Independence Contract Drilling, Inc. Reports Financial Results for the Second Quarter Ended June 30, 2024
Rhea-AI Summary
Independence Contract Drilling (ICD) reported financial results for Q2 2024, showing a net loss of $16.7 million ($1.15 per share) and adjusted EBITDA of $8.5 million. Key highlights include:
- Revenues of $43.3 million, down from $56.4 million in Q2 2023
- Average of 14.5 rigs working, a 4% sequential decrease
- Fully burdened margin per day of $9,675, an 18% sequential decrease
- Adjusted net debt of $196.7 million, a 3% sequential increase
The company faces challenges due to customer consolidation, drilling efficiencies, and increased fiscal discipline by E&P customers. ICD expects a decline in Q3 2024 average operating rig count to approximately 13 rigs, with potential recovery by Q4 2024.
Positive
- Adjusted EBITDA of $8.5 million for Q2 2024
- Successful addition of a third operating rig in Haynesville/East Texas market
- Expectation to return to Q2 operating rig levels by end of Q4 2024
- Reduction in cash selling, general and administrative expenses due to reduced incentive compensation accruals
Negative
- Net loss of $16.7 million for Q2 2024
- Revenue decline to $43.3 million from $56.4 million in Q2 2023
- 18% sequential decrease in fully burdened margin per day
- Expected decline in Q3 2024 average operating rig count to 13 rigs
- 3% sequential increase in adjusted net debt to $196.7 million
- Decline in revenue per day and expected further 2% decline in Q3 2024
- Challenges due to customer consolidation and increased fiscal discipline by E&P customers
News Market Reaction
On the day this news was published, ICD declined 39.67%, reflecting a significant negative market reaction.
Data tracked by StockTitan Argus on the day of publication.
Second quarter 2024 Highlights
- Net loss of
$16.7 million $1.15 - Adjusted net loss, as defined below, of
$10.6 million $0.73 - Adjusted EBITDA, as defined below, of
$8.5 million 28% sequential decrease - Adjusted net debt, as defined below, of
$196.7 million 3% sequential increase - 14.5 average rigs working during the quarter, representing a
4% sequential decrease - Fully burdened margin per day of
$9,675 18% sequential decrease
In the second quarter of 2024, the Company reported revenues of
Chief Executive Officer Anthony Gallegos commented, "Our financial results for the second quarter came in line with our expectations, as the overall
Quarterly Operational Results
In the second quarter of 2024, operating days decreased
Operating revenues in the second quarter of 2024 totaled
Operating costs in the second quarter of 2024 totaled
Fully burdened rig operating margins in the second quarter of 2024 were
Selling, general and administrative expenses in the second quarter of 2024 were
During the second quarter of 2024, the Company recorded interest expense of
Drilling Operations Update
The Company currently expects to operate approximately 13.0 net average rigs during the third quarter of 2024. The Company's backlog of drilling contracts with original terms of six months or longer is
Capital Expenditures and Liquidity Update
Cash outlays for capital expenditures in the second quarter of 2024, net of asset sales and recoveries, were
On June 30, 2024, the Company repurchased
As of June 30, 2024, the Company had cash on hand of
The Company reported adjusted net debt as of June 30, 2024 of
In February 2024, our Board of Directors established a committee of independent directors to evaluate strategic alternatives, including a refinancing and recapitalization of our outstanding Convertible Notes, which mature on March 18, 2026. There can be no assurance that the Company will be successful in refinancing or recapitalizing the Convertible Notes.
Conference Call
The Company will not host a quarterly earnings conference call relating to its financial results for the three months ended June 30, 2024, and does not intend to host future earnings calls until such time as the strategic review by the Board of Directors has completed its review of strategic alternatives.
About Independence Contract Drilling, Inc.
Independence Contract Drilling provides land-based contract drilling services for oil and natural gas producers in
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, including the Company's Quarterly Reports on Form 10-Q. 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 | ||||||
June 30, 2024 | December 31, 2023 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 5,542 | $ | 5,565 | ||
Accounts receivable | 30,454 | 31,695 | ||||
Inventories | 1,528 | 1,557 | ||||
Prepaid expenses and other current assets | 2,369 | 4,759 | ||||
Total current assets | 39,893 | 43,576 | ||||
Property, plant and equipment, net | 332,778 | 348,193 | ||||
Other long-term assets, net | 2,279 | 2,908 | ||||
Total assets | $ | 374,950 | $ | 394,677 | ||
Liabilities and Stockholders' Equity | ||||||
Liabilities | ||||||
Current portion of long-term debt (1) | $ | 1,400 | $ | 1,226 | ||
Accounts payable | 20,716 | 22,990 | ||||
Accrued liabilities | 7,770 | 16,371 | ||||
Total current liabilities | 29,886 | 40,587 | ||||
Long-term debt, net (2) | 170,948 | 154,549 | ||||
Deferred income taxes, net | 8,322 | 9,761 | ||||
Other long-term liabilities | 8,131 | 8,201 | ||||
Total liabilities | 217,287 | 213,098 | ||||
Commitments and contingencies | ||||||
Stockholders' equity | ||||||
Common stock, | 152 | 144 | ||||
Additional paid-in capital | 624,107 | 622,169 | ||||
Accumulated deficit | (462,497) | (436,794) | ||||
Treasury stock, at cost, 156,259 shares and 97,260 shares, respectively | (4,099) | (3,940) | ||||
Total stockholders' equity | 157,663 | 181,579 | ||||
Total liabilities and stockholders' equity | $ | 374,950 | $ | 394,677 | ||
__________________________ | |
(1) | As of June 30, 2024 and December 31, 2023, current portion of long-term debt includes |
(2) | As of June 30, 2024 and December 31, 2023, long-term debt includes |
INDEPENDENCE CONTRACT DRILLING, INC. Unaudited (in thousands, except per share data) | |||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | March 31, | June 30, | |||||||||||||
2024 | 2023 | 2024 | 2024 | 2023 | |||||||||||
Revenues | $ | 43,327 | $ | 56,356 | $ | 46,636 | $ | 89,963 | $ | 120,112 | |||||
Costs and expenses | |||||||||||||||
Operating costs | 31,535 | 33,827 | 30,816 | 62,351 | 71,287 | ||||||||||
Selling, general and administrative | 3,731 | 5,224 | 4,337 | 8,068 | 11,951 | ||||||||||
Depreciation and amortization | 12,571 | 11,405 | 11,826 | 24,397 | 22,259 | ||||||||||
Asset impairment, net | 4,299 | — | — | 4,299 | — | ||||||||||
(Gain) loss on disposition of assets, net | (1,130) | 2,007 | (1,004) | (2,134) | 1,993 | ||||||||||
Total costs and expenses | 51,006 | 52,463 | 45,975 | 96,981 | 107,490 | ||||||||||
Operating (loss) income | (7,679) | 3,893 | 661 | (7,018) | 12,622 | ||||||||||
Interest expense | (10,245) | (8,251) | (9,878) | (20,123) | (16,970) | ||||||||||
Loss before income taxes | (17,924) | (4,358) | (9,217) | (27,141) | (4,348) | ||||||||||
Income tax benefit | (1,207) | (197) | (231) | (1,438) | (199) | ||||||||||
Net loss | $ | (16,717) | $ | (4,161) | $ | (8,986) | $ | (25,703) | $ | (4,149) | |||||
Loss per share: | |||||||||||||||
Basic and diluted | $ | (1.15) | $ | (0.30) | $ | (0.62) | $ | (1.77) | $ | (0.30) | |||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic and diluted | 14,521 | 14,050 | 14,504 | 14,512 | 13,951 | ||||||||||
INDEPENDENCE CONTRACT DRILLING, INC. Unaudited (in thousands) | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
Six Months Ended June 30, | ||||||
2024 | 2023 | |||||
Cash flows from operating activities | ||||||
Net loss | $ | (25,703) | $ | (4,149) | ||
Adjustments to reconcile net loss to net cash provided by operating activities | ||||||
Depreciation and amortization | 24,397 | 22,259 | ||||
Asset impairment, net | 4,299 | — | ||||
Stock-based compensation | 627 | 2,852 | ||||
(Gain) loss on disposition of assets, net | (2,134) | 1,993 | ||||
Non-cash interest expense | 13,439 | 11,619 | ||||
Amortization of deferred financing costs | 55 | 55 | ||||
Amortization of Convertible Notes debt discount and issuance costs | 5,639 | 3,546 | ||||
Deferred income taxes | (1,438) | (371) | ||||
Changes in operating assets and liabilities | ||||||
Accounts receivable | 1,241 | 5,265 | ||||
Inventories | (81) | (208) | ||||
Prepaid expenses and other assets | 2,777 | 157 | ||||
Accounts payable and accrued liabilities | (5,657) | (7,964) | ||||
Net cash provided by operating activities | 17,461 | 35,054 | ||||
Cash flows from investing activities | ||||||
Purchases of property, plant and equipment | (17,311) | (31,164) | ||||
Proceeds from the sale of assets | 3,616 | 1,546 | ||||
Net cash used in investing activities | (13,695) | (29,618) | ||||
Cash flows from financing activities | ||||||
Payments to redeem Convertible Notes | (7,000) | (5,000) | ||||
Borrowings under Revolving ABL Credit Facility | 31,541 | 17,249 | ||||
Repayments under Revolving ABL Credit Facility | (27,291) | (15,560) | ||||
Proceeds from issuance of common stock through at-the-market facility, net of issuance costs | — | (34) | ||||
Purchase of treasury stock | (160) | — | ||||
Taxes paid for vesting of RSUs | (12) | (389) | ||||
Payments for finance lease obligations | (867) | (1,444) | ||||
Net cash used in financing activities | (3,789) | (5,178) | ||||
Net (decrease) increase in cash and cash equivalents | (23) | 258 | ||||
Cash and cash equivalents | ||||||
Beginning of period | 5,565 | 5,326 | ||||
End of period | $ | 5,542 | $ | 5,584 | ||
Six Months Ended June 30, | ||||||
2024 | 2023 | |||||
Supplemental disclosure of cash flow information | ||||||
Cash paid during the period for interest | $ | 946 | $ | 1,138 | ||
Cash paid during the period for taxes | $ | 235 | $ | 639 | ||
Supplemental disclosure of non-cash investing and financing activities | ||||||
Change in property, plant and equipment purchases in accounts payable | $ | (3,939) | $ | (11,092) | ||
Additions to property, plant and equipment through finance leases | $ | 1,513 | $ | 1,359 | ||
Extinguishment of finance lease obligations from sale of assets classified as finance leases | $ | (418) | $ | (100) | ||
The following table provides various financial and operational data for the Company's operations for the three months ended June 30, 2024 and 2023 and March 31, 2024 and the six months ended June 30, 2024 and 2023. 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 | Six Months Ended | |||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||
2024 | 2023 | 2024 | 2024 | 2023 | ||||||||||||||||
Number of marketed rigs end of period | 26 | 26 | 26 | 26 | 26 | |||||||||||||||
Rig operating days (1) | 1,315 | 1,369 | 1,376 | 2,691 | 3,113 | |||||||||||||||
Average number of operating rigs (2) | 14.5 | 15.0 | 15.1 | 14.8 | 17.2 | |||||||||||||||
Rig utilization (3) | 56 | % | 58 | % | 58 | % | 57 | % | 66 | % | ||||||||||
Average revenue per operating day (4) | $ | 28,899 | $ | 34,467 | $ | 30,313 | $ | 29,622 | $ | 34,693 | ||||||||||
Average cost per operating day (5) | $ | 19,224 | $ | 19,005 | $ | 18,484 | $ | 18,846 | $ | 19,117 | ||||||||||
Average rig margin per operating day | $ | 9,675 | $ | 15,462 | $ | 11,829 | $ | 10,776 | $ | 15,576 | ||||||||||
__________________________ | |
(1) | 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. During the three months ended June 30, 2024 and 2023 and March 31, 2024, there were 3.0, 97.9 and 14.0 operating days in which we earned revenue on a standby basis, respectively. During the six months ended June 30, 2024 and 2023, there were 17.0 and 112.5 operating days in which we earned revenue on a standby basis, respectively. During the second quarter ended June 30, 2023, the Company recognized |
(2) | 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. |
(3) | 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. |
(4) | 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 (i) out-of-pocket costs paid by customers of |
(5) | 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 |
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) plus accrued interest on its Convertible Notes 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 (loss) income as determined by
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) | June 30, 2024 | ||
Convertible Notes | $ | 185,523 | |
Revolving ABL Credit Facility | 9,750 | ||
Accrued interest on Convertible Notes to be paid in-kind on September 30, 2024 | 6,952 | ||
Less: Cash | (5,542) | ||
Adjusted net debt | $ | 196,683 | |
Reconciliation of Adjusted Net Debt to Reported Long-Term Debt:
(in thousands) | June 30, 2024 | ||
Adjusted net debt | $ | 196,683 | |
Add back: | |||
Cash | 5,542 | ||
Long-term portion of finance lease obligations | 1,855 | ||
Less: | |||
Debt discount and issuance costs, net of amortization | (26,180) | ||
Issuance of additional Convertible Notes for PIK interest due on September 30, 2024 | (6,952) | ||
Total reported long-term debt | $ | 170,948 | |
Reconciliation of Net Loss to Adjusted Net Loss:
(Unaudited) | (Unaudited) | ||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | March 31, | June 30, | |||||||||||||
2024 | 2023 | 2024 | 2024 | 2023 | |||||||||||
Amount | Amount | Amount | Amount | Amount | |||||||||||
(in thousands, except per share data) | |||||||||||||||
Net loss | $ | (16,717) | $ | (4,161) | $ | (8,986) | $ | (25,703) | $ | (4,149) | |||||
Add back: | |||||||||||||||
Asset impairment, net (1) | 4,299 | — | — | 4,299 | — | ||||||||||
(Gain) loss on disposition of assets, net (2) | (1,130) | 2,007 | (1,004) | (2,134) | 1,993 | ||||||||||
Amortization of debt discount and issuance costs - Convertible Notes | 2,919 | 1,168 | 2,720 | 5,639 | 3,546 | ||||||||||
Adjusted net (loss) income | $ | (10,629) | $ | (986) | $ | (7,270) | $ | (17,899) | $ | 1,390 | |||||
Adjusted net (loss) income per share - Basic | $ | (0.73) | $ | (0.07) | $ | (0.50) | $ | (1.23) | $ | 0.10 | |||||
Adjusted net (loss) income per share - Diluted | $ | (0.73) | $ | (0.07) | $ | (0.50) | $ | (1.23) | $ | 0.10 | |||||
Weighted average number of common shares outstanding - | 14,521 | 14,050 | 14,504 | 14,512 | 13,951 | ||||||||||
Weighted average number of common shares outstanding - | 14,521 | 14,050 | 14,504 | 14,512 | 13,983 | ||||||||||
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA:
(Unaudited) | (Unaudited) | ||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | March 31, | June 30, | |||||||||||||
2024 | 2023 | 2024 | 2024 | 2023 | |||||||||||
(in thousands) | |||||||||||||||
Net loss | $ | (16,717) | $ | (4,161) | $ | (8,986) | $ | (25,703) | $ | (4,149) | |||||
Add back: | |||||||||||||||
Income tax benefit | (1,207) | (197) | (231) | (1,438) | (199) | ||||||||||
Interest expense | 10,245 | 8,251 | 9,878 | 20,123 | 16,970 | ||||||||||
Depreciation and amortization | 12,571 | 11,405 | 11,826 | 24,397 | 22,259 | ||||||||||
Asset impairment, net (1) | 4,299 | — | — | 4,299 | — | ||||||||||
EBITDA | 9,191 | 15,298 | 12,487 | 21,678 | 34,881 | ||||||||||
(Gain) loss on disposition of assets, net (2) | (1,130) | 2,007 | (1,004) | (2,134) | 1,993 | ||||||||||
Stock-based and deferred compensation cost | 411 | 1,346 | 293 | 704 | 3,184 | ||||||||||
Adjusted EBITDA | $ | 8,472 | $ | 18,651 | $ | 11,776 | $ | 20,248 | $ | 40,058 | |||||
__________________________ | |
(1) | During the second quarter of 2024, we began the process of exiting our |
(2) | Gain or loss on disposition of assets, net, represents recognition of the sale or disposition of miscellaneous drilling equipment in each respective period. |
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.
FAQ
What was ICD's net loss for Q2 2024?
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