Independence Contract Drilling, Inc. Reports Financial Results for the Second Quarter Ended June 30, 2023

HOUSTON, Aug. 3, 2023 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today reported financial results for the three months ended June 30, 2023.

Second quarter 2023 Highlights

• Net loss, as defined below, of $4.2 million, or $0.30 per share
• Adjusted net loss, as defined below, of $1.0 million, or $0.07 per share
• Adjusted EBITDA, as defined below, of $18.7 million
• Adjusted net debt, as defined below, of $191.2 million
• 15.0 average rigs working during the quarter, excluding two average rigs earning revenue on an early termination basis
• Fully burdened margin per day of $15,462

In the second quarter of 2023, the Company reported revenues of $56.4 million, net loss of $4.2 million, or $0.30 per share, adjusted net loss (defined below) of $1.0 million, or $0.07 per share, and adjusted EBITDA (defined below) of $18.7 million. These results compare to revenues of $42.3 million, a net loss of $2.8 million, or $0.21 per share, adjusted net loss of $9.8 million, or $0.72 per share, and adjusted EBITDA of $9.2 million in the second quarter of 2022, and revenues of $63.8 million, net income of $12.0 thousand, or $0.00 per diluted share, adjusted net income of $2.4 million, or $0.14 per diluted share, and adjusted EBITDA of $21.4 million in the first quarter of 2023.

Chief Executive Officer Anthony Gallegos commented, "Second quarter 2023 results came in ahead of expectations with respect to revenues, margin per day and adjusted EBITDA. I am particularly pleased that overall margins benefitted from sequential cost per day improvements given the number of rigs we had in transition as we relocated rigs from the Haynesville to our Permian market. We also made significant progress towards our debt reduction goals. We repaid $5.0 million of Convertible Notes and reduced revolver borrowings by $5.3 million while at the same time increasing our overall net working capital position.

Although the Permian market remains strong, the industry did see a reduction in the overall Permian rig count during the second quarter of 2023. In this environment, I am pleased that ICD has already recontracted three rigs relocated from the Haynesville and has improved our overall contracted Permian rig count since year end. We expect further improvements during the back half of this year. Looking forward, based upon contract negotiations occurring today and assuming commodity prices remain constructive, we expect the third quarter of 2023 to be the operating rig trough for ICD with additional rig reactivations beginning in late third quarter and during the fourth quarter."

Quarterly Operational Results

In the second quarter of 2023, operating days decreased sequentially by 22% compared to the first quarter of 2023. The Company's marketed fleet operated at 58% utilization and recorded 1,369 revenue days, compared to 1,540 revenue days in the second quarter of 2022, and 1,744 revenue days in the first quarter of 2023. During the second quarter of 2023, the Company also recognized early termination revenue of approximately $5.1 million on two average working rigs.

Operating revenues in the second quarter of 2023 totaled $56.4 million, compared to $42.3 million in the second quarter of 2022 and $63.8 million in the first quarter of 2023. Revenue per day in the second quarter of 2023 was $34,467, compared to $24,875 in the second quarter of 2022 and $34,870 in the first quarter of 2023. Revenue per day statistics exclude early termination revenue recognized during the quarter.

Operating costs in the second quarter of 2023 totaled $33.8 million, compared to $28.9 million in the second quarter of 2022 and $37.5 million in the first quarter of 2023. Fully burdened operating costs were $19,005 per day in the second quarter of 2023, compared to $15,929 in the second quarter of 2022 and $19,205 in the first quarter of 2023. Sequential decreases in operating cost per day were driven primarily by cost efficiencies associated with rigs operating on a standby basis during the quarter and lower personnel costs. Reported cost per day excludes Haynesville-to-Permian rig transition costs of approximately $0.6 million and $2.8 million in the first and second quarters of 2023, respectively.

Fully burdened rig operating margins in the second quarter of 2023 were $15,462 per day, compared to $8,946 per day in the second quarter of 2022 and $15,665 per day in the first quarter of 2023. The Company currently expects per day operating margins in the third quarter of 2023 to fall approximately 8% sequentially driven primarily by lower average dayrates as rigs recontract in the current market environment.

Selling, general and administrative expenses in the second quarter of 2023 were $5.2 million (including $1.3 million of non-cash compensation), compared to $4.9 million (including $0.7 million of non-cash compensation) in the second quarter of 2022 and $6.7 million (including $1.8 million of non-cash compensation) in the first quarter of 2023. Cash selling, general and administrative expenses decreased sequentially during the quarter due to lower incentive compensation expense and lower professional fees. Stock-based incentive compensation expense increased sequentially due to awards granted in the first quarter of 2023.

During the second quarter of 2023, the Company recorded interest expense of $8.3 million, including $1.2 million relating to non-cash amortization of Convertible Note debt discount and debt issuance costs. The Company has excluded this non-cash amortization when presenting adjusted net income (loss). During the second quarter of 2023, the Company redeemed $5.0 million of Convertible Notes at par plus accrued interest.

Drilling Operations Update

The Company currently expects to operate between 13 and 14 average rigs during the third quarter of 2023 with two to three additional reactivations occurring during the fourth quarter of 2023. The Company's backlog of drilling contracts with original terms of six months or longer is $42.2 million. This backlog excludes rigs operating on short term pad-to-pad drilling contracts with original terms of less than six months.

Capital Expenditures and Liquidity Update

Cash outlays for capital expenditures in the second quarter of 2023, net of asset sales and recoveries, were $11.5 million. This included $11.1 million associated with prior period deliveries.

The Company had net working capital of $12.4 million, representing a $1.0 million improvement from March 31, 2023.

As of June 30, 2023, the Company had cash on hand of $5.6 million and a revolving line of credit with availability of $13.5 million. The Company reported adjusted net debt as of June 30, 2023 of $191.2 million, consisting of the full amount of the outstanding Convertible Notes and outstanding borrowings under the Company's revolving line of credit. Adjusted net debt also includes $6.5 million of accrued interest at quarter-end under the Company's Convertible Notes that the Company has elected to pay in-kind when due on September 30, 2023.

Conference Call Details

A conference call for investors will be held today, August 3, 2023, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's second quarter 2023 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 9447728. The replay will be available until August 10, 2023.

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 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.