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Independence Contract Drilling, Inc. Reports Financial Results For The Fourth Quarter And Year Ended December 31, 2018

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HOUSTON, March 1, 2019 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company") (NYSE:ICD) today reported financial results for the three and twelve months ended December 31, 2018.

Fourth Quarter 2018 Highlights

  • Net loss of $8.6 million, or $0.11 per share.
  • Adjusted net income, as defined below, of $1.0 million, or $0.01 per share.
  • Adjusted EBITDA, as defined below, of $16.0 million.
  • Net debt, excluding capitalized leases, of $117.1 million.
  • Fleet utilization of 95.7%.
  • Fully-burdened margin of $7,501 per day.
  • Completion of the Sidewinder merger on October 1, 2018.

In the fourth quarter of 2018, the Company reported revenues of $62.8 million, a net loss of $8.6 million, or $0.11 per share, adjusted net income (defined below) of $1.0 million, or $0.01 per share, and adjusted EBITDA (defined below) of $16.0 million.  This compares to revenues of $28.4 million, a net loss of $3.9 million, or $0.10 per share, an adjusted net loss of $1.8 million, or $0.05 per share, and adjusted EBITDA of $6.8 million in the third quarter of 2018 and revenues of $25.0 million, a net loss of $5.7 million, or $0.15 per share, an adjusted net loss of $4.6 million, or $0.12 per share, and adjusted EBITDA of $3.7 million in the fourth quarter of 2017.

For the year ended December 31, 2018, the Company reported revenues of $142.6 million, a net loss of $20.0 million, or $0.42 per share, an adjusted net loss of $8.3 million, or $0.17 per share, and adjusted EBITDA of $31.9 million.  This compares to revenues of $90.0 million, a net loss of $24.3 million, or $0.64 per share, an adjusted net loss of $20.1 million, or $0.53 per share, and adjusted EBITDA of $12.6 million for the year ended December 31, 2017.

Chief Executive Officer Anthony Gallegos commented, "The fourth quarter of 2018 was transformational for Independence Contract Drilling.  We successfully completed the combination with Sidewinder, more than doubling our operating fleet.  The combination fundamentally improved our profitability and free cash flow and the operating and financial scale of the Company.

The post-combination integration is progressing exceptionally well thanks to the efforts of our dedicated field and corporate employees who have worked diligently while maintaining our focus on safe and reliable operations and cost control. We are confident that we can exceed our $10 million synergy goal by the third quarter of 2019.

During the fourth quarter, we mobilized an incremental rig that commenced drilling operations in December under a one-year contract.  We also successfully recontracted or extended contracts on five rigs with expiring contracts.  As a result, we exited 2018 with 32 drilling rigs operating.

Looking forward into 2019, the decline in oil price during the fourth quarter of 2018 negatively impacted our customers' budgeting processes and 2019 capital budgets.  Although we remain encouraged by the oil price recovery and recent stabilization, we have seen some softness in drilling activity.  However, we expect super-spec rig utilization to remain robust, with only minimal periods of transitory idle time as operators reshape and high-grade their contracted rig fleets in light of their capital budgets."

Sidewinder Merger

On October 1, 2018, the Company completed its merger with Sidewinder Drilling, increasing its drilling fleet from 15 rigs to 34 rigs.  Pursuant to the terms of the merger, the Company issued 36,752,657 shares of common stock and assumed $58.5 million of Sidewinder indebtedness.  Contemporaneously with the closing of the merger, the Company entered into a new $130 million term loan and $40 million revolving line of credit facility, which were utilized to refinance the indebtedness assumed in the merger as well as the Company's then-existing outstanding bank debt.

The Company's results for the fourth quarter of 2018 fully reflect the combined operations.  As a result, prior period results of operations may not be comparable.  During the fourth quarter of 2018, the following items relating to the merger and associated financing impacted the Company's results of operations:

  • Non-cash revenues of $2.0 million associated with the amortization of intangible revenues attributable to the merger, which is excluded from the Company's reported adjusted net income, adjusted EBITDA and revenue per day statistics during the quarter;
  • merger related expenses of $11.3 million, which is excluded from the Company's reported adjusted net income and adjusted EBITDA during the quarter; and
  • non-cash interest expense of $0.9 million associated with the write-off of deferred financing costs associated with the termination of pre-merger financing arrangements, which is excluded from the Company's reported adjusted net income.

Quarterly Operational Results

In the fourth quarter of 2018, the Company's fleet operated at 95.7% utilization and recorded 2,818 revenue days, compared to 99% utilization and 1,345 revenue days in the third quarter of 2018, and 100% utilization and 1,289 revenue days in the fourth quarter of 2017.  The decrease in utilization compared to prior periods reflects idle time associated with the transition of one drilling rig assumed in the Sidewinder merger to a new contract during the quarter. 

Operating revenues in the fourth quarter of 2018 totaled $62.8 million, compared to $28.4 million in the third quarter of 2018 and $25.0 million in the fourth quarter of 2017.  Fourth quarter 2018 revenues include $2.0 million of non-cash intangible revenue associated with the Sidewinder merger.   Excluding this non-cash revenue, revenue per day in the fourth quarter of 2018 was $20,433, compared to $20,538 in the third quarter of 2018 and $18,338 in the fourth quarter of 2017.  The slight sequential revenue per day decline is associated primarily with below-market dayrate contracts assumed in the Sidewinder merger. 

Operating costs in the fourth quarter of 2018 totaled $39.9 million, compared to $18.4 million in the third quarter of 2018 and $18.8 million in the fourth quarter of 2017.  Fully-burdened operating costs were $12,932 per day in the fourth quarter of 2018, compared to $12,986 in the third quarter of 2018 and $13,094 in the fourth quarter of 2017. 

Fully-burdened rig operating margins, excluding reactivation and rig construction costs, in the fourth quarter of 2018 were $7,501 per day, compared to $7,552 per day in the third quarter of 2018 and $5,244 per day in the fourth quarter of 2017. 

Selling, general and administrative expenses in the fourth quarter of 2018 were $5.0 million (including $0.2 million of non-cash stock-based compensation), compared to $3.9 million (including $0.7 million of non-cash stock-based compensation) in the third quarter of 2018 and $3.1 million (including $0.5 million of non-cash stock-based compensation) in the fourth quarter of 2017.  Sequential increases in SG&A were primarily associated with additional operations acquired in the Sidewinder merger, but do not reflect the full realization of combined synergies, which the Company does not expect to realize on a run-rate basis until the end of the second quarter of 2019.

Drilling Operations Update

The Company is marketing 32 drilling rigs, including one rig acquired in the Sidewinder merger that was reactivated and began drilling operations in December 2018.

The Company's December 31, 2018 backlog of revenues from contracts with original terms of six months or more was $120.9 million.  Approximately $114.2 million of this backlog is expected to be realized during 2019.

Capital Expenditures and Liquidity Update

The Company's capital expenditure budget for 2019, net of asset sales and recoveries is $29 million, including $9.0 million associated with the delivery of long lead-time items required to complete four SCR conversions to AC pad-optimal status based upon market conditions and the timing of the rigs' existing drilling commitments, and $5.0 million reserved for future equipment enhancements based upon market conditions and customer demand.

As of December 31, 2018, the Company had cash on hand of $12.2 million, $2.5 million drawn on its $40 million revolving credit facility and a $130 million term loan outstanding.  The term loan includes a fully-committed $15 million accordion that remains undrawn and fully available to the Company.

Conference Call Details

A conference call for investors will be held today, March 1, 2019, at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss the Company's fourth quarter and year end 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 10128988.  The replay will be available until March 8, 2019.

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)


CONSOLIDATED BALANCE SHEETS



December 31, 2018


December 31, 2017

Assets




Cash and cash equivalents

$                    12,247


$                      2,533

Accounts receivable, net

41,987


18,056

Inventories

2,693


2,710

Assets held for sale

19,711


4,637

Prepaid expenses and other current assets

8,930


2,957


          Total current assets

85,568


30,893

Property, plant and equipment, net

496,197


272,388

Goodwill

1,627


-

Other long-term assets, net

1,470


1,364


          Total assets

$                   584,862


$                   304,645

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