2022, operating days increased
sequentially by 4% compared to the second quarter of 2022.
The Company's marketed fleet operated at 70% utilization and
recorded 1,601 revenue days, compared to 1,268 revenue days in the
third quarter of 2021, and 1,540 revenue days in the second quarter
of 2022.
Operating revenues in the third quarter of 2022 totaled
$49.1 million, compared to
$24.0 million in the third quarter of
2021 and $42.3 million in the second
quarter of 2022. Revenue per day in the third quarter of 2022
was $28,646, compared to $17,141 in the third quarter of 2021 and
$24,875 in the second quarter of
2022. The sequential increase quarter over quarter in revenue
per day was driven by higher dayrates on contract renewals and
reactivated rigs.
Operating costs in the third quarter of 2022 totaled
$31.4 million, compared to
$20.1 million in the third quarter of
2021 and $28.9 million in second
quarter of 2022. Fully burdened operating costs were
$17,305 per day in the third quarter
of 2022, compared to $13,685 in the
third quarter of 2021 and $15,929 in
the second quarter of 2022. Sequential increases in operating
costs per day were driven primarily by higher labor costs
associated with increases in field-level wages implemented during
the latter part of the second quarter of 2022, partially offset by
improved cost absorption.
Fully burdened rig operating margins in the third quarter of
2022 were $11,341 per day, compared
to $3,456 per day in the third
quarter of 2021 and $8,946 per day in
the second quarter of 2022. The Company currently expects per
day operating margins in the fourth quarter of 2022 to increase
sequentially between 10% and 15% compared to the third quarter of
2022, driven primarily by favorable dayrate momentum as well as the
reactivation of the Company's 19th and 20th rigs.
Selling, general and administrative expenses in the third
quarter of 2022 were $7.0 million
(including $1.7 million of non-cash
compensation), compared to $4.1
million (including $0.8
million of non-cash compensation) in the third quarter of
2021 and $4.9 million (including
$0.7 million of non-cash
compensation) in the second quarter of 2022. Cash selling,
general and administrative expenses increased sequentially during
the quarter due to $0.3 million
relating to a dispute settlement and higher incentive compensation
accruals. Stock-based incentive compensation expense increased
sequentially primarily due to full quarter amortization of
out-of-the-money stock appreciation rights granted late in the
second quarter of 2022.
During the quarter, the Company recorded interest expense of
$8.1 million, including $2.0 million, or $0.14 per share, relating to non-cash
amortization of debt discount and debt issuance costs. The
Company has excluded this non-cash amortization when presenting
adjusted net income/loss per share.
The Company recorded a tax benefit of $0.7 million, or $0.05 per share, during the third quarter of
2022, of which $0.1 million relates
to cash taxes, attributable to state and local franchise taxes.
Drilling Operations Update
The Company exited the third quarter with 18 rigs operating.
Overall, the Company's operating rig count averaged 17.4 rigs
during the quarter. The Company's backlog of drilling
contracts with original terms of six months or longer is
$101.6 million. This backlog
excludes rigs operating on short term pad-to-pad drilling
contracts. Approximately 31% of this backlog is expected to
be realized in 2022. The Company's 19th rig mobilized for
drilling operations on a one-year contract in the Haynesville at
the end of October 2022 and the
Company's 20th rig is contracted and scheduled for reactivation
late in the fourth quarter of 2022.
Capital Expenditures and Liquidity Update
Cash outlays for capital expenditures in the third quarter of
2022, net of asset sales and recoveries, were $9.4 million. This included $5.6 million associated with prior period
deliveries.
As of September 30, 2022, the Company had cash on hand
of $7.6 million and a revolving line
of credit with availability of $19.9
million. The Company elected to pay in-kind interest due
under its convertible notes as of September
30, 2022. Following this payment, $170.2 million principal amount was outstanding
under the convertible notes.
Conference Call Details
A conference call for investors will be held today, November 1, 2022, at 11:00
a.m. Central Time (12:00 p.m. Eastern
Time) to discuss the Company's third quarter 2022
results.
The call can be accessed live over the telephone by dialing
(855) 239-3115 or for international callers, (412) 542-4125.
A replay will be available shortly after the call and can be
accessed by dialing (877) 344-7529 or for international callers,
(412) 317-0088. The passcode for the replay is 2879534.
The replay will be available until November
8, 2022.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging onto the Company's website at
www.icdrilling.com in the Investor Relations section. A
replay of the webcast will also be available for approximately 30
days following the call.
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, 2022
|
|
December 31, 2021
|
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
7,566
|
|
$
|
4,140
|
Accounts
receivable
|
|
|
33,967
|
|
|
22,211
|
Inventories
|
|
|
1,433
|
|
|
1,171
|
Prepaid expenses and
other current assets
|
|
|
2,940
|
|
|
4,787
|
Total current
assets
|
|
|
45,906
|
|
|
32,309
|
Property, plant and
equipment, net
|
|
|
365,160
|
|
|
362,346
|
Other long-term assets,
net
|
|
|
2,159
|
|
|
2,449
|
Total
assets
|
|
$
|
413,225
|
|
$
|
397,104
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current portion of
long-term debt (1)
|
|
$
|
3,302
|
|
$
|
4,464
|
Accounts
payable
|
|
|
28,859
|
|
|
15,304
|
Accrued
liabilities
|
|
|
13,162
|
|
|
11,245
|
Accrued
interest
|
|
|
122
|
|
|
4,372
|
Current portion of
merger consideration payable to an affiliate
|
|
|
—
|
|
|
2,902
|
Total current
liabilities
|
|
|
45,445
|
|
|
38,287
|
Long-term debt
(2)
|
|
|
136,756
|
|
|
141,740
|
Deferred income taxes,
net
|
|
|
19,391
|
|
|
19,037
|
Other long-term
liabilities
|
|
|
1,661
|
|
|
2,811
|
Total
liabilities
|
|
|
203,253
|
|
|
201,875
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
Common stock, $0.01 par
value, 250,000,000 shares authorized; 13,698,851 and 10,287,931
shares issued, respectively, and 13,617,005 and 10,206,085 shares
outstanding, respectively
|
|
|
136
|
|
|
102
|
Additional paid-in
capital
|
|
|
616,316
|
|
|
532,826
|
Accumulated
deficit
|
|
|
(402,557)
|
|
|
(333,776)
|
Treasury stock, at
cost, 81,846 shares and 81,846 shares, respectively
|
|
|
(3,923)
|
|
|
(3,923)
|
Total stockholders'
equity
|
|
|
209,972
|
|
|
195,229
|
Total liabilities and
stockholders' equity
|
|
$
|
413,225
|
|
$
|
397,104
|
(1)
|
As of September 30,
2022 and December 31, 2021, current portion of long-term debt
includes $3.3 million and $4.5 million, respectively, of finance
lease obligations.
|
|
|
(2)
|
As of September 30,
2022 and December 31, 2021, long-term debt includes $1.7 million
and $1.3 million, respectively, of long-term finance lease
obligations.
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in thousands,
except par value and share data)
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
49,147
|
|
$
|
24,035
|
|
$
|
42,313
|
|
$
|
126,451
|
|
$
|
59,394
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
31,379
|
|
|
20,123
|
|
|
28,904
|
|
|
87,448
|
|
|
51,704
|
Selling, general and
administrative
|
|
|
7,007
|
|
|
4,068
|
|
|
4,860
|
|
|
17,096
|
|
|
11,829
|
Depreciation and
amortization
|
|
|
10,120
|
|
|
9,739
|
|
|
9,848
|
|
|
29,719
|
|
|
29,244
|
Asset impairment,
net
|
|
|
—
|
|
|
482
|
|
|
—
|
|
|
—
|
|
|
775
|
Loss (gain) on
disposition of assets, net
|
|
|
433
|
|
|
222
|
|
|
(582)
|
|
|
(665)
|
|
|
(182)
|
Total costs and
expenses
|
|
|
48,939
|
|
|
34,634
|
|
|
43,030
|
|
|
133,598
|
|
|
93,370
|
Operating income
(loss)
|
|
|
208
|
|
|
(10,599)
|
|
|
(717)
|
|
|
(7,147)
|
|
|
(33,976)
|
Interest
expense
|
|
|
(8,098)
|
|
|
(3,812)
|
|
|
(8,232)
|
|
|
(21,005)
|
|
|
(11,294)
|
Gain (loss) on
extinguishment of debt
|
|
|
—
|
|
|
10,128
|
|
|
—
|
|
|
(46,347)
|
|
|
10,128
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
—
|
|
|
(2,408)
|
|
|
(4,265)
|
|
|
—
|
Realized gain on
extinguishment of derivative
|
|
|
—
|
|
|
—
|
|
|
10,765
|
|
|
10,765
|
|
|
—
|
Loss before income
taxes
|
|
|
(7,890)
|
|
|
(4,283)
|
|
|
(592)
|
|
|
(67,999)
|
|
|
(35,142)
|
Income tax (benefit)
expense
|
|
|
(696)
|
|
|
19
|
|
|
2,199
|
|
|
783
|
|
|
86
|
Net loss
|
|
$
|
(7,194)
|
|
$
|
(4,302)
|
|
$
|
(2,791)
|
|
$
|
(68,782)
|
|
$
|
(35,228)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.53)
|
|
$
|
(0.59)
|
|
$
|
(0.21)
|
|
$
|
(5.36)
|
|
$
|
(5.22)
|
Weighted average number
of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
13,590
|
|
|
7,321
|
|
|
13,590
|
|
|
12,836
|
|
|
6,754
|
INDEPENDENCE
CONTRACT DRILLING, INC.
Unaudited
(in thousands,
except par value and share data)
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
2022
|
|
2021
|
Cash flows from operating
activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(68,782)
|
|
$
|
(35,228)
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
29,719
|
|
|
29,244
|
Asset impairment,
net
|
|
|
—
|
|
|
775
|
Stock-based
compensation
|
|
|
2,976
|
|
|
1,770
|
Gain on disposition of
assets, net
|
|
|
(665)
|
|
|
(182)
|
Non-cash interest
expense
|
|
|
15,859
|
|
|
2,828
|
Non-cash loss (gain) on
extinguishment of debt
|
|
|
46,347
|
|
|
(10,128)
|
Amortization of
deferred financing costs
|
|
|
320
|
|
|
836
|
Amortization of
Convertible Notes issuance costs and debt discount
|
|
|
4,310
|
|
|
—
|
Change in fair value of
embedded derivative liability
|
|
|
4,265
|
|
|
—
|
Gain on extinguishment
of derivative
|
|
|
(10,765)
|
|
|
—
|
Deferred income
taxes
|
|
|
354
|
|
|
86
|
Bad debt expense
(recovery)
|
|
|
256
|
|
|
(52)
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(12,012)
|
|
|
(6,863)
|
Inventories
|
|
|
(291)
|
|
|
(40)
|
Prepaid expenses and
other assets
|
|
|
2,098
|
|
|
1,929
|
Accounts payable and
accrued liabilities
|
|
|
208
|
|
|
7,322
|
Net cash provided by
(used in) operating activities
|
|
|
14,197
|
|
|
(7,703)
|
Cash flows from investing
activities
|
|
|
|
|
|
|
Purchases of property,
plant and equipment
|
|
|
(22,286)
|
|
|
(9,692)
|
Proceeds from the sale
of assets
|
|
|
2,749
|
|
|
1,849
|
Net cash used in
investing activities
|
|
|
(19,537)
|
|
|
(7,843)
|
Cash flows from financing
activities
|
|
|
|
|
|
|
Proceeds from issuance
of convertible debt
|
|
|
157,500
|
|
|
—
|
Repayments under Term
Loan Facility
|
|
|
(139,076)
|
|
|
—
|
Borrowings under
Revolving ABL Credit Facility
|
|
|
1,576
|
|
|
4,309
|
Repayments under
Revolving ABL Credit Facility
|
|
|
(28)
|
|
|
(17)
|
Payment of merger
consideration
|
|
|
(2,902)
|
|
|
—
|
Proceeds from issuance
of common stock through at-the-market facility, net of issuance
costs
|
|
|
3,038
|
|
|
3,859
|
Proceeds from issuance
of common stock under purchase agreement
|
|
|
—
|
|
|
2,072
|
RSUs withheld for
taxes
|
|
|
(32)
|
|
|
(11)
|
Convertible debt
issuance costs
|
|
|
(7,230)
|
|
|
—
|
Financing costs paid
under Revolving ABL Credit Facility
|
|
|
(266)
|
|
|
—
|
Payments for finance
lease obligations
|
|
|
(3,814)
|
|
|
(2,643)
|
Net cash provided by
financing activities
|
|
|
8,766
|
|
|
7,569
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
3,426
|
|
|
(7,977)
|
Cash and cash equivalents
|
|
|
|
|
|
|
Beginning of
period
|
|
|
4,140
|
|
|
12,279
|
End of
period
|
|
$
|
7,566
|
|
$
|
4,302
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
4,745
|
|
$
|
6,660
|
Supplemental disclosure of non-cash investing and
financing activities
|
|
|
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
|
$
|
9,015
|
|
$
|
3,755
|
Additions to property,
plant and equipment through finance leases
|
|
$
|
3,250
|
|
$
|
754
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
|
$
|
(163)
|
|
$
|
—
|
Transfer of assets from
held and used to held for sale
|
|
$
|
—
|
|
$
|
(1,082)
|
Gain on extinguishment
of debt
|
|
$
|
—
|
|
$
|
10,000
|
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, 2022 and 2021 and June 30, 2022 and
the nine months ended September 30, 2022 and 2021.
This information contains non-GAAP financial measures of the
Company's operating performance. The Company believes this
non-GAAP information is useful because it provides a means to
evaluate the operating performance of the Company on an ongoing
basis using criteria that are used by the Company's
management. Additionally, it highlights operating trends and
aids analytical comparisons. However, this information has
limitations and should not be used as an alternative to operating
income (loss) or cash flow performance measures determined in
accordance with GAAP, as this information excludes certain costs
that may affect the Company's operating performance in future
periods.
OTHER FINANCIAL
& OPERATING DATA
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed rigs
end of period (1)
|
|
|
26
|
|
|
|
24
|
|
|
|
24
|
|
|
|
26
|
|
|
|
24
|
|
Rig operating days
(2)
|
|
|
1,601
|
|
|
|
1,268
|
|
|
|
1,540
|
|
|
|
4,604
|
|
|
|
3,273
|
|
Average number of
operating rigs (3)
|
|
|
17.4
|
|
|
|
13.8
|
|
|
|
16.9
|
|
|
|
16.9
|
|
|
|
12.0
|
|
Rig utilization
(4)
|
|
|
70
|
%
|
|
|
58
|
%
|
|
|
71
|
%
|
|
|
69
|
%
|
|
|
50
|
%
|
Average revenue per
operating day (5)
|
|
$
|
28,646
|
|
|
$
|
17,141
|
|
|
$
|
24,875
|
|
|
$
|
25,216
|
|
|
$
|
16,459
|
|
Average cost per
operating day (6)
|
|
$
|
17,305
|
|
|
$
|
13,685
|
|
|
$
|
15,929
|
|
|
$
|
16,452
|
|
|
$
|
13,285
|
|
Average rig margin per
operating day
|
|
$
|
11,341
|
|
|
$
|
3,456
|
|
|
$
|
8,946
|
|
|
$
|
8,764
|
|
|
$
|
3,174
|
|
(1)
|
Marketed rigs exclude
idle rigs that will not be reactivated unless market conditions
materially improve.
|
|
|
(2)
|
Rig operating days
represent the number of days the Company's rigs are earning revenue
under a contract during the period, including days that standby
revenue is earned.
|
|
|
(3)
|
Average number of
operating rigs is calculated by dividing the total number of rig
operating days in the period by the total number of calendar days
in the period.
|
|
|
(4)
|
Rig utilization is
calculated as rig operating days divided by the total number of
days the Company's marketed drilling rigs are available during the
applicable period.
|
|
|
(5)
|
Average revenue per
operating day represents total contract drilling revenues earned
during the period divided by rig operating days in the
period. Excluded in calculating average revenue per operating
day are revenues associated with the reimbursement of out-of-pocket
costs paid by customers of $3.3 million, $2.3 million and $4.0
million during the three months ended September 30, 2022
and 2021, and June 30, 2022, respectively, and $10.3
million and $5.5 million during the nine months ended
September 30, 2022 and 2021, respectively.
|
|
|
(6)
|
Average cost per
operating day represents operating costs incurred during the period
divided by rig operating days in the period. The following
costs are excluded in calculating average cost per operating day:
(i) out-of-pocket costs paid by customers of $3.3 million, $2.3
million and $4.0 million during the three months ended
September 30, 2022 and 2021, and June 30, 2022,
respectively, and $10.3 million and $5.5 million during the nine
months ended September 30, 2022 and 2021, respectively;
(ii) overhead costs of $0.4 million, $0.4 million and $0.4 million
during the three months ended September 30, 2022 and
2021, and June 30, 2022, respectively, and $1.4 million
and $1.2 million during the nine months ended
September 30, 2022 and 2021, respectively; and (iii) rig
reactivation costs, inclusive of new crew training costs, of zero,
$0.1 million and zero during the three months ended
September 30, 2022 and 2021, and June 30, 2022,
respectively, and zero and $1.4 million during the nine months
ended September 30, 2022 and 2021,
respectively.
|
Non-GAAP Financial Measures
Adjusted net debt, adjusted net (loss) income, EBITDA and
adjusted EBITDA are supplemental non-GAAP financial measures that
are used by management and external users of the Company's
financial statements, such as industry analysts, investors, lenders
and rating agencies. In addition, adjusted EBITDA is
consistent with how EBITDA is calculated under the Company's credit
facility for purposes of determining the Company's compliance with
various financial covenants. The Company defines "adjusted
net debt" as long-term notes (excluding long-term capital leases)
less cash. The Company defines "adjusted net (loss) income"
as net (loss) income before: asset impairment, net; gain or loss on
disposition of assets, net; amortization of debt discount;
amortization of issuance costs; gain or loss on extinguishment of
debt; change in fair value of embedded derivative liability, gain
on extinguishment of derivative and other adjustments. The
Company defines "EBITDA" as earnings (or loss) before interest,
taxes, depreciation and amortization, and asset impairment, net and
the Company defines "adjusted EBITDA" as EBITDA before stock-based
compensation, gain or loss on disposition of assets, gain or loss
on extinguishment of debt, gain on extinguishment of derivative and
other non-recurring items added back to, or subtracted from, net
income for purposes of calculating EBITDA under the Company's
credit facilities. Neither adjusted net (loss) income, EBITDA
or adjusted EBITDA is a measure of net income as determined by U.S.
generally accepted accounting principles ("GAAP").
Management believes adjusted net debt, adjusted net (loss)
income, EBITDA and adjusted EBITDA are useful because they allow
the Company's stockholders to more effectively evaluate the
Company's operating performance and compliance with various
financial covenants under the Company's credit facility and compare
the results of the Company's operations from period to period and
against the Company's peers without regard to the Company's
financing methods or capital structure or non-recurring, non-cash
transactions. The Company excludes the items listed above from net
income (loss) in calculating adjusted net (loss) income, EBITDA and
adjusted EBITDA because these amounts can vary substantially from
company to company within the Company's industry depending upon
accounting methods and book values of assets, capital structures
and the method by which the assets were acquired. None of adjusted
net (loss) income, EBITDA or adjusted EBITDA should be considered
an alternative to, or more meaningful than, net income (loss), the
most closely comparable financial measure calculated in accordance
with GAAP, or as an indicator of the Company's operating
performance or liquidity. Certain items excluded from adjusted net
(loss) income, EBITDA and adjusted EBITDA are significant
components in understanding and assessing a company's financial
performance, such as a company's return on assets, cost of capital
and tax structure. The Company's presentation of adjusted net debt,
adjusted net (loss) income, EBITDA and adjusted EBITDA should not
be construed as an inference that the Company's results will be
unaffected by unusual or non-recurring items. The Company's
computations of adjusted net debt, adjusted net (loss) income,
EBITDA and adjusted EBITDA may not be comparable to other similarly
titled measures of other companies.
Calculation of
Adjusted Net Debt:
|
|
|
|
|
(in
thousands)
|
|
September 30, 2022
|
Convertible
Notes
|
|
$
|
170,166
|
Revolving ABL Credit
Facility
|
|
|
7,848
|
Less: Cash
|
|
|
(7,566)
|
Adjusted net debt
|
|
$
|
170,448
|
Reconciliation of
Adjusted Net Debt to Reported Long-Term Debt:
|
|
|
|
|
(in
thousands)
|
|
September 30, 2022
|
Adjusted net
debt
|
|
$
|
170,448
|
Add back:
|
|
|
|
Cash
|
|
|
7,566
|
Long-term portion of
finance lease obligations
|
|
|
1,745
|
Less:
|
|
|
|
Debt discount, net of
amortization
|
|
|
(34,761)
|
Deferred issuance
costs, net of amortization
|
|
|
(8,242)
|
Total reported long-term debt
|
|
$
|
136,756
|
Reconciliation of
Net Loss to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
|
|
|
|
|
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
|
|
|
|
|
|
2022
|
|
2021
|
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
|
|
|
|
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,194)
|
|
$
|
(0.53)
|
|
$
|
(4,302)
|
|
$
|
(0.59)
|
|
$
|
(2,791)
|
|
$
|
(0.21)
|
|
|
|
|
|
|
|
$
|
(68,782)
|
|
$
|
(5.36)
|
|
$
|
(35,228)
|
|
$
|
(5.22)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment, net
(1)
|
|
|
—
|
|
|
—
|
|
|
482
|
|
|
0.07
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
775
|
|
|
0.12
|
Loss (gain) on
disposition
of assets, net (2)
|
|
|
433
|
|
|
0.03
|
|
|
222
|
|
|
0.03
|
|
|
(582)
|
|
|
(0.04)
|
|
|
|
|
|
|
|
|
(665)
|
|
|
(0.05)
|
|
|
(182)
|
|
|
(0.03)
|
Amortization of debt
discount
|
|
|
1,354
|
|
|
0.10
|
|
|
—
|
|
|
—
|
|
|
1,462
|
|
|
0.11
|
|
|
|
|
|
|
|
|
2,816
|
|
|
0.22
|
|
|
—
|
|
|
—
|
Amortization of
issuance costs
|
|
|
606
|
|
|
0.05
|
|
|
—
|
|
|
—
|
|
|
518
|
|
|
0.04
|
|
|
|
|
|
|
|
|
1,124
|
|
|
0.09
|
|
|
—
|
|
|
—
|
Loss (gain) on
extinguishment
of debt (3)
|
|
|
—
|
|
|
—
|
|
|
(10,128)
|
|
|
(1.38)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
46,347
|
|
|
3.61
|
|
|
(10,128)
|
|
|
(1.50)
|
Change in fair value
of
embedded derivative liability (4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,408
|
|
|
0.17
|
|
|
|
|
|
|
|
|
4,265
|
|
|
0.33
|
|
|
—
|
|
|
—
|
Gain on extinguishment
of
derivative (5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,765)
|
|
|
(0.79)
|
|
|
|
|
|
|
|
|
(10,765)
|
|
|
(0.84)
|
|
|
—
|
|
|
—
|
Adjusted net loss
|
|
$
|
(4,801)
|
|
$
|
(0.35)
|
|
$
|
(13,726)
|
|
$
|
(1.87)
|
|
$
|
(9,750)
|
|
$
|
(0.72)
|
|
|
|
|
|
|
|
$
|
(25,660)
|
|
$
|
(2.00)
|
|
$
|
(44,763)
|
|
$
|
(6.63)
|
Reconciliation of
Net Loss to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
June 30,
|
|
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
|
2022
|
|
2021
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,194)
|
|
$
|
(4,302)
|
|
$
|
(2,791)
|
|
|
$
|
(68,782)
|
|
$
|
(35,228)
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
(696)
|
|
|
19
|
|
|
2,199
|
|
|
|
783
|
|
|
86
|
Interest
expense
|
|
|
8,098
|
|
|
3,812
|
|
|
8,232
|
|
|
|
21,005
|
|
|
11,294
|
Depreciation and
amortization
|
|
|
10,120
|
|
|
9,739
|
|
|
9,848
|
|
|
|
29,719
|
|
|
29,244
|
Asset impairment, net
(1)
|
|
|
—
|
|
|
482
|
|
|
—
|
|
|
|
—
|
|
|
775
|
EBITDA
|
|
|
10,328
|
|
|
9,750
|
|
|
17,488
|
|
|
|
(17,275)
|
|
|
6,171
|
Loss (gain) on
disposition of assets, net (2)
|
|
|
433
|
|
|
222
|
|
|
(582)
|
|
|
|
(665)
|
|
|
(182)
|
Stock-based and
deferred compensation cost
|
|
|
1,709
|
|
|
819
|
|
|
674
|
|
|
|
3,361
|
|
|
2,421
|
Loss (gain) on
extinguishment of debt (3)
|
|
|
—
|
|
|
(10,128)
|
|
|
—
|
|
|
|
46,347
|
|
|
(10,128)
|
Change in fair value of
embedded derivative liability (4)
|
|
|
—
|
|
|
—
|
|
|
2,408
|
|
|
|
4,265
|
|
|
—
|
Gain on extinguishment
of derivative (5)
|
|
|
—
|
|
|
—
|
|
|
(10,765)
|
|
|
|
(10,765)
|
|
|
—
|
Adjusted EBITDA
|
|
$
|
12,470
|
|
$
|
663
|
|
$
|
9,223
|
|
|
$
|
25,268
|
|
$
|
(1,718)
|
(1)
|
During the third
quarter of 2021, we impaired $0.5 million of drilling equipment
that we deemed obsolete or no longer usable in our business. During
the second quarter of 2021, we impaired a damaged piece of drilling
equipment for $0.3 million, net of insurance recoveries.
|
|
|
(2)
|
Loss or gain on
disposition of assets, net represents the sale or disposition of
miscellaneous drilling equipment in each respective
period.
|
|
|
(3)
|
Loss on extinguishment
of debt related to 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. During
the third quarter of 2021, we received notice from the SBA of full
forgiveness of our PPP loan and recorded a gain on extinguishment
of debt of $10.1 million.
|
|
|
(4)
|
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.
|
|
|
(5)
|
Represents the gain on
extinguishment of the variable 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.