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Independence Contract Drilling, Inc. Reports Financial Results For The Third Quarter Ended September 30, 2018

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HOUSTON, Nov. 6, 2018 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company") (NYSE:ICD) today reported financial results for the three months ended September 30, 2018. 

Third Quarter 2018 Highlights

  • Record quarterly revenues of $28.4 million.
  • Net loss of $3.9 million, or $0.10 per share.
  • Adjusted net loss, as defined below, of $1.8 million, or $0.05 per share.
  • Adjusted EBITDA, as defined below, of $6.8 million.
  • Fleet utilization of 99.0%.
  • Record revenue days of 1,345.
  • Fully-burdened margin per day of $7,552 per day.

In the third quarter of 2018, the Company reported record quarterly revenues of $28.4 million, a net loss of $3.9 million, or $0.10 per share, an adjusted net loss (defined below) of $1.8 million, or $0.05 per share, and adjusted EBITDA (defined below) of $6.8 million.  This compares to revenues of $25.8 million, a net loss of $3.3 million, or $0.09 per share, an adjusted net loss of $3.2 million, or $0.08 per share, and adjusted EBITDA of $5.0 million in the second quarter of 2018, and revenues of $23.4 million, a net loss of $6.0 million, or $0.16 per share, an adjusted net loss of $5.1 million, or $0.13 per share, and adjusted EBITDA of $3.1 million in the third quarter of 2017.

Chief Executive Officer Anthony Gallegos commented, "Demand for pad-optimal rigs remains strong and contracts continue to roll to market dayrates. With what we see as robust demand for pad-optimal rigs for the foreseeable future, we are placing orders for the long-lead time items necessary to complete the conversion of our three operating, and one idle, SCR rigs to AC, full pad-optimal status.  These converted rigs will be marketed with enhanced '300 series' capabilities, including 25,000+ ft. racking capacity, one million lbs. hook-load, 2,000 HP drawworks, 7,500 psi mud systems, three mud pumps, and drilling optimization software and controls making them the highest specification rigs in our fleet and amongst the highest specification rigs in the industry.  We plan to have all of these conversions complete by the end of 2019, and the final specifications for each rig will be determined based on the contracts we secure. 

On the integration front, the harmonization of systems and processes is in full gear and on schedule. These efforts have already led to the identification of additional transaction synergies, which we now expect to exceed $10 million once the integration process is complete.

Following the closing of the Sidewinder combination on October 1, 2018, we are now operating 31 rigs. We are contracting our remaining marketed but idle rig, which we expect to commence drilling operations by year end, and we have begun optimizing rig placements across our customer base with the signing of three additional term contracts at market dayrates." 

Quarterly Operational Results

Operating results for third quarter of 2018 did not include any benefits from the Sidewinder combination, which closed subsequent to quarter end on October 1, 2018.

In the third quarter of 2018, the Company's fleet operated at 99.0% utilization and recorded 1,345 revenue days, compared to 99.3% utilization and recorded 1,265 revenue days in the second quarter of 2018, and 98.0% utilization and 1,235 revenue days in the third quarter of 2017.  

Operating revenues in the third quarter of 2018 totaled $28.4 million, compared to $25.8 million in the second quarter of 2018 and $23.4 million in the third quarter of 2017.  Revenue per day in the third quarter of 2018 was $20,538, compared to $19,411 in the second quarter of 2018 and $18,034 in the third quarter of 2017.  Sequential revenue-per-day improvements were driven by increased pricing on contract renewals and introduction of the Company's 15th ShaleDriller® rig into the fleet.

Operating costs in the third quarter of 2018 totaled $18.4 million, compared to $18.0 million in the second quarter of 2018 and $18.2 million in the third quarter of 2017.  Fully-burdened operating costs, excluding reactivation and rig construction costs, were $12,986 per day in the third quarter of 2018, compared to $13,034 in the second quarter of 2018 and $13,513 in the third quarter of 2017.  The sequential decrease in cost per day related primarily to increased absorption of support group costs across the rig fleet.

Fully-burdened rig operating margins, excluding reactivation and rig construction costs, in the third quarter of 2018 were $7,552 per day, compared to $6,377 per day in the second quarter of 2018 and $4,521 per day in the third quarter of 2017.  Sequential improvements of 18% in rig margin per day resulted from significant flow through associated with increasing contractual dayrates and lower costs per day.   

Selling, general and administrative expenses in the third quarter of 2018 were $3.9 million (including $0.7 million of non-cash stock-based compensation), compared to $3.5 million (including $0.7 million of non-cash stock-based compensation) in the second quarter of 2018 and $2.9 million (including $0.9 million of non-cash stock-based compensation) in the third quarter of 2017.  Sequential increases in SG&A were primarily associated with higher incentive compensation expense.      

In the third quarter of 2018, merger expenses directly associated with the strategic combination with Sidewinder Drilling LLC were $1.9 million, compared to $0.4 million in the second quarter of 2018, consisting primarily of legal and other professional fees.

Drilling Operations Update

Following completion of the Sidewinder combination, the Company is operating 31 drilling rigs and is in the process of reactivating an idle rig that is expected to commence drilling operations by the end of 2018. 

The Company's September 30, 2018 pro forma backlog of revenues from contracts, with original terms of six months or more, including rigs acquired in the Sidewinder combination, was $154.6 million.  Approximately $56.8 million of this backlog is expected to be realized during the remainder of 2018.

Capital Expenditures and Liquidity Update

Aggregate cash outlays for capital expenditures in the third quarter of 2018, net of disposals, were $11.4 million, including $9.0 million of payments for second quarter 2018 deliveries.  The Company's aggregate capital expenditure budget for the fourth quarter of 2018 is $6.0 million, including approximately $3.0 million associated with the reactivation of the Company's remaining marketed but idle rig and down payments on long lead-time items required to complete the conversion of the Company's three operating, and one idle, SCR rigs to AC, pad-optimal status in 2019.

In connection with closing of the Sidewinder combination on October 1, 2018, the Company received net proceeds of $127.4 million associated with the funding of a $130 million term loan.  Net proceeds from this term loan were utilized to repay in full all of ICD's outstanding bank debt as well as $58.5 million of debt assumed pursuant to the Sidewinder combination.  The Company also entered into a new $40 million revolving credit facility, with an initial receivables-based borrowing base of $35.1 million.  Approximately $5.0 million was advanced under this credit facility at closing to fund transaction costs due at closing.

Conference Call Details

A conference call for investors will be held today, November 6, 2018, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's third quarter 2018 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 10124941.  The replay will be available until November 13, 2018.

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.

INDEPENDENCE CONTRACT DRILLING, INC.

Unaudited

 (in thousands, except par value and share data)


BALANCE SHEETS









September 30, 2018


December 31, 2017

Assets






Cash and cash equivalents

$                      2,965


$                    2,533

Accounts receivable, net

23,728


18,056

Inventories


3,087


2,710

Assets held for sale

3,898


4,637

Prepaid expenses and other current assets

4,188


2,957



Total current assets

37,866


30,893

Property, plant and equipment, net

277,978


272,388

Other long-term assets, net

1,763


1,364



Total assets

$                   317,607


$                   304,645

Liabilities and Stockholders' Equity




Liabilities







Current portion of long-term debt (1)

$                         575


$                         533


Accou

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