Independence Contract Drilling, Inc. Reports Financial Results For The Third Quarter Ended September 30, 2021
Independence Contract Drilling (ICD) reported a net loss of $4.3 million or $0.59 per share for Q3 2021, an improvement from previous quarters. Revenues reached $24 million, up from $10.2 million year-over-year. Notably, adjusted EBITDA increased to $0.7 million, marking a 300% sequential improvement. Marketed fleet utilization improved to 58%, with a projected 30-40% margin increase in Q4 2021. Additionally, the company achieved a $10.1 million gain from the forgiveness of a PPP loan. Overall, ICD is optimistic about future growth, expecting to generate positive free cash flow entering 2022.
- Revenues increased to $24 million, up from $10.2 million in Q3 2020.
- Adjusted EBITDA improved to $0.7 million, a 300% sequential increase.
- Marketed fleet utilization rose to 58%, an 18% sequential improvement.
- Projected margin growth of 30-40% in Q4 2021 compared to Q3 2021.
- $10.1 million gain from the forgiveness of the PPP loan.
- Net loss of $4.3 million or $0.59 per share.
- Adjusted net loss increased to $13.7 million or $1.87 per share.
- Operating costs rose to $20.1 million, significantly higher than $8.7 million in Q3 2020.
HOUSTON, Nov. 2, 2021 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today reported financial results for the three months ended September 30, 2021.
Third quarter 2021 Highlights
- Net loss, as defined below, of
$4.3 million , or$0.59 per share. - Adjusted net loss, as defined below, of
$13.7 million , or$1.87 per share. - Adjusted EBITDA, as defined below, of
$0.7 million , representing an approximate300% sequential improvement from the second quarter of 2021. - Net debt, excluding finance leases and net of deferred financing costs, of
$130.9 million . - Marketed fleet utilization of
58% , representing an18% sequential improvement from the second quarter of 2021. - Fully burdened margin of
$3,456 per day, representing a9% sequential improvement from the second quarter of 2021.
In the third quarter of 2021, the Company reported revenues of
Chief Executive Officer Anthony Gallegos commented, "Market conditions continue to improve for our business, buoyed by strong macro supply and demand fundamentals and shrinking availability of super-spec rigs across our key operating basins. This is manifesting itself in rapidly improving incremental operating and EBITDA margins and utilization, as well as increased forward visibility into 2022.
We realized sequential margin per day improvements in the third quarter of
Quarterly Operational Results
In the third quarter of 2021, operating days increased sequentially by
Operating revenues in the third quarter of 2021 totaled
Operating costs in the third quarter of 2021 totaled
Excluding the impact from reactivation costs, fully burdened rig operating margins in the third quarter of 2021 were
Selling, general and administrative expenses in the third quarter of 2021 were
Drilling Operations Update
The Company exited the third quarter with 15 operating rigs and with one additional rig reactivating in October 2021. Overall, the Company's operating rig count averaged 13.8 rigs during the quarter. The Company expects to reactivate one additional rig by year end. The Company's backlog of drilling contracts with original terms of six months or longer was
Capital Expenditures and Liquidity Update
Cash outlays for capital expenditures in the third quarter of 2021, net of asset sales and recoveries, were
As of September 30, 2021, the Company had cash on hand of
During the quarter, the Company instituted an additional at-the-market ("ATM") common stock offering with a maximum approved offering amount of
Conference Call Details
A conference call for investors will be held today, November 2, 2021, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's third quarter 2021 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 10161416. The replay will be available until November 9, 2021.
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.
Certain Defined Terms
Pad Optimal SuperSpec Rig is defined as an AC powered rig with minimum 20,000ft racking capacity, 1500HP+ drawworks, 750,000lb hookload, three high pressure pumps, four engines and omni-directional walking system. Such rigs also include dual fuel, hi-line power and drilling optimization software options.
300 Series Rigs are defined as a Pad Optimal SuperSpec rig with the following additional characteristics: 25,000ft+ racking capacity, hi-torque top drives, and 1,000,000lb hookload option.
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 our 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, 2021 | December 31, 2020 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 4,302 | $ | 12,279 | ||
Accounts receivable, net of allowance of zero and | 16,939 | 10,023 | ||||
Inventories | 1,078 | 1,038 | ||||
Assets held for sale | 50 | — | ||||
Prepaid expenses and other current assets | 2,764 | 4,102 | ||||
Total current assets | 25,133 | 27,442 | ||||
Property, plant and equipment, net | 364,813 | 382,239 | ||||
Other long-term assets, net | 2,723 | 3,528 | ||||
Total assets | $ | 392,669 | $ | 413,209 | ||
Liabilities and Stockholders' Equity | ||||||
Liabilities | ||||||
Current portion of long-term debt (1) | $ | 3,710 | $ | 7,637 | ||
Accounts payable | 13,265 | 4,072 | ||||
Accrued liabilities | 12,773 | 10,723 | ||||
Current portion of merger consideration payable to an affiliate | 2,902 | — | ||||
Total current liabilities | 32,650 | 22,432 | ||||
Long-term debt (2) | 137,526 | 137,633 | ||||
Merger consideration payable to an affiliate | — | 2,902 | ||||
Deferred income taxes, net | 591 | 505 | ||||
Other long-term liabilities | 2,810 | 2,704 | ||||
Total liabilities | 173,577 | 166,176 | ||||
Commitments and contingencies | ||||||
Stockholders' equity | ||||||
Common stock, | 80 | 62 | ||||
Additional paid-in capital | 525,217 | 517,948 | ||||
Accumulated deficit | (302,292) | (267,064) | ||||
Treasury stock, at cost, 78,578 shares and 78,578 shares, respectively | (3,913) | (3,913) | ||||
Total stockholders' equity | 219,092 | 247,033 | ||||
Total liabilities and stockholders' equity | $ | 392,669 | $ | 413,209 | ||
___________________ | |
(1) | As of September 30, 2021 and December 31, 2020, current portion of long-term debt includes |
(2) | As of September 30, 2021 and December 31, 2020, long-term debt includes |
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, | ||||||||||||||||
2021 | 2020 | 2021 | 2021 | 2020 | ||||||||||||||
Revenues | $ | 24,035 | $ | 10,224 | $ | 19,817 | $ | 59,394 | $ | 70,099 | ||||||||
Costs and expenses | ||||||||||||||||||
Operating costs | 20,123 | 8,663 | 17,040 | 51,704 | 52,987 | |||||||||||||
Selling, general and administrative | 4,068 | 2,796 | 4,075 | 11,829 | 10,101 | |||||||||||||
Severance expense | — | — | — | — | 1,076 | |||||||||||||
Depreciation and amortization | 9,739 | 10,767 | 9,516 | 29,244 | 33,338 | |||||||||||||
Asset impairment, net | 482 | — | 250 | 775 | 16,619 | |||||||||||||
Loss (gain) on disposition of assets, net | 222 | (326) | 31 | (182) | (1,208) | |||||||||||||
Total costs and expenses | 34,634 | 21,900 | 30,912 | 93,370 | 112,913 | |||||||||||||
Operating loss | (10,599) | (11,676) | (11,095) | (33,976) | (42,814) | |||||||||||||
Interest expense | (3,812) | (3,554) | (3,773) | (11,294) | (10,812) | |||||||||||||
Gain on extinguishment of debt | 10,128 | — | — | 10,128 | — | |||||||||||||
Loss before income taxes | (4,283) | (15,230) | (14,868) | (35,142) | (53,626) | |||||||||||||
Income tax expense (benefit) | 19 | (31) | 33 | 86 | (84) | |||||||||||||
Net loss | $ | (4,302) | $ | (15,199) | $ | (14,901) | $ | (35,228) | $ | (53,542) | ||||||||
Loss per share: | ||||||||||||||||||
Basic and diluted | $ | (0.59) | $ | (2.67) | $ | (2.22) | $ | (5.22) | $ | (11.91) | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||||
Basic and diluted | 7,321 | 5,703 | 6,714 | 6,754 | 4,495 | |||||||||||||
INDEPENDENCE CONTRACT DRILLING, INC. Unaudited (in thousands, except par value and share data) | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
Nine Months Ended September 30, | ||||||
2021 | 2020 | |||||
Cash flows from operating activities | ||||||
Net loss | $ | (35,228) | $ | (53,542) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities | ||||||
Depreciation and amortization | 29,244 | 33,338 | ||||
Asset impairment, net | 775 | 16,619 | ||||
Stock-based compensation | 1,770 | 1,554 | ||||
Gain on disposition of assets, net | (182) | (1,208) | ||||
Non-cash interest expense | 2,828 | — | ||||
Non-cash gain on extinguishment of debt | (10,128) | — | ||||
Deferred income taxes | 86 | (84) | ||||
Amortization of deferred financing costs | 836 | 709 | ||||
Bad debt (recovery) expense | (52) | 16 | ||||
Changes in operating assets and liabilities | ||||||
Accounts receivable | (6,863) | 26,985 | ||||
Inventories | (40) | (7) | ||||
Prepaid expenses and other assets | 1,929 | 660 | ||||
Accounts payable and accrued liabilities | 7,322 | (17,948) | ||||
Net cash (used in) provided by operating activities | (7,703) | 7,092 | ||||
Cash flows from investing activities | ||||||
Purchases of property, plant and equipment | (9,692) | (12,688) | ||||
Proceeds from the sale of assets | 1,849 | 2,445 | ||||
Collection of principal on note receivable | — | 145 | ||||
Net cash used in investing activities | (7,843) | (10,098) | ||||
Cash flows from financing activities | ||||||
Borrowings under Revolving ABL Credit Facility | 4,309 | 11,038 | ||||
Repayments under Revolving ABL Credit Facility | (17) | (11,038) | ||||
Borrowings under PPP Loan | — | 10,000 | ||||
Proceeds from issuance of common stock through at-the-market facility, net of issuance costs | 3,859 | 10,257 | ||||
Proceeds from issuance of common stock under purchase agreement | 2,072 | — | ||||
Purchase of treasury stock | — | (66) | ||||
RSUs withheld for taxes | (11) | (79) | ||||
Payments for finance lease obligations | (2,643) | (3,499) | ||||
Net cash provided by financing activities | 7,569 | 16,613 | ||||
Net (decrease) increase in cash and cash equivalents | (7,977) | 13,607 | ||||
Cash and cash equivalents | ||||||
Beginning of period | 12,279 | 5,206 | ||||
End of period | $ | 4,302 | $ | 18,813 | ||
Nine Months Ended September 30, | ||||||
2021 | 2020 | |||||
Supplemental disclosure of cash flow information | ||||||
Cash paid during the period for interest | $ | 6,660 | $ | 10,275 | ||
Supplemental disclosure of non-cash investing and financing activities | ||||||
Change in property, plant and equipment purchases in accounts payable | $ | 3,755 | $ | (7,488) | ||
Additions to property, plant and equipment through finance leases | $ | 754 | $ | 3,326 | ||
Extinguishment of finance lease obligations from sale of assets classified as finance leases | $ | — | $ | (1,504) | ||
Transfer of assets from held and used to held for sale | $ | (1,082) | $ | — | ||
Gain on extinguishment of debt | $ | 10,000 | $ | — | ||
The following table provides various financial and operational data for the Company's operations for the three months ended September 30, 2021 and 2020 and June 30, 2021 and the nine months ended September 30, 2021 and 2020. 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 our 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, | ||||||||||||||||||
2021 | 2020 | 2021 | 2021 | 2020 | ||||||||||||||||
Number of marketed rigs end of period (1) | 24 | 29 | 24 | 24 | 29 | |||||||||||||||
Rig operating days (2) | 1,268 | 460 | 1,077 | 3,273 | 3,032 | |||||||||||||||
Average number of operating rigs (3) | 13.8 | 5.0 | 11.8 | 12.0 | 11.1 | |||||||||||||||
Rig utilization (4) | 58 | % | 17 | % | 49 | % | 50 | % | 38 | % | ||||||||||
Average revenue per operating day (5) | $ | 17,141 | $ | 18,078 | $ | 16,514 | $ | 16,459 | $ | 19,536 | ||||||||||
Average cost per operating day (6) | $ | 13,685 | $ | 14,155 | $ | 13,352 | $ | 13,285 | $ | 14,049 | ||||||||||
Average rig margin per operating day | $ | 3,456 | $ | 3,923 | $ | 3,162 | $ | 3,174 | $ | 5,487 | ||||||||||
___________________ | |
(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 our rigs are earning revenue under a contract during the period, including days that standby revenues are 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 our 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 |
(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 |
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 our financial statements, such as industry analysts, investors, lenders and rating agencies. In addition, adjusted EBITDA is consistent with how EBITDA is calculated under our credit facility for purposes of determining our compliance with various financial covenants. We define "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. We define "EBITDA" as earnings (or loss) before interest, taxes, depreciation, and amortization, and we define "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 our 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 our stockholders to more effectively evaluate our operating performance and compliance with various financial covenants under our credit facility and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure or non-recurring, non-cash transactions. We exclude 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 our 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 our 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. Our presentation of adjusted net (loss) income, EBITDA and adjusted EBITDA should not be construed as an inference that our results will be unaffected by unusual or non-recurring items. Our 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) | (Unaudited) | |||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | June 30, | September 30, | ||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2021 | 2020 | ||||||||||||||||||||||||||
Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||
Net loss | $ | (4,302) | $ | (0.59) | $ | (15,199) | $ | (2.67) | $ | (14,901) | $ | (2.22) | $ | (35,228) | $ | (5.22) | $ | (53,542) | $ | (11.91) | ||||||||||
Add back: | ||||||||||||||||||||||||||||||
Asset impairment, net (1) | 482 | 0.07 | — | — | 250 | 0.04 | 775 | 0.12 | 16,619 | 3.70 | ||||||||||||||||||||
Loss (gain) on disposition of | 222 | 0.03 | (326) | (0.06) | 31 | — | (182) | (0.03) | (1,208) | (0.27) | ||||||||||||||||||||
Severance expense (3) | — | — | — | — | — | — | — | — | 1,076 | 0.24 | ||||||||||||||||||||
Gain on extinguishment of debt (4) | (10,128) | (1.38) | — | — | — | — | (10,128) | (1.50) | — | — | ||||||||||||||||||||
Adjusted net loss | $ | (13,726) | $ | (1.87) | $ | (15,525) | $ | (2.73) | $ | (14,620) | $ | (2.18) | $ | (44,763) | $ | (6.63) | $ | (37,055) | $ | (8.24) | ||||||||||
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA: | |||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | June 30, | September 30, | |||||||||||||
2021 | 2020 | 2021 | 2021 | 2020 | |||||||||||
(in thousands) | |||||||||||||||
Net loss | $ | (4,302) | $ | (15,199) | $ | (14,901) | $ | (35,228) | $ | (53,542) | |||||
Add back: | |||||||||||||||
Income tax expense (benefit) | 19 | (31) | 33 | 86 | (84) | ||||||||||
Interest expense | 3,812 | 3,554 | 3,773 | 11,294 | 10,812 | ||||||||||
Depreciation and amortization | 9,739 | 10,767 | 9,516 | 29,244 | 33,338 | ||||||||||
Asset impairment, net (1) | 482 | — | 250 | 775 | 16,619 | ||||||||||
EBITDA | 9,750 | (909) | (1,329) | 6,171 | 7,143 | ||||||||||
Loss (gain) on disposition of assets, net (2) | 222 | (326) | 31 | (182) | (1,208) | ||||||||||
Stock-based and deferred compensation cost | 819 | 694 | 929 | 2,421 | 1,554 | ||||||||||
Severance expense (3) | — | — | — | — | 1,076 | ||||||||||
Gain on extinguishment of debt (4) | (10,128) | — | — | (10,128) | — | ||||||||||
Adjusted EBITDA | $ | 663 | $ | (541) | $ | (369) | $ | (1,718) | $ | 8,565 | |||||
___________________ | |
(1) | During the third quarter of 2021, we impaired |
(2) | In the third quarter of 2021 and 2020, and the second quarter of 2021, we recorded a loss, gain and loss, respectively, on the disposition of miscellaneous drilling equipment in the respective quarter. |
(3) | Severance expense of |
(4) | During the third quarter of 2021, we received notice from the SBA of full forgiveness of our PPP loan and recorded gain on extinguishment of debt of |
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 were Independence Contract Drilling's financial results for Q3 2021?
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