Correction to Press Release Announcing Financial Results For the First Quarter Ended March 31, 2022

Rhea-AI Summary

Independence Contract Drilling (ICD) announced a correction to its May 5 press release on Q1 2022 financial results, confirming no impact on revenues or cash flows. The adjustments pertain to non-cash entries for convertible notes due 2026, aligning with the Company's 10-Q filings. Highlights include a net loss of $58.8 million ($5.20/share), an adjusted net loss of $11.1 million ($0.98/share), and an adjusted EBITDA of $3.6 million, a 146% improvement from Q4 2021. The fleet utilization stood at 68%, with a fully burdened margin of $5,754 per day.

Positive

• Adjusted EBITDA improved by 146% sequentially from Q4 2021 to $3.6 million.
• Fleet utilization reached 68%, indicating operational efficiency.

Negative

• Net loss of $58.8 million or $5.20 per share reported for Q1 2022.
• Adjusted net loss of $11.1 million or $0.98 per share.

HOUSTON, May 16, 2022 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today announced a correction to its press release issued on May 5, 2022, announcing the Company's unaudited financial results for the first quarter ended March 31, 2022.

The correction to the press release had no negative impact on the Company's revenues, revenue or cost per day, cash flows, adjusted net loss, or Adjusted EBITDA reported in the press release.

The correction relates to non-cash entries recorded to finalize the valuation and accounting presentation of embedded features associated with the Company's Convertible Senior Secured PIK Toggle Notes due 2026 and conforms reporting and presentation in the press release to the results and presentation as reported in the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

These corrections are reflected in the updated First Quarter 2022 Highlights and the financial statements and related tables below.

First Quarter 2022 Highlights

• Net loss, as defined below, of $58.8 million, or $5.20 per share.
• Adjusted net loss, as defined below, of $11.1 million, or $0.98 per share.
• Adjusted EBITDA, as defined below, of $3.6 million, representing an approximate 146% sequential improvement from the fourth quarter of 2021.
• Net debt (before debt discount), excluding finance leases and net of deferred financing costs, of $147.1 million.
• Marketed fleet utilization of 68%.
• Fully burdened margin of $5,754 per day.

About Independence Contract Drilling, Inc.

Independence Contract Drilling provides land-based contract drilling services for oil and natural gas producers in the United States. The Company constructs, owns and operates a fleet of pad-optimal ShaleDriller rigs that are specifically engineered and designed to accelerate its clients' production profiles and cash flows from their most technically demanding and economically impactful oil and gas properties. For more information, visit www.icdrilling.com.

Forward-Looking Statements

This news release contains certain forward-looking statements within the meaning of the federal securities laws. Words such as "anticipated," "estimated," "expected," "planned," "scheduled," "targeted," "believes," "intends," "objectives," "projects," "strategies" and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to Independence Contract Drilling's operations are based on a number of expectations or assumptions which have been used to develop such information and statements but which may prove to be incorrect. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, and there can be no assurance that actual outcomes and results will not differ materially from those expected by management of Independence Contract Drilling. For more information concerning factors that could cause actual results to differ materially from those conveyed in the forward-looking statements, please refer to the "Risk Factors" section of the Company's Annual Report on Form 10-K, filed with the SEC and the information included in subsequent amendments and other filings. These forward-looking statements are based on and include the Company's expectations as of the date hereof. Independence Contract Drilling does not undertake any obligation to update or revise such forward-looking statements to reflect events or circumstances that occur, or which Independence Contract Drilling becomes aware of, after the date hereof.

 

INDEPENDENCE CONTRACT DRILLING, INC. Unaudited (in thousands, except par value and share data)
CONSOLIDATED BALANCE SHEETS
		March 31, 2022			December 31, 2021
Assets
Cash and cash equivalents		$	9,342		$	4,140
Accounts receivable, net of allowance of $0.1 million and zero, respectively			24,231			22,211
Inventories			1,301			1,171
Prepaid expenses and other current assets			4,549			4,787
Total current assets			39,423			32,309
Property, plant and equipment, net			358,760			362,346
Other long-term assets, net			2,201			2,449
Total assets		$	400,384		$	397,104
Liabilities and Stockholders' Equity
Liabilities
Current portion of long-term debt (1)		$	3,902		$	4,464
Accounts payable			18,829			15,304
Accrued liabilities			10,545			15,617
Current portion of merger consideration payable to an affiliate			—			2,902
Total current liabilities			33,276			38,287
Long-term debt (2)			120,099			141,740
Derivative liability			77,589			—
Deferred income taxes, net			18,310			19,037
Other long-term liabilities			1,894			2,811
Total liabilities			251,168			201,875
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 50,000,000 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			545,575			532,826
Accumulated deficit			(392,572)			(333,776)
Treasury stock, at cost, 81,846 shares and 81,846 shares, respectively			(3,923)			(3,923)
Total stockholders' equity			149,216			195,229
Total liabilities and stockholders' equity		$	400,384		$	397,104

 

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(1)	As of March 31, 2022 and December 31, 2021, current portion of long-term debt includes $3.9 million and $4.5 million, respectively, of finance lease obligations.
(2)	As of March 31, 2022 and December 31, 2021, long-term debt includes $1.3 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
		March 31,						December 31,
		2022			2021			2021
Revenues		$	34,991		$	15,542		$	28,561
Costs and expenses
Operating costs			27,165			14,541			24,047
Selling, general and administrative			5,228			3,686			3,870
Depreciation and amortization			9,751			9,989			9,671
Asset impairment			—			43			25
Gain on disposition of assets, net			(516)			(435)			(63)
Other expense			—			—			150
Total costs and expenses			41,628			27,824			37,700
Operating loss			(6,637)			(12,282)			(9,139)
Interest expense			(4,675)			(3,709)			(3,899)
Loss on extinguishment of debt			(46,347)			—			—
Change in fair value of embedded derivative liability			(1,857)			—			—
Loss before income taxes			(59,516)			(15,991)			(13,038)
Income tax (benefit) expense			(720)			34			18,446
Net loss		$	(58,796)		$	(16,025)		$	(31,484)
Loss per share:
Basic and diluted		$	(5.20)		$	(2.58)		$	(3.23)
Weighted average number of common shares outstanding:
Basic and diluted			11,303			6,215			9,743

 

INDEPENDENCE CONTRACT DRILLING, INC. Unaudited (in thousands, except par value and share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS
		Three Months Ended March 31,
		2022			2021
Cash flows from operating activities
Net loss		$	(58,796)		$	(16,025)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			9,751			9,989
Asset impairment			—			43
Stock-based compensation			731			537
Gain on disposition of assets, net			(516)			(435)
Non-cash interest expense			3,193			—
Loss on extinguishment of debt			46,347			—
Amortization of deferred financing costs			250			279
Amortization of Convertible Notes issuance costs and debt discount			370			—
Change in fair value of embedded derivative liability			1,857			—
Deferred income taxes			(727)			34
Bad debt expense			60			—
Changes in operating assets and liabilities
Accounts receivable			(2,079)			(317)
Inventories			(130)			(33)
Prepaid expenses and other assets			386			323
Accounts payable and accrued liabilities			(2,358)			(685)
Net cash used in operating activities			(1,661)			(6,290)
Cash flows from investing activities
Purchases of property, plant and equipment			(6,279)			(1,742)
Proceeds from the sale of assets			589			654
Net cash used in investing activities			(5,690)			(1,088)
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			1,500			—
Repayments under Revolving ABL Credit Facility			(2)			(8)
Payment of merger consideration			(2,902)			—
Proceeds from issuance of common stock through at-the-market facility, net of issuance costs			3,360			521
Proceeds from issuance of common stock under purchase agreement			—			874
RSUs withheld for taxes			(32)			(11)
Convertible debt issuance costs			(6,601)			—
Payments for finance lease obligations			(1,194)			(837)
Net cash provided by financing activities			12,553			539
Net increase (decrease) in cash and cash equivalents			5,202			(6,839)
Cash and cash equivalents
Beginning of period			4,140			12,279
End of period		$	9,342		$	5,440

 

		Three Months Ended March 31,
		2022			2021
Supplemental disclosure of cash flow information
Cash paid during the period for interest		$	4,262		$	3,171
Supplemental disclosure of non-cash investing and financing activities
Change in property, plant and equipment purchases in accounts payable		$	(701)		$	70
Additions to property, plant and equipment through finance leases		$	604		$	376
Extinguishment of finance lease obligations from sale of assets classified as finance leases		$	(7)		$	—
Transfer of assets from held and used to held for sale		$	—		$	(550)
Shares issued for structuring fee		$	9,163		$	—

 

The following table provides various financial and operational data for the Company's operations for the three months ended March 31, 2022 and 2021 and December 31, 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
		March 31,								December 31,
		2022				2021				2021
Number of marketed rigs end of period (1)			24				24				24
Rig operating days (2)			1,463				929				1,378
Average number of operating rigs (3)			16.3				10.3				15.0
Rig utilization (4)			68	%			43	%			62	%
Average revenue per operating day (5)		$	21,823			$	15,465			$	19,042
Average cost per operating day (6)		$	16,069			$	12,663			$	15,504
Average rig margin per operating day		$	5,754			$	2,802			$	3,538

 

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(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 (i) out-of-pocket costs paid by customers of $3.1 million, $1.2 million and $2.3 million during the three months ended March 31, 2022 and 2021, and December 31, 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 $3.1 million, $1.2 million and $2.3 million during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively; (ii) overhead costs expensed due to reduced rig upgrade activity of $0.6 million, $0.5 million and $0.4 million during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively; and (iii) rig reactivation costs, inclusive of new crew training costs, of zero, $1.1 million and zero during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively.

 

Non-GAAP Financial Measures

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 (loss) income" as net (loss) income before: asset impairment, net; gain or loss on disposition of assets, net; intangible revenue; severance and merger-related expenses; gain or loss on extinguishment of debt and other adjustments.  The Company defines "EBITDA" as earnings (or loss) before interest, taxes, depreciation, and amortization, and the Company defines "adjusted EBITDA" as EBITDA before stock-based compensation, non-cash asset impairments, gain or loss on disposition of assets, gain or loss on extinguishment of debt 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 (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 (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 (loss) income, EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

 

Reconciliation of Net Loss to Adjusted Net Loss:
		(Unaudited)
		Three Months Ended
		March 31,												December 31,
		2022						2021						2021
		Amount			Per Share			Amount			Per Share			Amount			Per Share
(in thousands)
Net loss		$	(58,796)		$	(5.20)		$	(16,025)		$	(2.58)		$	(31,484)		$	(3.23)
Add back:
Asset impairment (1)			—			—			43			0.01			25			—
Gain on disposition of assets, net (2)			(516)			(0.05)			(435)			(0.07)			(63)			(0.01)
Purchase agreement costs (3)			—			—			—			—			150			0.02
Non-cash income tax expense related to IRC Section 382 limitation (4)			—			—			—			—			18,192			1.87
Loss on extinguishment of debt (5)			46,347			4.10			—			—			—			—
Change in fair value of embedded derivative liability (6)			1,857			0.17			—			—			—			—
Adjusted net loss		$	(11,108)		$	(0.98)		$	(16,417)		$	(2.64)		$	(13,180)		$	(1.35)

 

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA:
		(Unaudited)
		Three Months Ended
		March 31,						December 31,
		2022			2021			2021
(in thousands)
Net loss		$	(58,796)		$	(16,025)		$	(31,484)
Add back:
Income tax (benefit) expense			(720)			34			18,446
Interest expense			4,675			3,709			3,899
Depreciation and amortization			9,751			9,989			9,671
Asset impairment (1)			—			43			25
EBITDA			(45,090)			(2,250)			557
Gain on disposition of assets, net (2)			(516)			(435)			(63)
Stock-based and deferred compensation cost			977			673			808
Purchase agreement costs (3)			—			—			150
Loss on extinguishment of debt (5)			46,347			—			—
Change in fair value of embedded derivative liability (6)			1,857			—			—
Adjusted EBITDA		$	3,575		$	(2,012)		$	1,452

 

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(1)	In the first quarter of 2021, the Company recorded an asset impairment of $43 thousand related to the pending sale of one of our field location facilities.
(2)	In the first quarter of 2022 and 2021, and the fourth quarter of 2021, the Company recorded gains on the disposition of miscellaneous drilling equipment in the respective quarter.
(3)	Purchase agreement costs were recorded in the fourth quarter of 2021 in connection with the Company's committed equity line of credit.
(4)	During the fourth quarter of 2021, the Company recorded non-cash income tax expense related to the inability to utilize net operating loss ("NOL") deferred tax assets to offset deferred tax losses due to an IRC Section 382 change in ownership occurring in October 2021 and the limitations therefrom placed upon the NOLs.
(5)	Loss on extinguishment of debt related to Term Loan unamortized debt issuance costs, 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.
(6)	Represents the change in fair value of embedded derivative liability between the issuance date of the Convertible Notes and March 31, 2022.

 

Detail of Long-Term Debt

 

(in thousands)		March 31, 2022
Convertible Notes		$	157,500
Revolving ABL Credit Facility			7,798
Convertible Notes issuance costs			(8,893)
Convertible Notes debt discount			(37,576)
Finance lease obligations			1,270
Total long-term debt		$	120,099

 

 

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.

FAQ

What are Independence Contract Drilling's financial results for Q1 2022?

Independence Contract Drilling reported a net loss of $58.8 million and an adjusted net loss of $11.1 million for Q1 2022.

How much has ICD's Adjusted EBITDA improved in Q1 2022?

ICD's Adjusted EBITDA improved by 146% sequentially from Q4 2021, reaching $3.6 million.

What is ICD's fleet utilization rate as of Q1 2022?

Independence Contract Drilling reported a fleet utilization rate of 68% for Q1 2022.

What is the net debt of Independence Contract Drilling?

As of Q1 2022, ICD's net debt, excluding finance leases, was $147.1 million.