Independence Contract Drilling, Inc. Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2020 and Announces Additional Rig…

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 December31, 2020 and announced additional rig reactivations.

Fourth Quarter 2020 Highlights

Fleet Summary Highlights

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 December31, 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 December31, 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 December31, 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 December31, 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.TheCompany doesnot expect to add any rigs back toits 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 witheight 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 rigsare 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 December31, 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, February24, 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 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.

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

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

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Independence Contract Drilling, Inc. Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2020 and Announces Additional Rig...