News Releases

HOUSTON, May 7, 2020 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today reported financial results for the three months ended March 31, 2020.

First Quarter 2020 Highlights

• Net loss of $28.2 million, or $7.53 per share.
• Adjusted net loss, as defined below, of $10.6 million, or $2.82 per share.
• Adjusted EBITDA, as defined below, of $5.1 million.
• Net debt, excluding finance leases and net of deferred financing costs, of $128.9 million.
• Marketed fleet utilization of 66%.
• Fully burdened margin of $5,175 per day.

In the first quarter of 2020, the Company reported revenues of $38.5 million, a net loss of $28.2 million, or $7.53 per share, adjusted net loss (defined below) of $10.6 million, or $2.82 per share, and adjusted EBITDA (defined below) of $5.1 million. These results compare to revenues of $60.4 million, a net loss of $2.4 million, or $0.63 per share, adjusted net income of $2.9 million, or $0.76 per share, and adjusted EBITDA of $15.8 million in the first quarter of 2019, revenues of $45.3 million, a net loss of $35.0 million, or $9.32 per share, an adjusted net loss of $7.7 million, or $2.04 per share, and adjusted EBITDA of $7.2 million in the fourth quarter of 2019. 

Chief Executive Officer Anthony Gallegos commented, "The COVID-19 pandemic began to impact our operating rig count and results of operations late in the first quarter of 2020. The historic declines in oil demand and prices during March negatively impacted rig demand as evidenced by the significant decline in active drilling rigs working in North America. The pandemic and its effects are causing a rapid and substantial reduction in drilling activity which we expect will continue to play out throughout the second quarter of 2020 and beyond until economic activity rebounds and oil supply and demand fundamentals improve. In line with this view, the Company took actions beginning in March to reduce its cost structure through reducing headcount, salary, and other elements of compensation for all personnel and other initiatives including reducing planned capital expenditures and elimination of executive management and board positions.

As the impacts of the pandemic continue to play out, we currently estimate that we will exit the second quarter of 2020 with six rigs contracted, and because we cannot estimate the duration and ultimate impact of the COVID-19 pandemic, additional reductions in our operating rig count are possible as contracts on operating rigs expire during the back half of 2020. In this uncertain environment, we are focused on the safety of our workforce, exceeding our customers' expectations, and maximizing our available financial liquidity opportunities."

Quarterly Operational Results

In the first quarter of 2020, the Company's marketed fleet operated at 66% utilization and recorded 1,738 revenue days, compared to 95% utilization and 2,728 revenue days in the first quarter of 2019, and 77% utilization and 1,984 revenue days in the fourth quarter of 2019.

Operating revenues in the first quarter of 2020 totaled $38.5 million, compared to $60.4 million in the first quarter of 2019 and $45.3 million in the fourth quarter of 2019.  Revenue per day in the first quarter of 2020 was $19,823, compared to $20,755 in the first quarter of 2019 and $20,241 in the fourth quarter of 2019. Sequential revenue per day declines were driven by lower dayrates on contract renewals.

Operating costs in the first quarter of 2020 totaled $30.2 million, compared to $39.3 million in the first quarter of 2019 and $33.9 million in the fourth quarter of 2019. Fully burdened operating costs were $14,648 per day in the first quarter of 2020, compared to $13,302 in the first quarter of 2019 and $14,707 in the fourth quarter of 2019. Sequential increases from the first quarter of 2019 in per day operating cost were primarily attributable to increased labor costs associated with inefficiencies and transitory downtime resulting from rig releases and the reduction of operating rigs during the first quarter of 2020.

Fully burdened rig operating margins in the first quarter of 2020 were $5,175 per day, compared to $7,453 per day in the first quarter of 2019 and $5,534 per day in the fourth quarter of 2019.

Selling, general and administrative expenses in the first quarter of 2020 were $3.8 million (including $0.6 million of non-cash stock-based compensation), compared to $4.5 million (including $0.4 million of non-cash stock-based compensation) in the first quarter of 2019 and $4.7 million (including $0.5 million of non-cash stock-based compensation) in the fourth quarter of 2019.  Included in selling, general and administrative costs during the fourth quarter of 2019 was a $0.5 million (or $0.01 per share) charge associated with a bad debt reserve placed upon a receivable relating to a 2018 contract for which the collection process has not yet been completed. Excluding this charge, selling general and administrative expenses in the fourth quarter of 2019 were $4.2 million (including $0.5 million of non-cash stock-based compensation expense). Sequential decreases in selling, general and administrative expenses were associated with lower cash incentive compensation accruals and lower travel, training and professional fees in the first quarter of 2020.

Severance expenses of $1.1 million were recorded in the first quarter of 2020 in connection with the Company's cost reduction measures instituted in response to the COVID-19 pandemic and current deteriorating market conditions.  Severance and merger-related expenses of $1.1 million were recorded in the first quarter of 2019 primarily comprised of severance, professional fees and other merger-related expenses.

Impairment Charge

During the first quarter of 2020, the Company recorded impairments totaling $16.6 million relating primarily to the remaining assets on rigs removed from our marketed fleet, as well as certain other component equipment, inventory and assets held for sale. 

Drilling Operations Update

The Company exited the first quarter 2020 with 17 rigs earning revenues under drilling contracts and expects to exit the second quarter with six rigs earning revenues under drilling contracts. The Company's backlog of drilling contracts with original terms of six months or longer was $26.4 million as of March 31, 2020, representing 3.58 rig years of activity. All of this backlog is expected to be realized during the remainder of 2020. 

Capital Expenditures and Liquidity Update

The Company's capital expenditure budget for 2020, before asset sales and recoveries is $7.5 million, representing a $2.7 million reduction from its original annual budget.  Cash outlays for capital expenditures in the first quarter of 2020, net of asset sales and recoveries, of $8.4 million, included the cash flow impact of a $5.3 million reduction in accounts payable compared to year end.

As of March 31, 2020, the Company had cash on hand of $9.8 million, a borrowing base of $20.1 million under its revolving credit facility based upon eligible accounts receivable with $8.6 million of availability remaining, and $130 million principal amount outstanding under its term loan.  The term loan includes a committed $15 million accordion that remains undrawn and currently available to the Company.  Looking forward, the Company expects availability under its revolving line of credit to deteriorate during the remainder of 2020 with lower activity levels reducing the eligible accounts receivable collateral balance that is used to determine availability.  The Company also expects it will need to draw on its term loan accordion during 2020 to support operations and fund other non-operating expenses.  In light of the unprecedented declines in industry conditions, uncertain macro-economics, lack of capital market availability for micro-cap companies in the U.S. land oil field services industry and after assessing the Company's liquidity requirements and available sources of liquidity to fund operations, on April 27, 2020, the Company applied for and received a $10 million loan issued pursuant to the Payroll Protection Program (PPP) under the CARES Act, which will be used to fund permitted expenses under the CARES Act. 

Conference Call Details

A conference call for investors will be held today, May 7, 2020, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's first quarter 2020 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 10143627.  The replay will be available until May 14, 2020.

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 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.

 

 

 

The following table provides various financial and operational data for the Company's operations for the three months ending March 31, 2020 and 2019 and December 30, 2019.  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.

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 "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.

 

INVESTOR CONTACTS:

Independence Contract Drilling, Inc.
E-mail inquiries to: Investor.relations@icdrilling.com
Phone inquiries: (281) 598-1211

 

SOURCE Independence Contract Drilling, Inc.