Independence Contract Drilling, Inc. Reports Unaudited Financial Results For The First Quarter Ended March 31, 2022
Independence Contract Drilling (ICD) reported a net loss of $12.2 million or $1.08 per share for Q1 2022, despite revenues increasing to $35.0 million from $15.5 million year-over-year. The adjusted EBITDA improved to $3.6 million, marking a 146% sequential increase. Utilization of marketed fleet stood at 68% with expectations of a further 30% to 35% improvement in margins in Q2 2022. The company ended the quarter with net debt of $140.1 million and plans to reactivate additional rigs, focusing on high-demand 300 series rigs.
- Revenues increased to $35.0 million in Q1 2022 from $15.5 million in Q1 2021.
- Adjusted EBITDA improved to $3.6 million, a 146% increase sequentially.
- Expected 30% to 35% sequential improvement in margins in Q2 2022.
- Operating days increased 6% compared to Q4 2021.
- Net loss of $12.2 million, or $1.08 per share for Q1 2022.
- Operating costs rose to $27.2 million, up from $14.5 million in Q1 2021.
HOUSTON, May 5, 2022 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today reported financial results for the three months ended March 31, 2022.
First quarter 2022 Highlights
- Net loss, as defined below, of
$12.2 million , or$1.08 per share. - Adjusted net loss, as defined below, of
$11.2 million , or$0.99 per share. - Adjusted EBITDA, as defined below, of
$3.6 million , representing an approximate146% sequential improvement from the fourth quarter of 2021. - Net debt, excluding finance leases and net of deferred financing costs, of
$140.1 million . - Marketed fleet utilization of
68% . - Fully burdened margin of
$5,754 per day.
In the first quarter of 2022, the Company reported revenues of
Chief Executive Officer Anthony Gallegos commented, "We are pleased that increasing demand, pricing and margin generating capability for ICD's pad optimal, super-spec ShaleDriller rigs are reflected in our first quarter 2022 results, in-line with our prior forecasts. More exciting is that we expect an incremental
I could not be more excited about ICD's strategic positioning in this market dynamic. With our focus on short-term, pad-to-pad contracts, we are poised to quickly convert this rapidly improving dayrate momentum into our reported results. Right now, we do not have a single contract extending past mid-October. With our term loan refinancing now complete, we have resumed our rig reactivation plans with our 18th rig expected to be placed into service early in the third quarter and two additional reactivations planned during the remainder of the year. All three of these incremental rigs will be 300 series rigs. Rigs meeting our 300 series specifications are in the shortest supply and enjoy the highest demand in the industry. These rigs earn the highest dayrate and margins, and we expect each of these rig reactivation investments to pay back in less than one year and yield meaningful investment returns. We believe all of this sets up ICD very nicely to reach our goal of entering 2023 generating rig margins of
We also continue to enhance our customer mix and recently contracted a rig with one of the very largest independent oil and gas operators in the Permian basin. On the ESG front, I am extremely proud that ICD was selected by an existing customer, one of the largest international E&P companies in the world, to drill their pilot carbon capture well program in the lower 48. I believe the selection of ICD for this high-profile operation is further validation of the quality of our equipment, drilling teams and operations, and reflects the confidence that our customers have in us to provide the safest and most efficient contract drilling services in our industry."
Quarterly Operational Results
In the first quarter of 2022, operating days increased sequentially by
Operating revenues in the first quarter of 2022 totaled
Operating costs in the first quarter of 2022 totaled
Excluding the impact from reactivation costs, fully burdened rig operating margins in the first quarter of 2022 were
Selling, general and administrative expenses in the first quarter of 2022 were
Drilling Operations Update
The Company exited the first quarter with 17 rigs operating, with our 18th rig scheduled to be reactivated early in the third quarter of 2022. Overall, the Company's operating rig count averaged 16.3 rigs during the quarter. 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 first quarter of 2022, net of asset sales and recoveries, were
As of March 31, 2022, the Company had cash on hand of
During the first quarter of 2022, the Company issued an aggregate of 1.1 million shares of its common stock through at-the-market ("ATM") offerings raising
Conference Call Details
A conference call for investors will be held today, May 5, 2022, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's first 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 9952288. The replay will be available until May 12, 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.
Certain Defined Terms
Pad-Optimal, Super-Spec 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, Super-Spec 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 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 | 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 | 10,681 | 15,617 | ||||
Current portion of merger consideration payable to an affiliate | — | 2,902 | ||||
Total current liabilities | 33,412 | 38,287 | ||||
Long-term debt (2) | 150,663 | 141,740 | ||||
Deferred income taxes, net | 18,613 | 19,037 | ||||
Other long-term liabilities | 1,894 | 2,811 | ||||
Total liabilities | 204,582 | 201,875 | ||||
Commitments and contingencies | ||||||
Stockholders' equity | ||||||
Common stock, | 136 | 102 | ||||
Additional paid-in capital | 545,575 | 532,826 | ||||
Accumulated deficit | (345,986) | (333,776) | ||||
Treasury stock, at cost, 81,846 shares and 81,846 shares, respectively | (3,923) | (3,923) | ||||
Total stockholders' equity | 195,802 | 195,229 | ||||
Total liabilities and stockholders' equity | $ | 400,384 | $ | 397,104 | ||
(1) | As of March 31, 2022 and December 31, 2021, current portion of long-term debt includes |
(2) | As of March 31, 2022 and December 31, 2021, long-term debt includes |
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 | (4,461) | (3,709) | (3,899) | ||||||
Loss on extinguishment of debt | (1,533) | — | — | ||||||
Loss before income taxes | (12,631) | (15,991) | (13,038) | ||||||
Income tax (benefit) expense | (421) | 34 | 18,446 | ||||||
Net loss | $ | (12,210) | $ | (16,025) | $ | (31,484) | |||
Loss per share: | |||||||||
Basic and diluted | $ | (1.08) | $ | (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 | $ | (12,210) | $ | (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 | 1,533 | — | ||||
Amortization of deferred financing costs | 250 | 279 | ||||
Deferred income taxes | (421) | 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 | (2,209) | (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 | ||||||
(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 |
(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 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 | $ | (12,210) | $ | (1.08) | $ | (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) | 1,533 | 0.14 | — | — | — | — | ||||||||||||
Adjusted net loss | $ | (11,193) | $ | (0.99) | $ | (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 | $ | (12,210) | $ | (16,025) | $ | (31,484) | |||
Add back: | |||||||||
Income tax (benefit) expense | (421) | 34 | 18,446 | ||||||
Interest expense | 4,461 | 3,709 | 3,899 | ||||||
Depreciation and amortization | 9,751 | 9,989 | 9,671 | ||||||
Asset impairment (1) | — | 43 | 25 | ||||||
EBITDA | 1,581 | (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) | 1,533 | — | — | ||||||
Adjusted EBITDA | $ | 3,575 | $ | (2,012) | $ | 1,452 | |||
(1) | In the first quarter of 2021, the Company recorded an asset impairment of |
(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 the unamortized deferred financing costs of the Term Loan in the first quarter of 2022. |
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.
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