Independence Contract Drilling, Inc. reported financial results for the three months ended March 31, 2021.
First quarter 2021 Highlights
In the first quarter of 2021, the Company reported revenues of $15.5 million, a net loss of $16.0 million, or $2.58 per share, adjusted net loss (defined below) of $16.4 million, or $2.64 per share, and adjusted EBITDA loss (defined below) of $2.0 million. These results compare to revenues of $38.5 million, a net loss of $28.2 million, or $7.53 per share, adjusted net loss of $10.6 million, or $2.82 per share, and adjusted EBITDA of $5.1 million in the first quarter of 2020, and revenues of $13.3 million, a net loss of $43.1 million, or $7.02 per share, an adjusted net loss of $16.3 million, or $2.65 per share, and adjusted EBITDA of $1.5 million in the fourth quarter of 2020.
Chief Executive Officer Anthony Gallegos commented, “I am very pleased with our operational performance during the first quarter of 2021. It played out very much as expected as we safely and successfully reactivated several rigs during the quarter. The reactivations were on budget, and the rigs hit the ground running for our clients with minimal downtime, in a few instances setting drilling records for our clients right away. We have maintained strong cost control and operational efficiency throughout this process, but I am even more excited with the progress we made at quarter end and so far during the second quarter. We continue to see increasing demand for all of our rigs and are experiencing dayrate improvement on renewals and reactivations across our fleet which will drive sequential improvements in reported margins over at least the remainder of the year. Demand for ICD rigs is being driven not only by rig specification, but also by operating performance as we have displaced several larger competitor rigs with key customers. In particular, we are seeing strong improvements in utilization for our 300 series rigs involving customers drilling extended reach laterals or using high torque drill strings. By the end of the second quarter, we expect to have at least 15 rigs operating, of which six will be 300 series rigs, and based upon inquiries to date and stable commodity prices, we expect further reactivations during the back half of the year and continued positive dayrate momentum.”
Quarterly Operational Results
In the first quarter of 2021, operating days increased sequentially by over 31% compared to the fourth quarter of 2020. The Company’s marketed fleet operated at 43% utilization and recorded 929 revenue days, compared to 1,738 revenue days in the first quarter of 2020, and 707 revenue days in the fourth quarter of 2020. The Company currently expects operating days in the second quarter of 2021 to increase sequentially by approximately 22% compared to the first quarter of 2021.
Operating revenues in the first quarter of 2021 totaled $15.5 million, compared to $38.5 million in the first quarter of 2020 and $13.3 million in the fourth quarter of 2020. Revenue per day in the first quarter of 2021 was $15,465, compared to $19,823 in the first quarter of 2020 and $16,720 in the fourth quarter of 2020. Sequential decreases in revenue per day were driven by the expiration of two higher-dayrate legacy contracts and higher spot market exposure and one rig operating on a standby rate through the majority of the quarter.
Operating costs in the first quarter of 2021 totaled $14.5 million, compared to $30.2 million in the first quarter of 2020 and $12.4 million in the fourth quarter of 2020. Fully burdened operating costs were $12,663 per day in the first quarter of 2021, compared to $14,648 in the first quarter of 2020 and $13,719 in the fourth quarter of 2020. Sequential decreases in operating costs per day were driven by efficiencies associated with increased operating days as well as one rig operating on a standby basis through the majority of the quarter.
Excluding the impact from early termination revenues and reactivation costs, fully burdened rig operating margins in the first quarter of 2021 were $2,802 per day, compared to $5,175 per day in the first quarter of 2020 and $3,001 per day in the fourth quarter of 2020. The Company currently expects operating margins in the second quarter of 2021 to increase sequentially by approximately 11% compared to the first quarter of 2021 driven primarily by favorable dayrate momentum. Based upon recently signed contracts, further sequential improvements in margin per day are expected to occur during the third quarter of 2021 as well.
Selling, general and administrative expenses in the first quarter of 2021 were $3.7 million (including $0.7 million of non-cash compensation), compared to $3.8 million (including $0.6 million of non-cash compensation) in the first quarter of 2020 and $3.4 million (including $0.4 million of non-cash compensation) in the fourth quarter of 2020. Sequential increases in cash selling, general and administrative expenses were associated with current year incentive compensation accruals, seasonal year end audit and related costs, and expenses associated with recently granted at-risk, performance-based long-term incentive awards.
Drilling Operations Update
The Company operated twelve rigs during the first quarter of 2021, including three rigs that were reactivated during the quarter. Overall, the Company’s operating rig count averaged 10.3 rigs during the quarter. The Company expects to exit the second quarter of 2021 with 15 rigs operating based upon recently signed contracts in place and ongoing contractual negotiations. The Company’s backlog of drilling contracts with original terms of six months or longer was $12.1 million as of March 31, 2021. All of this backlog is expected to be realized during the remainder of 2021.
Capital Expenditures and Liquidity Update
Cash outlays for capital expenditures in the first quarter of 2021 were $1.7 million, offset by asset sales and recoveries of $0.7 million.
As of March 31, 2021, the Company had cash on hand of $5.4 million, an undrawn revolving line of credit with availability of $7.7 million based upon eligible accounts receivable, $130 million principal amount outstanding under its term loan, and $10 million outstanding under a loan issued under the Payroll Protection Program (“PPP”) under the CARES Act. The term loan includes a committed $15 million accordion that remains undrawn.
During the first quarter of 2021, the Company continued its at-the-market (“ATM”) common stock offering with a maximum approved offering amount of $2.2 million. During the first quarter of 2021, the Company issued 140,377 shares of common stock pursuant to this program at a weighted average gross selling price of $4.64 per share, resulting in gross proceeds to the Company of $0.7 million. During the quarter, the Company also issued 174,100 shares pursuant to the terms of its equity line of credit at a weighted average gross selling price of $5.02 per share, resulting in gross proceeds to the Company of $0.9 million.
Conference Call Details
A conference call for investors will be held today, May 4, 2021, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company’s first quarter 2021 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 10153764. The replay will be available until May 11, 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.
Independence Contract Drilling, Inc.
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