Independence Contract Drilling, Inc. Reports Financial Results For The Third Quarter Ended September 30, 2021 – PRNewswire

HOUSTON, Nov. 2, 2021 /PRNewswire/ --Independence Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today reported financial results for the three months ended September30,2021.

Third quarter 2021 Highlights

In the third quarter of 2021, the Company reported revenues of $24.0 million, a net loss of $4.3 million, or $0.59 per share, adjusted net loss (defined below) of $13.7 million, or $1.87 per share, and adjusted EBITDA (defined below) of $0.7 million. These results compare to revenues of $10.2 million, a net loss of $15.2 million, or $2.67 per share, 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, and revenues of $19.8 million, a net loss of $14.9 million, or $2.22 per share, an adjusted net loss of $14.6 million, or $2.18 per share, and adjusted EBITDA loss of $0.4 million in the second quarter of 2021.

Chief Executive Officer Anthony Gallegos commented, "Market conditions continue to improve for our business, buoyed by strong macro supply and demand fundamentals and shrinking availability of super-spec rigs across our key operating basins. This is manifesting itself in rapidly improving incremental operating and EBITDA margins and utilization, as well as increased forward visibility into 2022.

We realized sequential margin per day improvements in the third quarter of 9% and expect to realize further improvements in the fourth quarter over third quarter levels between 30% and 40%. With further visibility into 2022, we currently expect first quarter 2022 margins to increase over 100% compared to third quarter 2021 levels. With respect to utilization, by year end we expect to be operating 17 of our marketed rigs, seven of which will be 300 series rigs. Overall, we remain on course to achieve our goal of entering 2022 generating positive free cash flow and believe ICD is very well positioned to capitalize on what we believe will be a very strong 2022 and the early innings of an extended up-cycle in demand for our contract drilling services and super-spec rig fleet."

Quarterly Operational Results

In the third quarter of 2021, operating days increased sequentially by 18% compared to the second quarter of 2021. The Company's marketed fleet operated at 58% utilization and recorded 1,268 revenue days, compared to 460 revenue days in the third quarter of 2020, and 1,077 revenue days in the second quarter of 2021. The Company currently expects operating days in the fourth quarter of 2021 to increase sequentially by approximately 9% compared to the third quarter of 2021.

Operating revenues in the third quarter of 2021 totaled $24.0 million, compared to $10.2 million in the third quarter of 2020 and $19.8 million in the second quarter of 2021. Revenue per day in the third quarter of 2021 was $17,141, compared to $18,078 in the third quarter of 2020 and $16,514 in the second quarter of 2021. The sequential increase quarter over quarter in revenue per day was driven by higher dayrates on contract renewals and reactivated rigs.

Operating costs in the third quarter of 2021 totaled $20.1 million, compared to $8.7 million in the third quarter of 2020 and $17.0 million in second quarter of 2021. Operating costs during the third quarter of 2021 included $0.1 million associated with the reactivation of rigs compared to $0.2 million during the second quarter of 2021. Operating costs during the third quarter of 2020 included $0.8 million of rig reactivation costs. Fully burdened operating costs were $13,685 per day in the third quarter of 2021, compared to $14,155 in the third quarter of 2020 and $13,352 in the second quarter of 2021. Sequential increases in operating costs per day were driven primarily by higher labor costs associated with a tightening labor market.

Excluding the impact from reactivation costs, fully burdened rig operating margins in the third quarter of 2021 were $3,456 per day, compared to $3,923 per day in the third quarter of 2020 and $3,162 per day in the second quarter of 2021. The Company currently expects per day operating margins in the fourth quarter of 2021 to increase sequentially between 30% and 40% compared to the third quarter of 2021 driven primarily by favorable dayrate momentum.

Selling, general and administrative expenses in the third quarter of 2021 were $4.1 million (including $0.8 million of non-cash compensation), compared to $2.8 million (including $0.7 million of non-cash compensation) in the third quarter of 2020 and $4.1 million (including $0.9 million of non-cash compensation) in the second quarter of 2021. The sequential increase in cash selling, general and administrative expenses was primarily due to increasedrecruiting costsand corporate insurance costs.

Drilling Operations Update

The Company exited the third quarter with 15 operating rigs and with one additional rig reactivating in October 2021. Overall, the Company's operating rig count averaged 13.8 rigs during the quarter. The Company expects to reactivate one additional rig by year end. The Company's backlog of drilling contracts with original terms of six months or longer was $19.7 million as of September30,2021. This backlog excludes rigs operating on shorter term pad-to-pad drilling contracts. Approximately 52% 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 third quarter of 2021, net of asset sales and recoveries, were $4.3 million.

As of September30,2021, the Company had cash on hand of $4.3 million, a revolving line of credit with availability of $8.9 million, and $132.8 million principal amount outstanding under its term loan. The term loan includes a committed $15 million accordion that remained undrawn as of September 30, 2021. The Company applied for full forgiveness of the $10 million Payroll Protection Program loan ("PPP loan") under the CARES Act during the second quarter of 2021. During the third quarter of 2021, the Company received notice that the PPP loan was forgiven and paid in full. As a result, a gain on extinguishment of debt of $10.1 million was recognized during the third quarter of 2021.

During the quarter, the Company instituted an additional at-the-market ("ATM") common stock offering with a maximum approved offering amount of $7.5 million. During the third quarter, the Company issued an aggregate of 686,739 shares of common stock pursuant to this program at a weighted average gross selling price of $3.03 per share, resulting in gross proceeds to the Company of $2.1 million. During October 2021, the Company completed this offering process, raising an additional $5.4 million of gross proceeds and issuing an additional 1,588,251 shares. During the third quarter, the Company also sold 40,800 shares pursuant to the terms of its equity line of credit at a weighted average gross selling price of $3.03 per share, resulting in total gross proceeds to the Company of $0.1 million.

Conference Call Details

A conference call for investors will be held today, November 2, 2021, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) to discuss the Company's third 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 10161416. The replay will be available until November 9, 2021.

Interested parties may also listen to a simultaneous webcast of the conference call by logging onto the Company's website at http://www.icdrilling.com in the Investor Relations section. A replay of the webcast will also be available for approximately 30 days following the call.

Certain Defined Terms

Pad Optimal SuperSpec Rig is defined as an AC powered rig with minimum 20,000ft racking capacity, 1500HP+ drawworks, 750,000lb hookload, three high pressure pumps, four engines and omni-directional walking system. Such rigs also include dual fuel, hi-line power and drilling optimization software options.

300 Series Rigs are defined as a Pad Optimal SuperSpec rig with the following additional characteristics: 25,000ft+ racking capacity, hi-torque top drives, and 1,000,000lb hookload option.

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 http://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

September30,2021

December31,2020

Assets

Cash and cash equivalents

$

4,302

$

12,279

Accounts receivable, net of allowance of zero and $0.5 million, respectively

16,939

10,023

Inventories

1,078

1,038

Assets held for sale

50

Prepaid expenses and other current assets

2,764

4,102

Total current assets

25,133

27,442

Property, plant and equipment, net

364,813

382,239

Other long-term assets, net

2,723

3,528

Total assets

$

392,669

$

413,209

Liabilities and Stockholders' Equity

Liabilities

Current portion of long-term debt (1)

$

3,710

$

7,637

Accounts payable

13,265

4,072

Accrued liabilities

12,773

10,723

Current portion of merger consideration payable to an affiliate

2,902

Total current liabilities

32,650

22,432

Long-term debt (2)

137,526

137,633

Merger consideration payable to an affiliate

2,902

Deferred income taxes, net

591

505

Other long-term liabilities

2,810

2,704

Total liabilities

173,577

166,176

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Independence Contract Drilling, Inc. Reports Financial Results For The Third Quarter Ended September 30, 2021 - PRNewswire