Independence Contract Drilling, Inc. Reports Financial Results For The Second Quarter Ended June 30, 2017
HOUSTON, July 27, 2017 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company") (NYSE: ICD) today reported financial results for the three months ended June 30, 2017.
Second Quarter 2017 Highlights
-- Net loss of $6.3 million, or $0.17 per share.
-- Adjusted net loss, as defined below, of $5.0 million, or $0.13 per
share.
-- Adjusted EBITDA, as defined below, of $3.2 million.
-- Fleet utilization of 93.9%.
-- Revenue days of 1,111.
-- Margin per day, excluding reactivation and construction costs, of $5,275
per day.
In the second quarter of 2017, the Company reported revenues of $21.3 million, a net loss of $6.3 million, or $0.17 per share, an adjusted net loss (defined below) of $5.0 million, or $0.13 per share, and adjusted EBITDA (defined below) of $3.2 million. This compares to revenues of $20.2 million, a net loss of $6.3 million, or $0.17 per share, an adjusted net loss of $5.3 million, or $0.14 per share, and adjusted EBITDA of $2.6 million in the first quarter of 2017, and revenues of $15.2 million, a net loss of $4.2 million, or $0.12 per share, an adjusted net loss of $2.2 million, or $0.07 per share, and adjusted EBITDA of $5.4 million in the second quarter of 2016.
Chief Executive Officer Byron Dunn commented, "We currently have our entire fleet contracted, with our 14th rig scheduled to spud its first well by the end of the month under a multi-year contract. We believe the U.S. fleet of pad-optimal rigs has reached full effective utilization, and dayrates have improved to the high teens - low $20,000 per day range. We continue to have success recontracting rigs on term contracts at improving rates."
Quarterly Operational Results
In the second quarter of 2017, the Company's fleet operated at 93.9% utilization and recorded 1,111 revenue days compared to 91.7% utilization and 1,073 revenue days in the first quarter of 2017 and 65.6% utilization and 732 revenue days in the second quarter of 2016. There were no revenue days earned on a standby-without-crew basis in the second quarter of 2017, compared to 69 days in the first quarter of 2017 and 362.9 days in the second quarter of 2016.
Second quarter 2017 fully-burdened rig operating margins, excluding reactivation and rig construction costs, were $5,275 per day, compared to $6,019 per day in the first quarter of 2017 and $11,359 per day in the second quarter of 2016. The decrease in operating margin per day resulted primarily from a reduction in revenue days earned under higher dayrate legacy contracts compared to prior quarters.
Operating revenues in the second quarter of 2017 totaled $21.3 million, compared to $20.2 million in the first quarter of 2017 and $15.2 million in the second quarter of 2016. On a revenue-per-day basis, revenues were $18,201 per day in the second quarter of 2017, compared to $17,949 in the first quarter of 2017 and $20,116 in the second quarter of 2016.
Operating costs in the second quarter of 2017 totaled $15.8 million, compared to $14.9 million in the first quarter of 2017 and $7.4 million in the second quarter of 2016. Second quarter 2017 operating costs included $0.4 million of reactivation costs. First quarter 2017 operating costs included $0.7 million of reactivation costs and $0.2 million of rig construction costs. Fully-burdened operating costs, excluding reactivation and rig construction costs, were $12,926 per day in the second quarter of 2017, compared to $11,930 in the first quarter of 2017 and $8,757 in the second quarter of 2016. The sequential increase in costs per day related to a decrease in revenue days earned on a standby-without-crew basis, where revenue is recognized without an operating cost offset, as well as increased costs for repair and maintenance and new hire mentoring initiatives.
Selling, general and administrative expenses in the second quarter of 2017 were $3.4 million (including $1.2 million of non-cash stock-based compensation), compared to $3.7 million (including $1.0 million of non-cash stock-based compensation) in the first quarter of 2017 and $5.0 million (including $1.1 million of non-cash stock-based compensation and retirement expense of $1.5 million) in the second quarter of 2016. The sequential decrease in selling, general and administrative expenses compared to the first quarter of 2017 related primarily to a reduction in professional fees and incentive compensation accruals and the impact of the Company's 2016 restructuring efforts, partially offset by costs for expanded new hire training programs.
Drilling Operations Update
All 14 of the Company's ShaleDriller® rigs are contracted and out in the field, with the 14th rig scheduled to spud its first well by the end of July 2017 under a multi-year contract.
At June 30, 2017, the Company's backlog of revenues from contracts with original terms of six months or more was $70.7 million, compared to $42.5 million as of December 31, 2016. Approximately $40.7 million of this backlog is expected to be realized during the remainder of 2017.
Capital Expenditures and Liquidity Update
Aggregate cash outlays for capital expenditures in the second quarter of 2017, net of disposals, were $7.7 million. In addition, at June 30, 2017, accounts payable included approximately $5.3 million of capital expenditures principally associated with the Company's final rig conversion. The Company's capital expenditure budget, before disposals, for the remainder of 2017 is expected to be approximately $4.4 million. At June 30, 2017, the Company had $6.4 million of assets classified as held for sale.
As of June 30, 2017, the Company had drawn $39.0 million on its $85.0 million revolving credit facility and had net debt, excluding capital leases, of $33.5 million. The borrowing base under the Company's credit facility was $89.7 million as of June 30, 2017. Subsequent to June 30, 2017, the Company amended the terms of the credit facility to, among other things, extend the maturity until November 5, 2020.
Conference Call Details
A conference call for investors will be held today, July 27, 2017, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's second quarter 2017 results. Hosting the call will be Byron A. Dunn, President and Chief Executive Officer, and Philip A. Choyce, Executive Vice President and Chief Financial Officer.
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 10110534. The replay will be available until August 3, 2017.
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
June 30, 2017 December 31, 2016
------------- -----------------
Assets
Cash and cash equivalents $5,465 $7,071
Accounts receivable, net 12,946 11,468
Inventories 2,407 2,336
Assets held for sale 6,388 3,915
Prepaid expenses and other
current assets 3,737 3,102
----- -----
30,943 27,892
Total current assets
Property, plant and
equipment, net 271,725 273,188
Other long-term assets, net 865 1,027
$303,533 $302,107
Total assets
===
Liabilities and Stockholders' Equity
Liabilities
$468 $441
Current portion of long-term debt (1)
10,825 10,031
Accounts payable
5,867 7,821
Accrued liabilities
17,160 18,293
Total current liabilities
39,527 26,078
Long-term debt (2)
476 396
Deferred income taxes
1 88
Other long-term liabilities
57,164 44,855
Total liabilities
Commitments and contingencies
Stockholders' equity
378 376
Common stock, $0.01 par value, 100,000,000
shares authorized; 38,025,637 and
37,831,723 shares issued, respectively; and
37,807,467 and 37,617,920 shares
outstanding, respectively
325,630 323,918
Additional paid-in capital
(77,920) (65,347)
Accumulated deficit
(1,719) (1,695)
Treasury stock, at cost, 218,170 and 213,803
shares, respectively
246,369 257,252
Total stockholders' equity
$303,533 $302,107
Total liabilities and stockholders' equity
===
(1) Current portion of long-term
debt relates to the current
portion of vehicle capital
lease obligations.
(2) As of June 30, 2017, long-term
debt includes $527K of long-
term vehicle capital lease
obligations. As of December
31, 2016, long-term debt
included $326K of long-term
vehicle capital lease
obligations.
INDEPENDENCE CONTRACT DRILLING, INC.
Unaudited
(in thousands, except per share amounts)
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
------------------ ----------------
June 30, March 31, June 30,
-------- --------
2017 2016 2017 2017 2016
---- ---- ---- ---- ----
Revenues $21,285 $15,155 $20,236 $41,521 $37,610
Costs and expenses
15,808 7,398 14,898 30,706 19,965
Operating costs
3,435 5,005 3,718 7,153 8,626
Selling, general and administrative
6,335 5,816 6,256 12,591 11,641
Depreciation and amortization
546 - 129 675 -
Asset impairment, net
745 37 828 1,573 (88)
Loss (gain) on disposition of assets, net
---
26,869 18,256 25,829 52,698 40,144
Total cost and expenses
(5,584) (3,101) (5,593) (11,177) (2,534)
Operating loss
Interest expense (686) (1,059) (630) (1,316) (2,036)
---- ------ ---- ------ ------
(6,270) (4,160) (6,223) (12,493) (4,570)
Loss before income taxes
Income tax expense 34 31 46 80 35
--- --- --- --- ---
$(6,304) $(4,191) $(6,269) $(12,573) $(4,605)
Net loss
Loss per share:
$(0.17) $(0.12) $(0.17) $(0.33) $(0.16)
Basic and Diluted
Weighted average number of common shares outstanding:
37,679 33,608 37,546 37,613 28,812
Basic and Diluted
===
INDEPENDENCE CONTRACT DRILLING, INC.
Unaudited
(in thousands)
STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
-------------------------
2017 2016
---- ----
Cash flows from operating activities
Net loss $(12,573) $(4,605)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and
amortization 12,591 11,641
Asset impairment, net 675 -
Stock-based
compensation 2,169 2,360
Stock-based
compensation -
executive retirement - (67)
Loss (gain) on
disposition of assets,
net 1,573 (88)
Deferred income taxes 80 36
Amortization of
deferred financing
costs 250 283
Write-off of deferred
financing costs - 504
Changes in operating assets and liabilities
Accounts receivable (1,478) 11,368
Inventories (3) (146)
Prepaid expenses and
other assets (644) 176
Accounts payable and
accrued liabilities (392) (6,078)
Net cash provided by
operating activities 2,248 15,384
----- ------
Cash flows from investing activities
Purchases of property,
plant and equipment (17,367) (10,521)
Proceeds from insurance
claims - 188
Proceeds from the sale
of assets 1,060 747
Net cash used in
investing activities (16,307) (9,586)
------- ------
Cash flows from financing activities
Borrowings under credit
facility 22,611 34,775
Repayments under credit
facility (9,363) (81,129)
Public offering
proceeds, net of
offering costs - 42,983
Purchase of treasury
stock (24) (183)
RSUs withheld for taxes (455) -
Financing costs paid (8) (217)
Payments for capital
lease obligations (308) (285)
Net cash provided by
(used in) financing
activities 12,453 (4,056)
------ ------
Net (decrease) increase
in cash and cash
equivalents (1,606) 1,742
Cash and cash equivalents
Beginning of period 7,071 5,344
End of period $5,465 $7,086
====== ======
Supplemental disclosure of cash flow information
Cash paid during the
period for interest $1,157 $1,426
Supplemental disclosure of non-cash investing and
financing activity
Change in property,
plant and equipment
purchases in accounts
payable $(855) $(2,577)
Additions to property,
plant and equipment
through capital leases $536 $965
The following table provides various financial and operational data for the Company's operations during the three months ending June 30, 2017 and 2016 and March 31, 2017 and the six months ending June 30, 2017 and 2016. 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 Six Months Ended
------------------ ----------------
June 30, 2017 June 30, 2016 March 31, 2017 June 30, 2017 June 30, 2016
------------- ------------- -------------- ------------- -------------
Number of completed rigs end of
period 14 14 14 14 14
Rig operating days (1) 1,111.2 732.2 1,072.9 2,184.1 1,675.3
Average number of operating rigs
(2) 12.2 8.0 11.9 12.1 9.2
Rig utilization (3) 93.9% 65.6% 91.7% 92.8% 75.9%
Average revenue per operating day
(4) $18,201 $20,116 $17,949 $18,077 $21,498
Average cost per operating day
(5) $12,926 $8,757 $11,930 $12,435 $10,351
Average rig margin per operating
day $5,275 $11,359 $6,019 $5,642 $11,147
(1) 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. For the three
months ended June 30, 2017 and 2016
and March 31, 2017 there were zero,
368.4 and 77.9 operating days in
which the Company earned revenue on
a standby basis, respectively,
including zero, 362.9 and 69.0
standby-without-crew days,
respectively. For the six months
ended June 30, 2017 and 2016 there
were 77.9 and 554.1 operating days
in which the Company earned revenue
on a standby basis, respectively,
including 69.0 and 525.0 standby-
without-crew days, respectively.
(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 our drilling rigs
are available during the applicable
period. During the third quarter of
2015, we elected to remove our two
100 Series non-walking rigs from
the marketed fleet pending
completion of their planned rig
conversions to 200 Series, pad-
optimal status. The conversion of
one of the 100 series rig was
completed during the second quarter
of 2016 and the rig re-entered the
marketed fleet in June 2016. The
conversion of the second 100 series
rig was completed in the second
quarter of 2017 and the rig will
begin operating in July 2017.
(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 out-of-pocket costs paid by
customers of $1.1 million, $0.4
million and $1.0 million for the
three months ended June 30, 2017
and 2016 and March 31, 2017,
respectively, and $2.0 million and
$1.6 million for the six months
ended June 30, 2017 and 2016,
respectively. Included in
calculating average revenue per
operating day for the three and six
months ended June 30, 2016 was $1.6
million and $1.8 million,
respectively, of early termination
revenues associated with a contract
termination at the end of the first
quarter of 2016. The first and
second quarter of 2017 did not
include any early termination
revenues.
(5) Average cost per operating day
represents total direct 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 reimbursed by
customers of $1.1 million, $0.4
million and $1.0 million for the
three months ended June 30, 2017
and 2016 and March 31, 2017,
respectively and $2.0 million and
$1.6 million for the six months
ended June 30, 2017 and 2016,
respectively, (ii) new crew
training costs of $0.1 million for
the three months ended June 30,
2017 and 2016 and March 31, 2017,
and the six months ended June 30,
2017 and 2016, (iii) construction
overhead costs expensed due to
reduced rig construction activity
of zero, $0.5 million and $0.2
million for the three months ended
June 30, 2017 and 2016 and March
31, 2017, respectively, and $0.2
million and $1.0 million for the
six months ended June 30, 2017 and
2016, respectively, (iv) rig
reactivation costs for the three
months ended June 30, 2017 and
March 31, 2017 of $0.3 million and
$0.7 million, respectively, and
$1.0 million for the six months
ended June 30, 2017 (excluding $0.1
million of new crew training costs
(included in (ii) above)), and (v)
out-of-pocket expenses of $0.1
million, net of insurance
recoveries, incurred as a result of
damage to one of our rig's mast
during the first quarter of 2017.
Non-GAAP Financial Measures
Adjusted net loss, 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 revolving credit facility for purposes of determining our compliance with various financial covenants. 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 revolving credit facility. Neither adjusted net loss, 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, 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 revolving 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, 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, 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, EBITDA and adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's return of assets, cost of capital and tax structure. Our presentation of adjusted net loss, 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, 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 Six Months Ended
------------------ ----------------
June 30, 2017 June 30, 2016 March 31, 2017 June 30, 2017 June 30, 2016
------------- ------------- -------------- ------------- -------------
Amount Per Share Amount Per Share Amount Per Share Amount Per Share Amount Per Share
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
(in thousands)
Net loss $(6,304) $(0.17) $(4,191) $(0.12) $(6,269) $(0.17) $(12,573) $(0.33) $(4,605) $(0.16)
Asset impairment,
net (1) 546 0.02 - - 129 0.01 675 0.02 - -
Loss (gain) on
disposition of
assets, net (2) 745 0.02 37 0.00 828 0.02 1,573 0.04 (88) (0.00)
Write-off of
deferred financing
costs (3) - - 504 0.01 - - - - 504 0.02
Executive
retirement (4) - - 1,552 0.05 - - - - 1,552 0.05
Stock-based
compensation -
executive
retirement (4) - - (67) (0.01) - - - - (67) (0.00)
Adjusted net loss $(5,013) $(0.13) $(2,165) $(0.07) $(5,312) $(0.14) $(10,325) $(0.27) $(2,704) $(0.09)
======= ====== ======= ====== ======= ====== ======== ====== ======= ======
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA:
(Unaudited) (Unaudited)
---------- ----------
Three Months Ended Six Months Ended
------------------ ----------------
June 30, 2017 June 30, 2016 March 31, 2017 June 30, 2017 June 30, 2016
------------- ------------- -------------- ------------- -------------
(in thousands)
Net loss $(6,304) $(4,191) $(6,269) $(12,573) $(4,605)
Add back:
Income tax expense 34 31 46 80 35
Interest expense 686 1,059 630 1,316 2,036
Depreciation and
amortization 6,335 5,816 6,256 12,591 11,641
----- ----- ----- ------ ------
EBITDA 751 2,715 663 1,414 9,107
Stock-based
compensation 1,157 1,205 1,012 2,169 2,360
Stock-based
compensation -
executive
retirement (4) - (67) - - (67)
Asset impairment,
net (1) 546 - 129 675 -
Loss (gain) on
disposition of
assets, net (2) 745 37 828 1,573 (88)
Executive
retirement (4) - 1,552 - - 1,552
Adjusted EBITDA $3,199 $5,442 $2,632 $5,831 $12,864
====== ====== ====== ====== =======
(1) In the second quarter of 2017,
we recorded a $0.5 million, or
$0.02 per share, non-cash
impairment reflecting the
estimated loss from the
expected sale of our Galayda
facility. In the first quarter
of 2017, we recorded a $0.1
million, or $0.01 per share,
non-cash impairment
representing the estimated
damage to the mast of one of
our rigs, net of insurance
recoveries.
(2) In the second quarter of 2017,
we recorded a loss on
disposition of assets of $0.7
million, or $0.02 per share,
primarily due a loss on the
sale of drilling equipment
previously designated as held
for sale. In the first quarter
of 2017, we recorded a loss on
disposition of assets of $0.8
million, or $0.02 per share,
primarily due to non-cash
disposal of equipment in
connection with the upgrade to
7,500 psi mud systems.
(3) In the second quarter of 2016,
we recorded $0.5 million, or
$0.01 per share, related to the
amortization of deferred
financing costs in connection
with a reduction of commitments
under the Company's revolving
credit facility.
(4) In the second quarter of 2016,
we recorded $1.5 million, or
$0.04 per share, of retirement
benefits associated with the
departure of an executive
officer.
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.
