HOUSTON, March 2,
2023 /PRNewswire/ -- Independence Contract Drilling,
Inc. (the "Company" or "ICD") (NYSE: ICD) today reported financial
results for the three and twelve months ended
December 31, 2022.
Fourth quarter 2022 Highlights
- Net income, as defined below, of $3.5
million, or $0.20 per diluted
share.
- Adjusted net loss, as defined below, of $0.1 million, or $0.01 per share.
- Adjusted EBITDA, as defined below, of $18.5 million, representing an approximate 48%
sequential improvement from the third quarter of 2022.
- Adjusted net debt, as defined below, of $182.5 million.
- 18.5 average rigs working during the quarter.
- Fully burdened margin per day of $14,517 representing an approximate 28%
sequential improvement from the third quarter of 2022.
In the fourth quarter of 2022, the Company reported revenues of
$60.3 million, net income of
$3.5 million, or $0.20 per diluted share, adjusted net loss
(defined below) of $0.1 million, or
$0.01 per share, and adjusted EBITDA
(defined below) of $18.5
million. These results compare to revenues of
$28.6 million, a net loss of
$31.5 million, or $3.23 per share, adjusted net loss of
$13.2 million, or $1.35 per share, and adjusted EBITDA of
$1.5 million in the fourth quarter of
2021, and revenues of $49.1 million,
a net loss of $7.2 million, or
$0.53 per share, an adjusted net loss
of $4.8 million, or $0.35 per share, and adjusted EBITDA of
$12.5 million in the third quarter of
2022.
For the year ended December 31,
2022, the Company reported revenues of $186.7 million, a net loss of $65.3 million, or $5.01 per share, an adjusted net loss of
$25.7 million, or $1.98 per share, and adjusted EBITDA of
$43.8 million. This compares to
revenues of $88.0 million, a net loss
of $66.7 million, or $8.89 per share, an adjusted net loss of
$57.9 million, or $7.72 per share, and adjusted EBITDA loss of
$0.3 million for the year ended
December 31, 2021.
Chief Executive Officer Anthony
Gallegos commented, "Fiscal 2022 was a transformative year
for ICD and one in which we attained record levels of quarterly
revenues, margins and EBITDA. Financially, we have closed the
historic margin- per-day gap between ICD and our larger
competitors. Operationally, we have transformed our fleet
with the penetration of our 300 series rigs and commencement of our
200-to-300 series rig conversion program. Despite the
operational challenges associated with achieving this growth while
navigating an historically tight labor market, we maintained
operational integrity and achieved a safety record in 2022 well
below U.S. land drilling averages.
The overall market for pad optimal super spec rigs remains
strong with greater than 90% utilization of this class of
rig. However, while oil directed drilling activity in the
Permian remains robust, recent declines in natural gas prices as
well as take-away constraints have created softness in the
natural-gas-driven Haynesville market. Against a backdrop of a
shrinking Haynesville rig count, we have begun to transition rigs
from the Haynesville to our customer base in the Permian
Basin. Our first rig moved in late February, and we expect
additional relocations to the Permian through the summer of
2023. Our 21st rig is scheduled to reactivate and begin
operations during the second quarter of 2023 in the Permian
Basin. However, in light of the recent shift in operational
focus towards transitioning rigs from our Haynesville operation to
the Permian Basin, we intend to postpone reactivation of our 22nd
rig and will re-evaluate additional reactivation opportunities once
our planned rig relocations are complete.
With this backdrop, as our pace of rig reactivations temporarily
slows, progress towards our free cash flow and net debt reduction
targets will accelerate as cash flow previously earmarked for rig
reactivations will begin accumulating on our balance sheet, with a
goal to be below 2x levered as we exit 2023 on a net debt basis.
Our 2023 capital expenditure budget is currently set at
$30.4 million, net of
disposals. We also expect to see further sequential
improvements in revenues and margin per day during the first
quarter of 2023. Our current expectations are that first quarter
margin per day will exceed reported fourth quarter levels between
3% and 7%, and we are excited about further opportunities for
margin expansion beyond these levels once rig transitions to the
Permian are complete."
Quarterly Operational Results
In the fourth quarter of 2022, operating days increased
sequentially by 6% compared to the third quarter of 2022. The
Company's marketed fleet operated at 71% utilization and recorded
1,704 revenue days, compared to 1,378 revenue days in the fourth
quarter of 2021, and 1,601 revenue days in the third quarter of
2022.
Operating revenues in the fourth quarter of 2022 totaled
$60.3 million, compared to
$28.6 million in the fourth quarter
of 2021 and $49.1 million in the
third quarter of 2022. Revenue per day in the fourth quarter
of 2022 was $32,778, compared to
$19,042 in the fourth quarter of 2021
and $28,646 in the third 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 fourth quarter of 2022 totaled
$36.0 million, compared to
$24.0 million in the fourth quarter
of 2021 and $31.4 million in third
quarter of 2022. Fully burdened operating costs were
$18,261 per day in the fourth quarter
of 2022, compared to $15,504 in the
fourth quarter of 2021 and $17,305 in
the third quarter of 2022. Sequential increases in operating
costs per day were driven primarily by higher labor costs
associated with increases in field-level incentive
compensation.
Fully burdened rig operating margins in the fourth quarter of
2022 were $14,517 per day, compared
to $3,538 per day in the fourth
quarter of 2021 and $11,341 per day
in the third quarter of 2022. The Company currently expects
per day operating margins in the first quarter of 2023 to increase
sequentially between 3% and 7% compared to the fourth quarter of
2022, driven primarily by favorable dayrate momentum on reactivated
rigs and contract repricing.
Selling, general and administrative expenses in the fourth
quarter of 2022 were $7.7 million
(including $1.9 million of non-cash
compensation), compared to $3.9
million (including $0.8
million of non-cash compensation) in the fourth quarter of
2021 and $7.0 million (including
$1.7 million of non-cash
compensation) in the third quarter of 2022. Cash selling,
general and administrative expenses increased sequentially during
the quarter due to higher incentive compensation accruals.
Stock-based incentive compensation expense increased due to
variable accounting tied to period end stock prices.
During the fourth quarter of 2022, the Company recorded interest
expense of $8.6 million, including
$2.4 million, or $0.18 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.
The Company recorded a tax benefit of $7.0 million, or $0.51 per share, during the fourth quarter of
2022. This included a non-cash benefit of $6.8 million, or $0.50 per share, related to deductibility of
Convertible Notes interest. This non-cash benefit was
excluded when presenting adjusted net income/loss.
Drilling Operations Update
The Company exited the fourth quarter with 20 rigs operating.
Overall, the Company's operating rig count averaged 18.5 rigs
during the quarter. The Company's backlog of drilling
contracts with original terms of six months or longer is
$79.1 million. This backlog
excludes rigs operating on short term pad-to-pad drilling
contracts. All of this backlog is expected to be realized in
2023.
Capital Expenditures and Liquidity Update
Cash outlays for capital expenditures in the fourth quarter of
2022, net of asset sales and recoveries, were $18.8 million. This included $13.5 million associated with prior period
deliveries.
As of December 31, 2022, the Company had cash on hand
of $5.3 million and a revolving line
of credit with availability of $21.3
million. The Company reported adjusted net debt as of
December 31, 2022 of $182.5 million, consisting of the full amount of
the outstanding Convertible Notes and outstanding borrowings under
the Company's revolving line of credit. Adjusted net debt
also includes $5.8 million of accrued
interest at year-end under the Company's Convertible Notes that the
Company has elected to pay in-kind when due on March 31, 2023.
Conference Call Details
A conference call for investors will be held today, March 2, 2023, at 11:00
a.m. Central Time (12:00 p.m. Eastern
Time) to discuss the Company's fourth quarter and year end
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 5187801.
The replay will be available until March 9,
2023.
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
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022
|
|
December 31, 2021
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
5,326
|
|
$
|
4,140
|
|
Accounts
receivable
|
|
|
39,775
|
|
|
22,211
|
|
Inventories
|
|
|
1,508
|
|
|
1,171
|
|
Assets held for
sale
|
|
|
325
|
|
|
—
|
|
Prepaid expenses and
other current assets
|
|
|
4,736
|
|
|
4,787
|
|
Total current
assets
|
|
|
51,670
|
|
|
32,309
|
|
Property, plant and
equipment, net
|
|
|
376,084
|
|
|
362,346
|
|
Other long-term assets,
net
|
|
|
1,960
|
|
|
2,449
|
|
Total
assets
|
|
$
|
429,714
|
|
$
|
397,104
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current portion of
long-term debt (1)
|
|
$
|
2,485
|
|
$
|
4,464
|
|
Accounts
payable
|
|
|
31,946
|
|
|
15,304
|
|
Accrued
liabilities
|
|
|
17,608
|
|
|
15,617
|
|
Merger consideration
payable to an affiliate
|
|
|
—
|
|
|
2,902
|
|
Total current
liabilities
|
|
|
52,039
|
|
|
38,287
|
|
Long-term debt
(2)
|
|
|
143,223
|
|
|
141,740
|
|
Deferred income taxes,
net
|
|
|
12,266
|
|
|
19,037
|
|
Other long-term
liabilities
|
|
|
7,474
|
|
|
2,811
|
|
Total
liabilities
|
|
|
215,002
|
|
|
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 13,613,759 and 10,206,085 shares
outstanding, respectively
|
|
|
136
|
|
|
102
|
|
Additional paid-in
capital
|
|
|
617,606
|
|
|
532,826
|
|
Accumulated
deficit
|
|
|
(399,097)
|
|
|
(333,776)
|
|
Treasury stock, at
cost, 85,092 shares and 81,846 shares, respectively
|
|
|
(3,933)
|
|
|
(3,923)
|
|
Total stockholders'
equity
|
|
|
214,712
|
|
|
195,229
|
|
Total liabilities and
stockholders' equity
|
|
$
|
429,714
|
|
$
|
397,104
|
|
_____________________
|
|
(1)
|
As of December 31, 2022
and December 31, 2021, current portion of long-term debt includes
$2.5 million and $4.5 million, respectively, of finance lease
obligations.
|
|
|
|
(2)
|
As of December 31, 2022
and December 31, 2021, long-term debt includes $1.6 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
|
|
Year
Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
60,259
|
|
$
|
28,561
|
|
$
|
49,147
|
|
$
|
186,710
|
|
$
|
87,955
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
35,950
|
|
|
24,047
|
|
|
31,379
|
|
|
123,399
|
|
|
75,751
|
|
Selling, general and
administrative
|
|
|
7,714
|
|
|
3,870
|
|
|
7,007
|
|
|
24,809
|
|
|
15,699
|
|
Depreciation and
amortization
|
|
|
10,724
|
|
|
9,671
|
|
|
10,120
|
|
|
40,443
|
|
|
38,915
|
|
Asset impairment,
net
|
|
|
350
|
|
|
25
|
|
|
—
|
|
|
350
|
|
|
800
|
|
Loss (gain) on
disposition of assets, net
|
|
|
469
|
|
|
(63)
|
|
|
433
|
|
|
(196)
|
|
|
(245)
|
|
Other
expense
|
|
|
—
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
150
|
|
Total costs and
expenses
|
|
|
55,207
|
|
|
37,700
|
|
|
48,939
|
|
|
188,805
|
|
|
131,070
|
|
Operating income
(loss)
|
|
|
5,052
|
|
|
(9,139)
|
|
|
208
|
|
|
(2,095)
|
|
|
(43,115)
|
|
Interest
expense
|
|
|
(8,570)
|
|
|
(3,899)
|
|
|
(8,098)
|
|
|
(29,575)
|
|
|
(15,193)
|
|
(Loss) gain on
extinguishment of debt
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46,347)
|
|
|
10,128
|
|
Change in fair value of
embedded derivative liability
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,265)
|
|
|
—
|
|
Realized gain on
extinguishment of derivative
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,765
|
|
|
—
|
|
Loss before income
taxes
|
|
|
(3,518)
|
|
|
(13,038)
|
|
|
(7,890)
|
|
|
(71,517)
|
|
|
(48,180)
|
|
Income tax (benefit)
expense
|
|
|
(6,979)
|
|
|
18,446
|
|
|
(696)
|
|
|
(6,196)
|
|
|
18,532
|
|
Net income
(loss)
|
|
$
|
3,461
|
|
$
|
(31,484)
|
|
$
|
(7,194)
|
|
$
|
(65,321)
|
|
$
|
(66,712)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.25
|
|
$
|
(3.23)
|
|
$
|
(0.53)
|
|
$
|
(5.01)
|
|
$
|
(8.89)
|
|
Diluted
|
|
$
|
0.20
|
|
$
|
(3.23)
|
|
$
|
(0.53)
|
|
$
|
(5.01)
|
|
$
|
(8.89)
|
|
Weighted average number
of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
13,617
|
|
|
9,743
|
|
|
13,590
|
|
|
13,026
|
|
|
7,507
|
|
Diluted
|
|
|
51,880
|
|
|
9,743
|
|
|
13,590
|
|
|
13,026
|
|
|
7,507
|
|
INDEPENDENCE
CONTRACT DRILLING, INC.
|
|
Unaudited
|
|
(in
thousands)
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Year Ended
December 31,
|
|
|
2022
|
|
2021
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(65,321)
|
|
$
|
(66,712)
|
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
40,443
|
|
|
38,915
|
|
Asset impairment,
net
|
|
|
350
|
|
|
800
|
|
Stock-based
compensation
|
|
|
4,644
|
|
|
2,295
|
|
Gain on disposition of
assets, net
|
|
|
(196)
|
|
|
(245)
|
|
Non-cash interest
expense
|
|
|
15,859
|
|
|
5,883
|
|
Non-cash loss (gain) on
extinguishment of debt
|
|
|
46,347
|
|
|
(10,128)
|
|
Amortization of
deferred financing costs
|
|
|
346
|
|
|
1,115
|
|
Amortization of
Convertible Notes issuance costs and debt discount
|
|
|
6,714
|
|
|
—
|
|
Change in fair value of
embedded derivative liability
|
|
|
4,265
|
|
|
—
|
|
Gain on extinguishment
of derivative
|
|
|
(10,765)
|
|
|
—
|
|
Deferred income
taxes
|
|
|
(6,771)
|
|
|
18,532
|
|
Bad debt expense
(recovery)
|
|
|
256
|
|
|
(52)
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(17,820)
|
|
|
(12,136)
|
|
Inventories
|
|
|
(365)
|
|
|
(133)
|
|
Prepaid expenses and
other assets
|
|
|
266
|
|
|
57
|
|
Accounts payable and
accrued liabilities
|
|
|
10,325
|
|
|
12,230
|
|
Net cash provided by
(used in) operating activities
|
|
|
28,577
|
|
|
(9,579)
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
Purchases of property,
plant and equipment
|
|
|
(43,047)
|
|
|
(16,415)
|
|
Proceeds from the sale
of assets
|
|
|
4,552
|
|
|
2,037
|
|
Proceeds from insurance
claims
|
|
|
191
|
|
|
—
|
|
Net cash used in
investing activities
|
|
|
(38,304)
|
|
|
(14,378)
|
|
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
|
|
|
5,589
|
|
|
6,309
|
|
Repayments under
Revolving ABL Credit Facility
|
|
|
(78)
|
|
|
(17)
|
|
Payment of merger
consideration
|
|
|
(2,902)
|
|
|
—
|
|
Proceeds from issuance
of common stock through at-the-market facility, net of issuance
costs
|
|
|
3,038
|
|
|
8,969
|
|
Proceeds from issuance
of common stock under purchase agreement
|
|
|
—
|
|
|
4,239
|
|
Purchase of treasury
stock
|
|
|
(10)
|
|
|
(10)
|
|
RSUs withheld for
taxes
|
|
|
(10)
|
|
|
(14)
|
|
Convertible debt
issuance costs
|
|
|
(6,986)
|
|
|
—
|
|
Financing costs paid
under Term Loan Facility
|
|
|
—
|
|
|
(64)
|
|
Financing costs paid
under Revolving ABL Credit Facility
|
|
|
(341)
|
|
|
—
|
|
Payments for finance
lease obligations
|
|
|
(5,811)
|
|
|
(3,594)
|
|
Net cash provided by
financing activities
|
|
|
10,913
|
|
|
15,818
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
1,186
|
|
|
(8,139)
|
|
Cash and cash
equivalents
|
|
|
|
|
|
|
|
Beginning of
year
|
|
|
4,140
|
|
|
12,279
|
|
End of year
|
|
$
|
5,326
|
|
$
|
4,140
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
5,084
|
|
$
|
6,918
|
|
Supplemental
disclosure of non-cash investing and financing
activities
|
|
|
|
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
|
$
|
11,686
|
|
$
|
3,564
|
|
Additions to property,
plant and equipment through finance leases
|
|
$
|
4,440
|
|
$
|
1,503
|
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
|
$
|
(281)
|
|
$
|
(65)
|
|
Transfer of assets from
held and used to held for sale
|
|
$
|
(325)
|
|
$
|
(1,082)
|
|
Gain on extinguishment
of debt
|
|
$
|
—
|
|
$
|
10,000
|
|
Initial embedded
derivative liability upon issuance of Convertible Notes
|
|
$
|
75,733
|
|
$
|
—
|
|
Extinguishment of
embedded derivative liability
|
|
$
|
(69,232)
|
|
$
|
—
|
|
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
December 31, 2022 and 2021 and September 30, 2022
and the year ended December 31, 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
|
|
Year
Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of marketed rigs
end of period (1)
|
|
|
26
|
|
|
|
24
|
|
|
|
26
|
|
|
|
26
|
|
|
|
24
|
|
|
Rig operating days
(2)
|
|
|
1,704
|
|
|
|
1,378
|
|
|
|
1,601
|
|
|
|
6,308
|
|
|
|
4,651
|
|
|
Average number of
operating rigs (3)
|
|
|
18.5
|
|
|
|
15.0
|
|
|
|
17.4
|
|
|
|
17.3
|
|
|
|
12.7
|
|
|
Rig utilization
(4)
|
|
|
71
|
%
|
|
|
62
|
%
|
|
|
70
|
%
|
|
|
70
|
%
|
|
|
53
|
%
|
|
Average revenue per
operating day (5)
|
|
$
|
32,778
|
|
|
$
|
19,042
|
|
|
$
|
28,646
|
|
|
$
|
27,258
|
|
|
$
|
17,224
|
|
|
Average cost per
operating day (6)
|
|
$
|
18,261
|
|
|
$
|
15,504
|
|
|
$
|
17,305
|
|
|
$
|
16,940
|
|
|
$
|
13,943
|
|
|
Average rig margin per
operating day
|
|
$
|
14,517
|
|
|
$
|
3,538
|
|
|
$
|
11,341
|
|
|
$
|
10,318
|
|
|
$
|
3,281
|
|
|
______________________
|
|
(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 $4.4 million, $2.3 million and $3.3
million during the three months ended December 31, 2022 and 2021,
and September 30, 2022, respectively, and $14.8 million and $7.8
million during the year ended December 31, 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 $4.4 million, $2.3
million and $3.3 million during the three months ended
December 31, 2022 and 2021, and
September 30, 2022, respectively, and $14.8 million and
$7.8 million during the year ended December 31, 2022 and
2021, respectively; (ii) overhead costs of $0.4 million, $0.4
million and $0.4 million during the three months ended
December 31, 2022 and 2021, and
September 30, 2022, respectively, and $1.8 million and
$1.6 million during the year ended December 31, 2022 and
2021, respectively; and (iii) rig reactivation costs, inclusive of
new crew training costs, of zero and $1.4 million during the year
ended December 31, 2022 and 2021, respectively.
There were no rig reactivation costs for the three months ended
December 31, 2022 and 2021 or September 30, 2022.
|
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)
|
|
December 31, 2022
|
|
Convertible
Notes
|
|
$
|
170,166
|
|
Revolving ABL Credit
Facility
|
|
|
11,811
|
|
Issuance of additional
Convertible Notes for PIK interest due on March 31, 2023
|
|
|
5,842
|
|
Less: Cash
|
|
|
(5,326)
|
|
Adjusted net
debt
|
|
$
|
182,493
|
|
Reconciliation of
Adjusted Net Debt to Reported Long-Term Debt:
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
December 31, 2022
|
|
Adjusted net
debt
|
|
$
|
182,493
|
|
Add back:
|
|
|
|
|
Cash
|
|
|
5,326
|
|
Long-term portion of
finance lease obligations
|
|
|
1,599
|
|
Less:
|
|
|
|
|
Debt discount, net of
amortization
|
|
|
(32,906)
|
|
Deferred issuance
costs, net of amortization
|
|
|
(7,447)
|
|
Issuance of additional
Convertible Notes for PIK interest due on March 31, 2023
|
|
|
(5,842)
|
|
Total reported
long-term debt
|
|
$
|
143,223
|
|
Reconciliation of
Net Income (Loss) to Adjusted Net Loss:
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2022
|
|
2021
|
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
3,461
|
|
$
|
0.25
|
|
$
|
(31,484)
|
|
$
|
(3.23)
|
|
$
|
(7,194)
|
|
$
|
(0.53)
|
|
$
|
(65,321)
|
|
$
|
(5.01)
|
|
$
|
(66,712)
|
|
$
|
(8.89)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment, net
(1)
|
|
|
350
|
|
|
0.03
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
350
|
|
|
0.02
|
|
|
800
|
|
|
0.11
|
|
(Gain) loss on
disposition of assets, net (2)
|
|
|
469
|
|
|
0.03
|
|
|
(63)
|
|
|
(0.01)
|
|
|
433
|
|
|
0.03
|
|
|
(196)
|
|
|
(0.02)
|
|
|
(245)
|
|
|
(0.03)
|
|
Amortization of debt
discount
|
|
|
1,855
|
|
|
0.14
|
|
|
—
|
|
|
—
|
|
|
1,354
|
|
|
0.10
|
|
|
4,671
|
|
|
0.36
|
|
|
—
|
|
|
—
|
|
Amortization of
issuance costs
|
|
|
551
|
|
|
0.04
|
|
|
—
|
|
|
—
|
|
|
606
|
|
|
0.05
|
|
|
1,676
|
|
|
0.13
|
|
|
—
|
|
|
—
|
|
Loss (gain) on
extinguishment of debt (3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,347
|
|
|
3.56
|
|
|
(10,128)
|
|
|
(1.35)
|
|
Change in fair value of
embedded derivative liability (4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,265
|
|
|
0.33
|
|
|
—
|
|
|
—
|
|
Gain on extinguishment
of derivative (5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,765)
|
|
|
(0.83)
|
|
|
—
|
|
|
—
|
|
Purchase agreement
costs (6)
|
|
|
—
|
|
|
—
|
|
|
150
|
|
|
0.02
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
150
|
|
|
0.02
|
|
Non-cash income tax
expense related to IRC Section 382 limitation (7)
|
|
|
—
|
|
|
—
|
|
|
18,192
|
|
|
1.87
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,192
|
|
|
2.42
|
|
Non-cash income tax
benefit related to deductibility of Convertible Note interest
(8)
|
|
|
(6,773)
|
|
|
(0.50)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,773)
|
|
|
(0.52)
|
|
|
—
|
|
|
—
|
|
Adjusted net
loss
|
|
$
|
(87)
|
|
$
|
(0.01)
|
|
$
|
(13,180)
|
|
$
|
(1.35)
|
|
$
|
(4,801)
|
|
$
|
(0.35)
|
|
$
|
(25,746)
|
|
$
|
(1.98)
|
|
$
|
(57,943)
|
|
$
|
(7.72)
|
|
Reconciliation of
Net Income (Loss) to EBITDA and Adjusted EBITDA:
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2022
|
|
2021
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
3,461
|
|
$
|
(31,484)
|
|
$
|
(7,194)
|
|
$
|
(65,321)
|
|
$
|
(66,712)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
(6,979)
|
|
|
18,446
|
|
|
(696)
|
|
|
(6,196)
|
|
|
18,532
|
|
Interest
expense
|
|
|
8,570
|
|
|
3,899
|
|
|
8,098
|
|
|
29,575
|
|
|
15,193
|
|
Depreciation and
amortization
|
|
|
10,724
|
|
|
9,671
|
|
|
10,120
|
|
|
40,443
|
|
|
38,915
|
|
Asset impairment, net
(1)
|
|
|
350
|
|
|
25
|
|
|
—
|
|
|
350
|
|
|
800
|
|
EBITDA
|
|
|
16,126
|
|
|
557
|
|
|
10,328
|
|
|
(1,149)
|
|
|
6,728
|
|
Loss (gain) on
disposition of assets, net (2)
|
|
|
469
|
|
|
(63)
|
|
|
433
|
|
|
(196)
|
|
|
(245)
|
|
Stock-based and
deferred compensation cost
|
|
|
1,890
|
|
|
808
|
|
|
1,709
|
|
|
5,251
|
|
|
3,229
|
|
Loss (gain) on
extinguishment of debt (3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,347
|
|
|
(10,128)
|
|
Change in fair value of
embedded derivative liability (4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,265
|
|
|
—
|
|
Gain on extinguishment
of derivative (5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,765)
|
|
|
—
|
|
Purchase agreement
costs (6)
|
|
|
—
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
150
|
|
Adjusted
EBITDA
|
|
$
|
18,485
|
|
$
|
1,452
|
|
$
|
12,470
|
|
$
|
43,753
|
|
$
|
(266)
|
|
______________________
|
|
(1)
|
During the fourth
quarter of 2022, we impaired $0.4 million of drilling equipment
that was designated held for sale. We impaired the drilling
equipment to fair market value less cost to sell, recorded asset
impairment expense of $0.4 million and recorded $0.3 million of
assets held for sale.
|
|
|
|
(2)
|
Gain or loss on
disposition of assets, net represents recognition of 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 18,
2022 and June 8, 2022. 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.
|
|
|
|
(6)
|
Purchase agreement
costs were recorded in the fourth quarter of 2021 in connection
with the Company's committed equity line of credit.
|
|
|
|
(7)
|
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.
|
|
|
|
(8)
|
During the fourth
quarter of 2022, the Company recorded non-cash income tax benefit
related to the determination of deductibility of the Convertible
Note interest.
|
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.