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Independence Contract Drilling Gets Bullish Comments From iBERIA Capital

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Independence Contract Drilling Gets Bullish Comments From iBERIA Capital
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With Independence Contract Drilling Inc (NYSE: ICD) management indicating more inbounds from customers, the company could announce a couple of new contracts over the next several weeks, iBERIA Capital Partners’ Robert MacKenzie said in a report. He maintained an Outperform rating on the company, while raising the price target from $5 to $7, expecting utilization to improve to 80 percent by 1Q17.

“We continue to favor ICD among the land drillers given its highspec, all-AC drive fleet located in the Permian. We believe these rigs will be the first to go back to work in the coming upturn while most legacy rigs will probably not be demanded again for some time, if ever,” analyst Robert MacKenzie wrote.

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Management noted an increase in inbounds from customers, with oil price stabilizing around $50/bbl. Contract term discussions are now more in the six-month range, MacKenzie mentioned. He estimated dayrates for high-spec AC walking rigs in the $15-17k/d range. So far, all the inquiries received by Independence Contract Drilling for rigs have required high-spec features like 7,500 psi mud pumps.

Citing the “more positive commentary surrounding contracting discussions,” the analyst expects total utilization to bottom in 2Q, at 57 percent. Marketed utilization, of 9 active rigs, is estimated at 89 percent in 2Q. “As the company begins putting rigs back to work in the active fleet, we believe marketed utilization could be slightly lumpy.”

Changes In Estimates

The EPS estimate for 2016 has been reduced from ($0.35) to ($0.38), to reflect higher costs in 3Q as the company begins to reactivate idle or standby rigs. The EPS estimate for 2017 has been raised from ($0.35) to ($0.30), to reflect better utilization.

Although EPS could trend down in the back half of this year, as rigs roll off contract, the equity raise in April helps to protect against rigs being removed from the borrowing base and adversely impacting the company's liquidity, MacKenzie added.

Latest Ratings for ICD

DateFirmActionFromTo
Sep 2016DA DavidsonInitiates Coverage onBuy
Apr 2016Morgan StanleyMaintainsOverweight
Apr 2016NomuraInitiates Coverage onBuy

View More Analyst Ratings for ICD
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Posted-In: Iberia Capital Partners Robert MacKenzieAnalyst Color Price Target Commodities Reiteration Markets Analyst Ratings Best of Benzinga

 

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