Independence Contract Drilling, Inc. Reports Financial Results For The Second Quarter Ended June 30, 2021 And Additional Rig Reactivations
Independence Contract Drilling (ICD) reported a net loss of $14.9 million, or $2.22 per share, for Q2 2021, an adjusted net loss of $14.6 million, or $2.18 per share. Revenues were $19.8 million, down from $21.4 million in Q2 2020, yet improved from $15.5 million in Q1 2021. Operating rig utilization increased to 49%, and adjusted EBITDA loss improved sequentially by 82%. The company plans to reactivate more rigs amid rising demand, particularly for its 300 series rigs in the Haynesville area, anticipating better financial performance moving forward.
- 82% sequential improvement in adjusted EBITDA loss.
- 49% fleet utilization, a 14% sequential increase.
- Revenue per day increased sequentially due to higher dayrates.
- Expectations of further revenue growth and margin improvement.
- Net loss increased from $10.1 million year-over-year.
- Operating costs rose to $17.0 million, higher than $14.1 million in Q2 2020.
- Total revenues decreased from $21.4 million in Q2 2020.
HOUSTON, Aug. 4, 2021 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today reported financial results for the three months ended June 30, 2021.
Second quarter 2021 Highlights
- Net loss, as defined below, of
$14.9 million , or$2.22 per share. - Adjusted net loss, as defined below, of
$14.6 million , or$2.18 per share. - Adjusted EBITDA loss, as defined below, of
$0.4 million , representing an82% sequential improvement from the first quarter of 2021. - Net debt, excluding finance leases and net of deferred financing costs, of
$134.6 million . - Marketed fleet utilization of
49% , representing a14% sequential improvement from the first quarter of 2021. - Fully burdened margin of
$3,162 per day, representing a13% sequential improvement from the first quarter of 2021.
In the second quarter of 2021, the Company reported revenues of
Chief Executive Officer Anthony Gallegos commented, "Second quarter 2021 played out very much as we anticipated as our operations continued their forward momentum across all fronts. We continued to break drilling records for our customers, expanded our ESG efforts, and reactivated additional 300 series rigs. We exited the second quarter with 13 rigs operating, and our 14th and 15th rigs, both 300 series, reactivating shortly thereafter in July. Of these 15 rigs, six are 300 series. Reactivations were completed on time and on budget.
On the dayrate front, our strategy of focusing on shorter term contracts until dayrates fully recover continued to pay dividends. Second quarter renewals and reactivations, along with another eight rigs scheduled to re-rate throughout the third quarter, are expected to drive sequential revenue per day increases through the remainder of the year. Strong cost control also continued during the quarter, with further expected improvements to come as our operating rig base increases. We also continued to make progress on the ESG front. All ICD rigs are dual-fuel enabled and utility-grid hi-line electric power capable, and
Looking forward, we continue to expect increasing demand for all of our rigs across our operating basins, in particular our 300 series rigs and in the Haynesville where strong natural gas prices and outlooks coupled with fewer qualified drilling contractors is driving increasing demand for ICD rigs. Based upon current conversations with our customers, we expect there is further utilization upside for ICD during the remainder of the year with stronger demand at year end and in 2022 as our customers continue efforts to replace and increase production against a backdrop of improving fundamentals and depleting DUC inventories."
Quarterly Operational Results
In the second quarter of 2021, operating days increased sequentially by over
Operating revenues in the second quarter of 2021 totaled
Operating costs in the second quarter of 2021 totaled
Excluding the impact from reactivation costs, fully burdened rig operating margins in the second quarter of 2021 were
Selling, general and administrative expenses in the second quarter of 2021 were
Drilling Operations Update
The Company exited the second quarter with 13 operating rigs and with two additional rigs reactivating in July 2021. Overall, the Company's operating rig count averaged 11.8 rigs during the quarter. Based on current customer inquiries, the Company expects to reactivate several additional rigs during the remainder of the year. 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 second quarter of 2021 were
As of June 30, 2021, the Company had cash on hand of
During the second quarter of 2021, the Company completed its 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, August 4, 2021, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's second 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 10158631. The replay will be available until August 11, 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, 750,000# hookload, 3 high pressure pumps, 4 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 1,000,000# 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 | ||||||
June 30, 2021 | December 31, 2020 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 6,032 | $ | 12,279 | ||
Accounts receivable, net | 14,062 | 10,023 | ||||
Inventories | 1,077 | 1,038 | ||||
Assets held for sale | 507 | — | ||||
Prepaid expenses and other current assets | 2,308 | 4,102 | ||||
Total current assets | 23,986 | 27,442 | ||||
Property, plant and equipment, net | 368,733 | 382,239 | ||||
Other long-term assets, net | 3,006 | 3,528 | ||||
Total assets | $ | 395,725 | $ | 413,209 | ||
Liabilities and Stockholders' Equity | ||||||
Liabilities | ||||||
Current portion of long-term debt (1) | $ | 13,642 | $ | 7,637 | ||
Accounts payable | 10,245 | 4,072 | ||||
Accrued liabilities | 10,860 | 10,723 | ||||
Current portion of merger consideration payable to an affiliate | 2,902 | — | ||||
Total current liabilities | 37,649 | 22,432 | ||||
Long-term debt (2) | 133,825 | 137,633 | ||||
Merger consideration payable to an affiliate | — | 2,902 | ||||
Deferred income taxes, net | 572 | 505 | ||||
Other long-term liabilities | 2,733 | 2,704 | ||||
Total liabilities | 174,779 | 166,176 | ||||
Commitments and contingencies | ||||||
Stockholders' equity | ||||||
Common stock, | 72 | 62 | ||||
Additional paid-in capital | 522,777 | 517,948 | ||||
Accumulated deficit | (297,990) | (267,064) | ||||
Treasury stock, at cost, 78,578 shares and 78,578 shares, respectively | (3,913) | (3,913) | ||||
Total stockholders' equity | 220,946 | 247,033 | ||||
Total liabilities and stockholders' equity | $ | 395,725 | $ | 413,209 | ||
(1) | As of June 30, 2021 and December 31, 2020, current portion of long-term debt includes |
(2) | As of June 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 | Six Months Ended | ||||||||||||||
June 30, | March 31, | June 30, | |||||||||||||
2021 | 2020 | 2021 | 2021 | 2020 | |||||||||||
Revenues | $ | 19,817 | $ | 21,381 | $ | 15,542 | $ | 35,359 | $ | 59,875 | |||||
Costs and expenses | |||||||||||||||
Operating costs | 17,040 | 14,095 | 14,541 | 31,581 | 44,324 | ||||||||||
Selling, general and administrative | 4,075 | 3,544 | 3,686 | 7,761 | 7,305 | ||||||||||
Severance expense | — | — | — | — | 1,076 | ||||||||||
Depreciation and amortization | 9,516 | 11,055 | 9,989 | 19,505 | 22,571 | ||||||||||
Asset impairment, net | 250 | — | 43 | 293 | 16,619 | ||||||||||
Loss (gain) on disposition of assets, net | 31 | (836) | (435) | (404) | (882) | ||||||||||
Total costs and expenses | 30,912 | 27,858 | 27,824 | 58,736 | 91,013 | ||||||||||
Operating loss | (11,095) | (6,477) | (12,282) | (23,377) | (31,138) | ||||||||||
Interest expense | (3,773) | (3,654) | (3,709) | (7,482) | (7,258) | ||||||||||
Loss before income taxes | (14,868) | (10,131) | (15,991) | (30,859) | (38,396) | ||||||||||
Income tax expense (benefit) | 33 | (11) | 34 | 67 | (53) | ||||||||||
Net loss | $ | (14,901) | $ | (10,120) | $ | (16,025) | $ | (30,926) | $ | (38,343) | |||||
Loss per share: | |||||||||||||||
Basic and diluted | $ | (2.22) | $ | (2.52) | $ | (2.58) | $ | (4.78) | $ | (9.87) | |||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic and diluted | 6,714 | 4,018 | 6,215 | 6,466 | 3,884 | ||||||||||
INDEPENDENCE CONTRACT DRILLING, INC. Unaudited (in thousands, except par value and share data) | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
Six Months Ended June 30, | ||||||
2021 | 2020 | |||||
Cash flows from operating activities | ||||||
Net loss | $ | (30,926) | $ | (38,343) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities | ||||||
Depreciation and amortization | 19,505 | 22,571 | ||||
Asset impairment, net | 293 | 16,619 | ||||
Stock-based compensation | 1,217 | 860 | ||||
Gain on disposition of assets, net | (404) | (882) | ||||
Interest expense (non-cash) | 2,828 | — | ||||
Deferred income taxes | 67 | (53) | ||||
Amortization of deferred financing costs | 558 | 431 | ||||
Bad debt expense | — | 149 | ||||
Changes in operating assets and liabilities | ||||||
Accounts receivable | (4,039) | 22,622 | ||||
Inventories | (39) | (16) | ||||
Prepaid expenses and other assets | 2,209 | 1,319 | ||||
Accounts payable and accrued liabilities | 3,862 | (16,258) | ||||
Net cash (used in) provided by operating activities | (4,869) | 9,019 | ||||
Cash flows from investing activities | ||||||
Purchases of property, plant and equipment | (4,295) | (12,126) | ||||
Proceeds from the sale of assets | 739 | 1,002 | ||||
Collection of principal on note receivable | — | 145 | ||||
Net cash used in investing activities | (3,556) | (10,979) | ||||
Cash flows from financing activities | ||||||
Borrowings under Revolving ABL Credit Facility | 9 | 11,038 | ||||
Repayments under Revolving ABL Credit Facility | (8) | (11,038) | ||||
Borrowings under PPP Loan | — | 10,000 | ||||
Proceeds from issuance of common stock through at-the-market facility, net of issuance costs | 1,993 | 6,801 | ||||
Proceeds from issuance of common stock under purchase agreement | 1,949 | — | ||||
Purchase of treasury stock | — | (66) | ||||
RSUs withheld for taxes | (11) | (79) | ||||
Payments for finance lease obligations | (1,754) | (2,506) | ||||
Net cash provided by financing activities | 2,178 | 14,150 | ||||
Net (decrease) increase in cash and cash equivalents | (6,247) | 12,190 | ||||
Cash and cash equivalents | ||||||
Beginning of period | 12,279 | 5,206 | ||||
End of period | $ | 6,032 | $ | 17,396 | ||
Six Months Ended June 30, | ||||||
2021 | 2020 | |||||
Supplemental disclosure of cash flow information | ||||||
Cash paid during the period for interest | $ | 3,406 | $ | 7,021 | ||
Supplemental disclosure of non-cash investing and financing activities | ||||||
Change in property, plant and equipment purchases in accounts payable | $ | 2,171 | $ | (7,412) | ||
Additions to property, plant and equipment through finance leases | $ | 632 | $ | 2,434 | ||
Extinguishment of finance lease obligations from sale of assets classified as finance leases | $ | — | $ | (599) | ||
Transfer of assets from held and used to held for sale | $ | (550) | $ | — | ||
The following table provides various financial and operational data for the Company's operations for the three months ended June 30, 2021 and 2020 and March 31, 2021 and the six months ended June 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 | Six Months Ended | |||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||
2021 | 2020 | 2021 | 2021 | 2020 | ||||||||||||||||
Number of marketed rigs end of period (1) | 24 | 29 | 24 | 24 | 29 | |||||||||||||||
Rig operating days (2) | 1,077 | 834 | 929 | 2,006 | 2,572 | |||||||||||||||
Average number of operating rigs (3) | 11.8 | 9.2 | 10.3 | 11.1 | 14.1 | |||||||||||||||
Rig utilization (4) | 49 | % | 32 | % | 43 | % | 46 | % | 49 | % | ||||||||||
Average revenue per operating day (5) | $ | 16,514 | $ | 19,741 | $ | 15,465 | $ | 16,028 | $ | 19,796 | ||||||||||
Average cost per operating day (6) | $ | 13,352 | $ | 12,741 | $ | 12,663 | $ | 13,033 | $ | 14,030 | ||||||||||
Average rig margin per operating day | $ | 3,162 | $ | 7,000 | $ | 2,802 | $ | 2,995 | $ | 5,766 | ||||||||||
(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) loss on disposition of assets, net; intangible revenue; severance and merger-related expenses; 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, gains or losses on disposition of assets, 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 | Six Months Ended | |||||||||||||||||||||||||||||
June 30, | March 31, | June 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 | $ | (14,901) | $ | (2.22) | $ | (10,120) | $ | (2.52) | $ | (16,025) | $ | (2.58) | $ | (30,926) | $ | (4.78) | $ | (38,343) | $ | (9.87) | ||||||||||
Add back: | ||||||||||||||||||||||||||||||
Asset impairment, net (1) | 250 | 0.04 | — | — | 43 | 0.01 | 293 | 0.04 | 16,619 | 4.28 | ||||||||||||||||||||
Loss (gain) on disposition of assets, net (2) | 31 | — | (836) | (0.21) | (435) | (0.07) | (404) | (0.06) | (882) | (0.23) | ||||||||||||||||||||
Severance expense (3) | — | — | — | — | — | — | — | — | 1,076 | 0.28 | ||||||||||||||||||||
Adjusted net loss | $ | (14,620) | $ | (2.18) | $ | (10,956) | $ | (2.73) | $ | (16,417) | $ | (2.64) | $ | (31,037) | $ | (4.80) | $ | (21,530) | $ | (5.54) | ||||||||||
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA: | ||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2021 | 2020 | ||||||||||||
(in thousands) | ||||||||||||||||
Net loss | $ | (14,901) | $ | (10,120) | $ | (16,025) | $ | (30,926) | $ | (38,343) | ||||||
Add back: | ||||||||||||||||
Income tax expense (benefit) | 33 | (11) | 34 | 67 | (53) | |||||||||||
Interest expense | 3,773 | 3,654 | 3,709 | 7,482 | 7,258 | |||||||||||
Depreciation and amortization | 9,516 | 11,055 | 9,989 | 19,505 | 22,571 | |||||||||||
Asset impairment, net (1) | 250 | — | 43 | 293 | 16,619 | |||||||||||
EBITDA | (1,329) | 4,578 | (2,250) | (3,579) | 8,052 | |||||||||||
Loss (gain) on disposition of assets, net (2) | 31 | (836) | (435) | (404) | (882) | |||||||||||
Stock-based and non-cash deferred compensation cost | 929 | 290 | 673 | 1,602 | 860 | |||||||||||
Severance expense (3) | — | — | — | — | 1,076 | |||||||||||
Adjusted EBITDA | $ | (369) | $ | 4,032 | $ | (2,012) | $ | (2,381) | $ | 9,106 | ||||||
(1) | During the second quarter of 2021, we impaired a damaged piece of drilling equipment for |
(2) | In the second quarter of 2021 and 2020, and the first quarter of 2021, we recorded a loss, gain and gain, respectively, on the disposition of miscellaneous drilling equipment in the respective quarter. |
(3) | Severance expense 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 Q2 2021 earnings results?
How did ICD's rig utilization performance change in Q2 2021?
What is the outlook for Independence Contract Drilling in the upcoming quarters?
