HOUSTON, Feb. 24, 2021
/PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company"
or "ICD") (NYSE: ICD) today reported financial results for the
three and twelve months ended December 31, 2020 and announced
additional rig reactivations.
Fourth Quarter 2020 Highlights
- Net loss of $43.1 million, or
$7.02 per share.
- Adjusted net loss, as defined below, of $16.3 million, or $2.65 per share.
- Adjusted EBITDA loss, as defined below, of $1.5 million.
- Net debt, excluding finance leases and net of deferred
financing costs, of $125.1
million.
- Marketed fleet utilization of 27%.
- Fully burdened margin of $3,001
per day.
Fleet Summary Highlights
- Eight rigs operating as of December 31, 2020.
- Twelve rigs expected to be operating at March 31, 2021, based on executed contracts in
place.
In the fourth quarter of 2020, the Company reported revenues of
$13.3 million and a net loss of
$43.1 million, or $7.02 per share, compared to revenues of
$45.3 million and a net loss of
$35.0 million, or $9.32 per share, in the fourth quarter of 2019,
and to revenues of $10.2 million and
a net loss of $15.2 million, or
$2.67 per share in the third quarter
of 2020. In addition, the Company reported adjusted net loss
(defined below) of $16.3 million, or
$2.65 per share, and adjusted EBITDA
loss (defined below) of $1.5 million
in the fourth quarter of 2020, compared to 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, and to adjusted net loss of $15.5
million, or $2.73 per share,
and adjusted EBITDA loss of $0.5
million in the third quarter of 2020.
For the year ended December 31, 2020, the Company reported
revenues of $83.4 million and a net
loss of $96.6 million, or
$19.69 per share, compared to
revenues of $203.6 million and a net
loss of $60.8 million, or
$16.11 per share for the year ended
December 31, 2019. In addition, the Company reported
adjusted net loss of $53.3 million,
or $10.86 per share, and adjusted
EBITDA of $7.0 million for the year
ended December 31, 2020 compared to adjusted net loss of
$18.1 million, or $4.80 per share, and adjusted EBITDA of
$43.4 million for the year ended
December 31, 2019. Adjusted net loss and adjusted EBITDA
are both non-GAAP financial measures that are defined and
reconciled below.
Chief Executive Officer Anthony
Gallegos commented, "The fourth quarter of 2020 marked an
inflection point as our contracted rig count increased materially
as demand for our services continued to recover from the effects of
the COVID-19 pandemic. Our operating teams, supported by our
industry leading systems and processes, performed exceptionally
well during this period. In addition, several of our prior
customers reinitiated drilling activities and contracted ICD rigs
to execute their programs. Overall, since the trough of three
operating rigs during the third quarter of 2020, we reactivated
five rigs as of year end, representing a 167% increase over this
low point. All of these reactivations were completed safely,
on time, on budget and with exceptional uptime performance.
We are grateful for our customers and appreciate the hard work of
ICD's dedicated employees to make this performance possible."
"Looking out across our primary markets, including the Permian,
Haynesville and Eagle Ford, we continue to see opportunities to
increase our contracted rig count as the underlying macro
environment continues to improve. Since the beginning of
2021, we have reactivated an additional three rigs and a fourth
reactivation is scheduled to occur in early March. Driven by
our desire to maximize shareholder returns and capitalize on
improving market conditions, our Board of Directors has approved a
capital budget for 2021 of $5.8
million, the vast majority of which will be maintenance
driven, representing a substantial reduction compared to 2020
capital expenditures of $14.2
million."
Quarterly Operational Results
In the fourth quarter of 2020, the Company's marketed fleet
operated at 27% utilization and recorded 707 revenue days, compared
to 77% utilization and 1,984 revenue days in the fourth quarter of
2019, and 17% utilization and 460 revenue days in the third quarter
of 2020. Operating days in the fourth quarter of 2020
include 34 standby days in which the Company earned a substantially
lower dayrate.
Operating revenues in the fourth quarter of 2020 totaled
$13.3 million, compared to
$45.3 million in the fourth quarter
of 2019 and $10.2 million in the
third quarter of 2020. Revenues in the fourth quarter 2019
and third quarter of 2020 included early termination revenues of
$0.6 million and $1.2 million, respectively. There was no
early termination revenue in the fourth quarter of 2020.
Revenue per day in the fourth quarter of 2020 was $16,720, compared to $20,241 in the fourth quarter of 2019 and
$18,078 in the third quarter of 2020,
excluding early termination revenue from the earlier periods. This
decrease in average revenue per day resulted from a significant
decline in spot dayrates during 2020, as well as the expiration of
various higher dayrate legacy term contracts during 2020. The
Company does not have any legacy dayrate contracts with primary
terms extending into 2021.
Operating costs in the fourth quarter of 2020 totaled
$12.4 million, compared to
$33.9 million in the fourth quarter
of 2019 and $8.7 million in the third
quarter of 2020. Fully burdened operating costs were
$13,719 per day in the fourth quarter
of 2020, compared to $14,707 in the
fourth quarter of 2019 and $14,155 in
the third quarter of 2020. The sequential decrease was primarily
attributable to stronger absorption of overhead costs associated
with a larger operating fleet during the fourth quarter of
2020.
Excluding the impact from early termination revenues and
decommissioning and reactivation costs, fully burdened rig
operating margins in the fourth quarter of 2020 were $3,001 per day, compared to $5,534 per day in the fourth quarter of 2019 and
$3,923 per day in the third quarter
of 2020.
Selling, general and administrative expenses in the fourth
quarter of 2020 were $3.4 million
(including $0.4 million of non-cash
stock-based compensation and $0.5
million of transaction costs incurred in connection with
entering into an equity line of credit during the quarter).
Excluding the equity line of credit costs, selling, general and
administrative expenses during the fourth quarter of 2020 were
$2.9 million (including $0.4 million of non-cash stock-based
compensation). This compares to selling, general and
administrative expenses of $4.7
million (including $0.5
million of non-cash stock-based compensation) in the fourth
quarter of 2019 and $2.8 million
(including $0.7 million of non-cash
stock-based compensation) in the third quarter of 2020. The
sequential increase in selling, general and administrative expenses
was primarily due to seasonal audit and professional fees.
Impairment Charge
During the fourth quarter of 2020, due to the highly competitive
market, management evaluated the Company's marketed fleet of
drilling rigs to assess which rigs would be most relevant in the
post-COVID pandemic market place and the capital requirements
associated with each of these rigs. As a result of this
review, the Company made the decision to reduce its marketed fleet
from 29 rigs to 24 rigs. The Company does not
expect to add any rigs back to its marketed fleet unless
market conditions substantially improve over expectations. As
a result of this review, the Company recorded an impairment charge
of $24.4 million related to the
remaining assets on these rigs, as well as certain other component
equipment.
Drilling Operations Update
The Company exited the fourth quarter with eight rigs
earning revenues under drilling contracts and currently has 12 rigs
under contract, including a rig scheduled for mobilization in early
March 2021. The majority of the Company's rigs are
operating on short-term pad-to-pad contracts that are excluded from
the Company's reported backlog. As such, the Company's
backlog of drilling contracts with original terms of six months or
longer was $6.1 million as of
December 31, 2020, representing 1.1 rig years of
activity. All of this backlog will be realized during
2021.
Capital Expenditures and Liquidity Update
The Company's capital expenditure budget for 2021, before asset
sales and recoveries is $5.8
million. As of December 31,
2020, the Company had cash on hand of $12.3 million, $7.5
million of availability under its $40.0 million ABL Credit Facility, $15.0 million committed accordion under its
existing term loan facility and $5.0
million available under its committed equity line of
credit.
Conference Call Details
A conference call for investors will be held today,
February 24, 2021, at 11:00 a.m.
Central Time (12:00 p.m. Eastern
Time) to discuss the Company's fourth quarter and year end
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
10151640. The replay will be available until March 3, 2021.
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,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
12,279
|
|
|
$
|
5,206
|
|
Accounts receivable,
net
|
10,023
|
|
|
35,834
|
|
Inventories
|
1,038
|
|
|
2,325
|
|
Assets held for
sale
|
—
|
|
|
8,740
|
|
Prepaid expenses and
other current assets
|
4,102
|
|
|
4,640
|
|
Total current
assets
|
27,442
|
|
|
56,745
|
|
Property, plant and
equipment, net
|
382,239
|
|
|
457,530
|
|
Other long-term
assets, net
|
3,528
|
|
|
2,726
|
|
Total
assets
|
$
|
413,209
|
|
|
$
|
517,001
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Liabilities
|
|
|
|
Current portion of
long-term debt (1)
|
$
|
7,637
|
|
|
$
|
3,685
|
|
Accounts
payable
|
4,072
|
|
|
22,674
|
|
Accrued
liabilities
|
10,723
|
|
|
16,368
|
|
Merger consideration
payable to an affiliate
|
—
|
|
|
3,022
|
|
Current portion of
contingent consideration
|
—
|
|
|
2,814
|
|
Total current
liabilities
|
22,432
|
|
|
48,563
|
|
Long-term debt
(2)
|
137,633
|
|
|
134,941
|
|
Merger consideration
payable to an affiliate
|
2,902
|
|
|
—
|
|
Deferred income taxes,
net
|
505
|
|
|
652
|
|
Other long-term
liabilities
|
2,704
|
|
|
1,249
|
|
Total
liabilities
|
166,176
|
|
|
185,405
|
|
Stockholders'
equity
|
|
|
|
Common stock, $0.01 par
value, 50,000,000 shares authorized;
6,254,396 and 3,876,196 shares issued, respectively, and
6,175,818
and 3,812,050 shares outstanding, respectively
|
62
|
|
|
38
|
|
Additional paid-in
capital
|
517,948
|
|
|
505,831
|
|
Accumulated
deficit
|
(267,064)
|
|
|
(170,426)
|
|
Treasury stock, at
cost, 78,578 shares and 64,146 shares, respectively
|
(3,913)
|
|
|
(3,847)
|
|
Total stockholders'
equity
|
247,033
|
|
|
331,596
|
|
Total liabilities and
stockholders' equity
|
$
|
413,209
|
|
|
$
|
517,001
|
|
|
|
(1)
|
As of
December 31, 2020 and December 31, 2019, current portion
of long-term debt includes $3.4 million
and $3.7 million, respectively, of finance lease obligations.
As of December 31, 2020, current portion of
long-term debt also includes $4.3 million related to the PPP
Loan.
|
|
|
(2)
|
As of
December 31, 2020 and December 31, 2019, long-term debt
includes $4.6 million and $7.5 million,
respectively, of long-term finance lease obligations. As of
December 31, 2020, long-term debt also includes
$5.7 million related to the PPP Loan.
|
INDEPENDENCE
CONTRACT DRILLING, INC. Unaudited (in
thousands, except par value and share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
2020
|
|
2019
|
|
2020
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
13,319
|
|
|
$
|
45,292
|
|
|
$
|
10,224
|
|
|
$
|
83,418
|
|
|
$
|
203,602
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
12,380
|
|
|
33,881
|
|
|
8,663
|
|
|
65,367
|
|
|
144,913
|
|
Selling, general and
administrative
|
3,383
|
|
|
4,743
|
|
|
2,796
|
|
|
13,484
|
|
|
16,051
|
|
Severance and
merger-related expenses
|
—
|
|
|
10
|
|
|
—
|
|
|
1,076
|
|
|
2,698
|
|
Depreciation and
amortization
|
10,581
|
|
|
11,529
|
|
|
10,767
|
|
|
43,919
|
|
|
45,367
|
|
Asset impairment,
net
|
24,388
|
|
|
25,909
|
|
|
—
|
|
|
41,007
|
|
|
35,748
|
|
Loss (gain) on
disposition of assets, net
|
1,931
|
|
|
1,440
|
|
|
(326)
|
|
|
723
|
|
|
4,943
|
|
Other
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
Total cost and
expenses
|
52,663
|
|
|
77,512
|
|
|
21,900
|
|
|
165,576
|
|
|
250,097
|
|
Operating
loss
|
(39,344)
|
|
|
(32,220)
|
|
|
(11,676)
|
|
|
(82,158)
|
|
|
(46,495)
|
|
Interest
expense
|
(3,815)
|
|
|
(3,502)
|
|
|
(3,554)
|
|
|
(14,627)
|
|
|
(14,415)
|
|
Loss before income
taxes
|
(43,159)
|
|
|
(35,722)
|
|
|
(15,230)
|
|
|
(96,785)
|
|
|
(60,910)
|
|
Income tax
benefit
|
(63)
|
|
|
(712)
|
|
|
(31)
|
|
|
(147)
|
|
|
(122)
|
|
Net loss
|
$
|
(43,096)
|
|
|
$
|
(35,010)
|
|
|
$
|
(15,199)
|
|
|
$
|
(96,638)
|
|
|
$
|
(60,788)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share:
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
$
|
(7.02)
|
|
|
$
|
(9.32)
|
|
|
$
|
(2.67)
|
|
|
$
|
(19.69)
|
|
|
$
|
(16.11)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
6,135
|
|
|
3,755
|
|
|
5,703
|
|
|
4,907
|
|
|
3,774
|
|
INDEPENDENCE
CONTRACT DRILLING, INC. Unaudited (in
thousands, except par value and share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Twelve Months
Ended December 31,
|
|
2020
|
|
2019
|
Cash flows from
operating activities
|
|
|
|
Net loss
|
$
|
(96,638)
|
|
|
$
|
(60,788)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
Depreciation and
amortization
|
43,919
|
|
|
45,367
|
|
Asset impairment,
net
|
41,007
|
|
|
35,748
|
|
Stock-based
compensation
|
1,979
|
|
|
1,871
|
|
Loss on disposition of
assets, net
|
723
|
|
|
4,943
|
|
Deferred income
taxes
|
(147)
|
|
|
(122)
|
|
Amortization of
deferred financing costs
|
988
|
|
|
814
|
|
Bad debt
expense
|
16
|
|
|
459
|
|
Changes in operating
assets and liabilities
|
|
|
|
Accounts
receivable
|
26,026
|
|
|
5,695
|
|
Inventories
|
117
|
|
|
(349)
|
|
Prepaid expenses and
other assets
|
(1,023)
|
|
|
1,473
|
|
Accounts payable and
accrued liabilities
|
(16,680)
|
|
|
(7,190)
|
|
Net cash provided by
operating activities
|
287
|
|
|
27,921
|
|
Cash flows from
investing activities
|
|
|
|
Purchases of
property, plant and equipment
|
(14,229)
|
|
|
(38,320)
|
|
Proceeds from the
sale of assets
|
5,107
|
|
|
8,951
|
|
Proceeds from
insurance claims
|
—
|
|
|
1,000
|
|
Collection of
principal on note receivable
|
145
|
|
|
—
|
|
Net cash used in
investing activities
|
(8,977)
|
|
|
(28,369)
|
|
Cash flows from
financing activities
|
|
|
|
Borrowings under
Revolving Credit Facilities
|
11,045
|
|
|
4,511
|
|
Repayments under
Revolving Credit Facilities
|
(11,038)
|
|
|
(7,077)
|
|
Borrowings under PPP
Loan
|
10,000
|
|
|
—
|
|
Proceeds from
issuance of common stock
|
10,978
|
|
|
—
|
|
Common stock issuance
costs
|
(772)
|
|
|
(177)
|
|
Purchase of treasury
stock
|
(66)
|
|
|
(809)
|
|
RSUs withheld for
taxes
|
(44)
|
|
|
(34)
|
|
Financing costs paid
under Term Loan Facility
|
—
|
|
|
(5)
|
|
Financing costs paid
under Revolving Credit Facilities
|
—
|
|
|
(22)
|
|
Payments for finance
lease obligations
|
(4,340)
|
|
|
(2,980)
|
|
Net cash provided by
(used in) financing activities
|
15,763
|
|
|
(6,593)
|
|
Net increase
(decrease) in cash and cash equivalents
|
7,073
|
|
|
(7,041)
|
|
Cash and cash
equivalents
|
|
|
|
Beginning of
year
|
5,206
|
|
|
12,247
|
|
End of
year
|
$
|
12,279
|
|
|
$
|
5,206
|
|
|
Twelve Months
Ended December 31,
|
|
2020
|
|
2019
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash paid during the
year for interest
|
$
|
13,309
|
|
|
$
|
13,974
|
|
Supplemental
disclosure of non-cash investing and financing
activity
|
|
|
|
Change in property,
plant and equipment purchases in accounts payable
|
$
|
(7,201)
|
|
|
$
|
1,607
|
|
Additions to
property, plant and equipment through finance leases
|
$
|
2,650
|
|
|
$
|
13,143
|
|
Extinguishment of
finance lease obligations from sale of assets classified as finance
leases
|
$
|
(1,549)
|
|
|
$
|
(249)
|
|
Transfer of assets
from held and used to held for sale
|
$
|
—
|
|
|
$
|
(18,506)
|
|
Transfer from
inventory to fixed assets
|
$
|
—
|
|
|
$
|
(406)
|
|
The following table provides various financial and operational
data for the Company's operations for the three months ending
December 31, 2020 and 2019 and September 30, 2020, and
the twelve months ending December 31, 2020 and 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.
OTHER FINANCIAL
& OPERATING DATA Unaudited
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
2020
|
|
2019
|
|
2020
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Number of marketed
rigs end of period(1)
|
24
|
|
|
29
|
|
|
29
|
|
|
24
|
|
|
29
|
|
Rig operating
days(2)
|
707
|
|
|
1,984
|
|
|
460
|
|
|
3,739
|
|
|
8,985
|
|
Average number of
operating rigs(3)
|
7.7
|
|
|
21.6
|
|
|
5.0
|
|
|
10.2
|
|
|
24.6
|
|
Rig
utilization(4)
|
27
|
%
|
|
77
|
%
|
|
17
|
%
|
|
35
|
%
|
|
83
|
%
|
Average revenue per
operating day(5)
|
$
|
16,720
|
|
|
$
|
20,241
|
|
|
$
|
18,078
|
|
|
$
|
19,000
|
|
|
$
|
20,628
|
|
Average cost per
operating day(6)
|
$
|
13,719
|
|
|
$
|
14,707
|
|
|
$
|
14,155
|
|
|
$
|
13,984
|
|
|
$
|
14,202
|
|
Average rig margin
per operating day
|
$
|
3,001
|
|
|
$
|
5,534
|
|
|
$
|
3,923
|
|
|
$
|
5,016
|
|
|
$
|
6,426
|
|
|
|
(1)
|
Marketed rigs exclude
idle rigs that will not be reactivated until upgrades or
conversions are complete.
|
|
|
(2)
|
Rig operating days
represent the number of days our rigs are earning revenue under a
contract during the
period, including days that standby revenues are earned.
|
|
|
(3)
|
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.
|
|
|
(4)
|
Rig utilization is
calculated as rig operating days divided by the total number of
days our marketed drilling rigs
are available during the applicable period.
|
|
|
(5)
|
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 $1.5 million, $4.5 million and
$0.8 million during the three months ended December 31, 2020
and 2019, and September 30, 2020, respectively,
and $9.0 million and $15.8 million during the twelve months ended
December 31, 2020 and 2019, respectively, (ii)
revenues associated with the amortization of intangible revenue
acquired in the Sidewinder Merger of $1.1 million
during the twelve months ended December 31, 2019, and (iii)
early termination revenues of zero, $0.6 million and
$1.2 million during the three months ended December 31, 2020
and 2019, and September 30, 2020, respectively,
and $3.3 million and $1.4 million during the twelve months ended
December 31, 2020 and 2019, respectively.
|
|
|
(6)
|
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 $1.5 million, $4.5 million and $0.8 million
during the three months ended December 31, 2020
and 2019, and September 30, 2020, respectively, and $9.0
million and $15.8 million during the twelve months ended
December 31, 2020 and 2019, respectively, (ii) new crew
training costs of zero, $0.2 million and zero during the three
months ended December 31, 2020 and 2019, and
September 30, 2020, respectively, and $0.2 million and $0.3
million
during the twelve months ended December 31, 2020 and 2019,
respectively, (iii) construction overhead costs expensed
due to reduced rig construction activity of $0.5 million, zero and
$0.5 million during the three months ended December
31, 2020 and 2019, and September 30, 2020, respectively, and
$1.9 million and $1.1 million during the twelve months
ended December 31, 2020 and 2019, respectively, and (iv) rig
decommissioning costs associated with stacking deactivated
rigs and rig reactivation costs associated with the redeployment of
previously stacked rigs of $0.7 million, zero and $0.8
million during the three months ended December 31, 2020 and
2019, and September 30, 2020, respectively, and $2.0
million
and $0.2 million during the twelve months ended December 31,
2020, and 2019, respectively.
|
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
"adjusted net (loss) income" as net (loss) income before: asset
impairment, net; (gain) loss on disposition of assets, net;
intangible revenue; severance and merger-related expenses; and
other adjustments. 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.
Reconciliation of
Net Loss to Adjusted Net Loss:
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
2020
|
|
2019
|
|
2020
|
|
2020
|
|
2019
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
|
Amount
|
|
Per
Share
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(43,096)
|
|
|
$
|
(7.02)
|
|
|
$
|
(35,010)
|
|
|
$
|
(9.32)
|
|
|
$
|
(15,199)
|
|
|
$
|
(2.67)
|
|
|
$
|
(96,638)
|
|
|
$
|
(19.69)
|
|
|
$
|
(60,788)
|
|
|
$
|
(16.11)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment, net
(1)
|
24,388
|
|
|
3.98
|
|
|
25,909
|
|
|
6.90
|
|
|
—
|
|
|
—
|
|
|
41,007
|
|
|
8.36
|
|
|
35,748
|
|
|
9.47
|
|
Loss (gain) on
disposition of assets, net (2)
|
1,931
|
|
|
0.31
|
|
|
1,440
|
|
|
0.38
|
|
|
(326)
|
|
|
(0.06)
|
|
|
723
|
|
|
0.15
|
|
|
4,943
|
|
|
1.31
|
|
Intangible revenue
(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,079)
|
|
|
(0.28)
|
|
Severance and
merger-related expenses (4)
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,076
|
|
|
0.22
|
|
|
2,698
|
|
|
0.71
|
|
Purchase agreement
costs (5)
|
497
|
|
|
0.08
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
497
|
|
|
0.10
|
|
|
—
|
|
|
—
|
|
Other
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
0.10
|
|
Adjusted net
loss
|
$
|
(16,280)
|
|
|
$
|
(2.65)
|
|
|
$
|
(7,651)
|
|
|
$
|
(2.04)
|
|
|
$
|
(15,525)
|
|
|
$
|
(2.73)
|
|
|
$
|
(53,335)
|
|
|
$
|
(10.86)
|
|
|
$
|
(18,101)
|
|
|
$
|
(4.80)
|
|
Reconciliation of
Net Loss to EBITDA and Adjusted EBITDA:
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
2020
|
|
2019
|
|
2020
|
|
2020
|
|
2019
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(43,096)
|
|
|
$
|
(35,010)
|
|
|
$
|
(15,199)
|
|
|
$
|
(96,638)
|
|
|
$
|
(60,788)
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
(63)
|
|
|
(712)
|
|
|
(31)
|
|
|
(147)
|
|
|
(122)
|
|
Interest
expense
|
3,815
|
|
|
3,502
|
|
|
3,554
|
|
|
14,627
|
|
|
14,415
|
|
Depreciation and
amortization
|
10,581
|
|
|
11,529
|
|
|
10,767
|
|
|
43,919
|
|
|
45,367
|
|
Asset impairment, net
(1)
|
24,388
|
|
|
25,909
|
|
|
—
|
|
|
41,007
|
|
|
35,748
|
|
EBITDA
|
(4,375)
|
|
|
5,218
|
|
|
(909)
|
|
|
2,768
|
|
|
34,620
|
|
Loss (gain) on
disposition of assets, net (2)
|
1,931
|
|
|
1,440
|
|
|
(326)
|
|
|
723
|
|
|
4,943
|
|
Stock-based
compensation
|
425
|
|
|
486
|
|
|
694
|
|
|
1,979
|
|
|
1,871
|
|
Intangible revenue
(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,079)
|
|
Severance and
merger-related expenses (4)
|
—
|
|
|
10
|
|
|
—
|
|
|
1,076
|
|
|
2,698
|
|
Purchase agreement
costs (5)
|
497
|
|
|
—
|
|
|
—
|
|
|
497
|
|
|
—
|
|
Other
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
Adjusted
EBITDA
|
$
|
(1,522)
|
|
|
$
|
7,154
|
|
|
$
|
(541)
|
|
|
$
|
7,043
|
|
|
$
|
43,430
|
|
|
|
(1)
|
During the fourth
quarter of 2020, due to the highly competitive market and in an
effort to minimize capital
spending, management drafted and approved a plan to upgrade our
existing fleet, by utilizing the primary
components needed to complete the upgrades from five rigs and these
rigs were removed from our marketed
fleet. We recorded an impairment charge of $24.4 million
related to the remaining assets on these rigs, as
well as certain other component equipment. In the fourth
quarter of 2019, we recorded impairments totaling
$25.9 million relating primarily to our decision to remove two rigs
from our marketed fleet, as well as a plan to
sell or otherwise dispose of rigs and related component equipment,
much of which was acquired in connection
with the Sidewinder Merger.
|
|
|
(2)
|
In the fourth quarter
of 2020 and 2019, and the third quarter of 2020, we recorded a
loss, loss and gain,
respectively, of $1.9 million, $1.4 million and $0.3 million,
respectively, on disposition of miscellaneous
drilling equipment in the respective quarter.
|
|
|
(3)
|
We amortized $1.1
million of intangible revenue related to an unfavorable contract
liability acquired in the
Sidewinder Merger for the year ended December 31, 2019.
|
|
|
(4)
|
Severance expense of
$1.1 million was recorded in 2020 in connection with our cost
reduction measures
instituted in response to the COVID-19 pandemic and deteriorating
market conditions. Severance and
merger-related expenses of $2.7 million were recorded in 2019
primarily comprised of severance,
professional fees and other Sidewinder merger-related
expenses.
|
|
|
(5)
|
Purchase agreement
costs were recorded in the fourth quarter of 2020 in connection
with our
committed equity line of credit.
|
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.