ICD - Earnings call transcript Q4 2018 | Independence Contract Drilling, Inc.

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Operator

Good morning and welcome to the Independence Contract Drilling Fourth Quarter and Year-End 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Philip Choyce, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Philip Choyce

thank quarter joining and and discuss today everyone fourth ICD's year-end morning, you us for to Good XXXX results. is today Executive me Anthony President our With and Officer. Gallegos, Chief

participants differ forward-looking statements, in cause today. are I talk to would A Before and certain actual materially future which we comments and number about we include remind results of subject begin, factors all from will what today that risks like to uncertainties. to periods our could uncertainties

these we the documents encourage of read discussion Company's earnings our to complete and the on a For risks, SEC. you release with file

In EBITDA addition, and it Please our non-GAAP opening adjusted definitions for and loss, reconciliation non-GAAP during release refer for for remarks. filings the net our full EBITDA And turn and we call. I'll refer our with to that, public of over of earnings income, to measures. Anthony net the to adjusted measures adjusted

Anthony Gallegos

everyone. Phil. morning, Thanks, Good

for combined fourth helped quarterly in free his quarter report our our income to are first to combination the stage fleet. recent than the first Our as results ICD closed combination as October The more X, cash company, public the rig remarks. strategic net prepared Company doubled which Phil reflecting drive the set flow for a generation will beyond. XXXX and in and time provide that adjusted on a meaningful report detail

these the performance realization, lines results However, synergy on I'd company's our particular better-than-expected control and of our focus say the drove quarter. financial in operations, cost proud to which on on integration during cost continued like I'm that intense combined in safe and

is Haynesville, XXnd well in a under one-year fleet. which its which exiting XX a the mobilized the quarter, us rig, XXX% of During marketed operating in with our operating, we XXXX our rigs contract fourth reactivated resulting first

operating days few contracts into our fell rigs, guidance. rigs transitioning line with we in During customers a entered the or in renewed instances. for our between quarter, new five also Overall, strategically including right

happy achieve to all and synergies our of continued quarter the and to XXX by work more employees third also Meshing with are We I'm or we companies hard our activities two XXXX. report the million I'm similarly is confident ability the regarding target for of combined on period. $XX of easy schedule integration sized no during task. integration

the However, responded has ICD team magnificently.

the land come to how proud more continue in over for team working team for as dividends the the category years which but past has and than way, in day one seeds months, IDC. of integration, the have ICD in has XX% hard U.S. lower everyone and cost as metrics per year-end the providing we which our the In continuous on we as of and to on I'm importantly, come. have focused daywork of culture will by our much more by the the throughout in pay terms seen most integration. presented achieved industry drilling reliable not safety focus our is several Our day-to-day, company, safest which our operations record lost better-than-expected than is our evidenced process tracked sown together combined the the

downdraft unprecedented during this November means the in in consecutive happened on where call in it I'm was to career, moving what everyone last sure aware close my WTI XX November for year. prices oil days. ICD and we to during saw XXXX. Now market WTI what on down of is The

time forecast the the at analysts As very for we XXXX, page were that on negative were most XXXX rig by turning activity.

margin rigs, been and analysts' demand those than been as However, that forecast. doubt original release on is some for which [Indiscernible] evidenced pad-optimal discussed rigs. various owns as by most There conference XXXX the more other some no year-to-date been on has has operates customers drilling calls, some resilient tweaks

there spoken discipline thinks will customers less, to certain be flow drilling of I've those has well, delivered. will That If and releases. within cash about as offset grading prices to be they E&P message lower, their to expected oil requiring some to then Street our live some thereby commitment been completion and their of the capital high the heard is cash flow. be recalibrate with spending. which operators also expected have However, others speak

are them at and the able rigs current giving itself months November recontract announcements not the hearing if think current from that their I December, Rather see. is the ICD were do lower we eventually thereby we to levels couple of three operators lower hearing spite their remain and been the This were high past mass count rig customers opportunity prices pad-optimal to specification our expecting. in stable sure some of releases operating durations, there I'm and manifested operators incrementally levels price uncertainty of our that higher really extending contracts. grading, was during shorter However, what to really some hard-earned contracted efficiencies CapEx What has in picking oil their rigs. were budget planning E&P not typically But contracted reducing rate several Even their rigs rig hold this, rolled of SCR was releasing rise. have than than by day in rigs. lighter on contracts uncertainty. than we on up count, expiring and rigs they over

responded count very the seeing is fleet what it again may and levels of way high once ongoing the not So, does replacement are of the utilization. rig have to land necessarily respond Pad-optimal cycle. enjoy manifestation pre-XXXX continued we continues U.S. rig

and the this both as basis. will before we fleet of and contracted be consequence all EBITDA absolute per outlook and our Overall, planning operating on cash for positive. which ICD for than operate means year higher free share flow a does Undisputedly, we of operations are larger ever and XXXX? my today, an very what rig for how So remains count this ICD's

transitory our two high. signing half or normal, first to a the be and to one demand do pad-optimal rigs downtime be adjust will this could drilling thought may contracts than as little continue year of see in But quarters, plans many We three as second oil I the in ago, this but the upon transitory backdrop, principally conversions million prices our equipment contracts remain items pricing long we to not AC for engines, hook-load over months our the unique market and packages, the of for more hurdles. will million lead-time customers of as fourth first improve meets between stabilize contract $X we tenure year, Board and ICD. and to this and which course year expect While exceeds reserved not demand, conditions, Against setback for and of customer XXXX. for themselves. SCR issues $X approved additional million budget our delivery planned or to return pumps, Directors capital including includes has resolve our much that accordingly will upgrades, $XX of internal a depend their This net will this third related

ourselves, at in doing exceptionally free positioned keep find to American we the If severe As generating possible will $XX our sheet by in to focused see ICD banded that I and call make land a close free high X where to on team well norm With returns over our about cash then cash appear in to size ICD. post-XXXX customers Oil Philip, at continually turn flow. focus North my rig feels I'll prepared the that pad-optimal It observations of $XX the everything manufacturing our development new grade on vis-a-vis in, that the except characterized remarks, the safe, results. financial I operations, I increased manifestation continued model dynamics, the our point less meaningful seeing that, replacement to cycle and flow to we intense here world respond be and whatever market. provide focus more market and rig as rig the strong we prices fleet range. are who is is Number will Shorter, is field the detail live in to lateral our on to like our members I'm an generally pad cycles, cycle for confident rig length final meanwhile a ICD. balance want market few

Philip Choyce

Thanks, Anthony.

we And costs of we reflect million exclude $XXX,XXX adjusted these are adjusted non-cash associated interest purchase a $XX.X Sidewinder $X incurred revenue the million There our results our when recorded accordance expense deferred termination mentioned, balance per of quarter Anthony credit of EBITDA significantly net prior calculating quarter. income net income, revenues and net adjusted affecting our of write-offs day excluded with the during in calculating and excluded quarter of reported price items fourth of facility We with that adjusted operation, in connection has been reported and income. merger. intangibles the benefited the EBITDA. fully net discrete Sidewinder with for our of accounting with statistics. adjusted when incurred expenses Sidewinder and non-cash benefits This sheet approximately associated calculating in We with As the increased couple results financing during merger-related the amortization Company merger. We results. the

a in our ahead $XX,XXX onto utilization Revenue amount of small adjusted of day our with and income of idle of of associated the of both guidance net guidance. results customers. per reported with $XX our consistent rig adjusted rig moving transitioning with $X.XX for million, Now between operations share came We EBITDA time per quarter. a and

of in scale of SG&A our that our $XX,XXX, began certain below better we guidance with of during exited and adjusted increased came acceleration operating XX all in late guidance, a income depreciation price result of also operating. day the allocation December benefiting economies purchase also our lower our XXXX per guidance, quarter. Sidewinder of the also with acquired associated in rig Cost expense of than with marketed rigs than We from benefiting Depreciation and combination certain final the came synergies. in reactivated and synergies. operations expense reflects the net coming reported acceleration in

$XXX.X XXXX had very and net EBITDA hand ratio of comprised cash leases under debt upon strong balance revolver than fourth term position. less our Moving on loan debt, to of ended and sheet. availability we our X quarter total of in a onto times. net a based liquidity million. capitalized excluding accordion results had We We $XX And and of million

million, $XXX rig December representing at at backlog stood years XX work. of XX.X Our

guidance for to on XXXX. Moving

other be As upon tenders. equipment of Anthony investments. customer by relating $X of $X completions based for budget, items demand course, timing investment lead-time to of disposals this and The our SCR on and planned an purchase our acceptable of XXXX package and contract long us and mentioned, on the of for million return is and received capital $XX conversions conditions will includes million net these reserve market million

reactivation conversion couple conditions. past all until three With our conversion timing and later attractive extending months the mid-year. rig the of during contract dayrates of idle year market as AC off not based -- We pad-optimal contracts rig planned with successful this rigs have to in status, begin final at been and first mid-year our the operating does SCR in upon completing it's we respect as can actual soon to come

are budgeting on SG&A expense compensation that, year for approximately $X.X million, to approximately full We $XX.X the be of stock-based top cash of million. non-cash with

quarterly top million For the realization depreciation Full-year per on million. SG&A, approximately budgeted cash believe combination, after from to $X.X full be of our of be of rate is we $XXX,XXX quarter approximately half the should compensation quarter run expense the back of we non-cash of have expense $XX stock-based that. plus year, Sidewinder per synergies

to quarter first guidance. Now the moving on

be that to still working during declines, this are $X.X flow prepared day we roll expense top month on will from addition is quarter, of Cost quarter. in as higher be contract expect the than remarks, reactivated the to a growth that cash half $XX,XXX expense. with investments dayrates first We quarter quarter marketed Depreciation regard, of skewed idle expected we $XX,XXX,XXX of expense the well matters up XXXX shorter the spread during to will is true between $XX,XXX XX% as payment first more quarter. quarter approximately representing long quarter end associated on half higher combination. free roll, is later Cash fourth day days, represent and operating with the be flow conversion of expected on of the days the in utilization year million, rather and expense substantially of as compensation during the valorem cash with free signed offset one be items operating than finally, interest per I realization generate And the by with quarter will payments oil operating the quarter ad and The year-end SCR or in Anthony In the of $XXX,XXX that's and SG&A with fourth items $XX,XXX the quarter approximately last approximately ever. that to million the of contract non-cash. $XXX,XXX skewed first to and not increase is reflecting payroll fleet. seasonal will quarter, the during taxes toward accrued incentive first after this And $XX,XXX be XX-rig represent during our the back half being rig $X.X standby per related the to $X.X per between year even quarter that, second And fourth CapEx operating cost price which Sidewider Anthony. and are addition, see cash expected tax stock-based more call Even to there fixed expense be outlays for offset the slightly which relates for compensation the one in the during during turn fewer pricing and associated per the approximately following: make. to the is costs increase will of fleet; to calendar and than matters this of during the expected rig by be year-end year, the of revenue on associated want fourth meaningful higher with that over will considering day, seasonal capital XXXX seasonal sequentially increases as a the than approximately contracts recent but of continued expense the mention at the cash is operating current Non-cash and generation will range to expect mentioned day, first of year. higher of synergies transaction And half million the dayrates as audit from year. I of $X expenses the first the back lead-time quarter. million toward does

Anthony Gallegos

Phil. up further at have and for questions. time. let's open Thanks, it this I Operator, no comments go ahead

Operator

you. Thank

Please session. question-and-answer Hallead Kurt We question And will now go Instructions] from ahead. today's begin first the [Operator comes of RBC.

Kurt Hallead

so morning. Hey, to far Congratulations, guys XXXX. good to solid and a start integration good very

budget the of So, Anthony, XX rig maybe saying by I like by so. companies can start E&P your their they for different that dynamic we've number drilling that seen cut indicated something customers noticed count XXXX. would program of largest or expectations their provide and rigs I a one

looking dynamic on You seems picked necessary to cut in that your significant it that basis. are mentioned in on picked really or commentary up dynamic you back you prepared haven't haven't a your up a customers where

kind from your and get really calibration and just here the of trying field. read from standpoint the the some do So I'm to read

Anthony Gallegos

Certainly, for for asked. Kurt, I the It's the people I'm sit great whole. your Yes, say seen to through and several question that's certainly with really is count, They and for do a quarter have last obviously probably were that them, toward can that back they release point more proud very what outlining release at rigs say expecting to they out anywhere with. lightly. than and rig for or rig the the to drivers rigs the haven't when customer overall relationship want quite thing key into having I is other to want that took conservative that as near isolation understand different point ICD, would on later referring look you they are pick relationship Like they're in from what time When in compliments be to great plans Ultimately, something air they is if what is projecting themselves What but overall up. We six someone find and release It's and year. may been great I the today to approach count talk rigs decision did Concho, the at their several declines we I particular that. look only We enjoy where there. taken down thank need customer market I enjoying out a rigs weeks about back efficiencies doing. road a to months rolled you they've going they months. do decide the we to there, that opportunity particular rig some them. with had that their would this XXXX. a really no that up had the that to that the long-term they CapEx and operators contracted have problem. for was and to them you've not the wasn't contract a rigs under take make

have operator, look, of respond Kurt. to going for expect continue still do they rigs certainly So rigs how them. that expect Certainly to we up, when with take back would forward several be what that, they but part I that's to working

Kurt Hallead

level of kind activity period secondarily, through are you little play able give to that's your pricing dynamic to of going keep what's a pricing? dynamic to the you of on Okay. price choppiness of mentioned thanks. on fairly to up to with your go firm these are on you some be your, through active? rigs or have bit able mostly respect kind at And hold this And assets finding transitory keep then -- as that you Great, as to going you're and kind you your active, going confidence client

Anthony Gallegos

Yes.

ago months expecting day sitting to to to guess the at compared today, I $XX,XXX we months roll is, range. three three here were us contract So ago different what's for $XX,XXX

going we're Given were Dayrates not were, ago expecting to happened were be months a of XX little the but these going disaster. the to a market less where they roll contracts be were that months ago, as not are certainly roll given still going in to few will to at Kurt, last lot we're which It's we interesting, three what's over a what's negotiated we they is where months, from a that. what than now. year increases negotiated contracts see ago,

Kurt Hallead

Appreciate color. Thanks, Anthony Okay. the for Great. it.

Anthony Gallegos

you, Thank Kurt.

Operator

comes from FBR. question our B. today And Pfingst go next ahead. Ryan Please Riley of

Ryan Pfingst

morning, guys. Hey, good

Anthony Gallegos

morning. Good

Philip Choyce

Good morning.

Ryan Pfingst

on a Philip, just follow-up pricing.

extended the ago, previous going that than quarter dayrates their higher for rigs a that the class contracted throughout in are uptrend mentioned are remain You just be and to in months dayrates to you still expect at super fourth be saying few a though the to dayrates you XXXX? Anthony expect steady where not contracts spec

Philip Choyce

the all been we've certainly higher than dayrates expiring today the signed contracts have Well, at contracts were. what

little a momentum. Anthony think I in as going of through as we period, can and so achieve paused think dayrate think or position so, mid-year gone, think a we by said, I but we're go bit, be that's some I we where this momentum lot back transitory to a

Anthony Gallegos

Yes, capabilities, that. would add Ryan, to like I their also that outfitted, at rigs, things got look they're how you've

to fleet. to when we I dayrate the do improvement dayrates see think like rigs, on be the that at three going they highest thought walking when pad-optimal exactly not four we would stuff the months subsector So you're nice being continue of market that that's of ago, for extended that, capability, maybe in, where subset talk pump, gen, about look at you three

that have fleet, ICD of obviously, opportunities class they looking XX capability. some We're the with market rig well. all participates at that really but interesting don't in rig involving obviously, So as today that

it going nice may that's year we're not not So but what say be plays not talk points really average some why we to be, thought to data as that's we're about out. have saying would to this the

Ryan Pfingst

months you. the just now M&A I you acquisition? additional on the past color. appreciate further of we're guys Got thoughts then close that as And your five can give

Anthony Gallegos

question. Yes. Great

important from the it, planning synergy work not for a So, into thing the standpoint as and integration more quarter I Sidewinder from cultural launch, mind was put I'm the third merger of that standpoint. the a with said was since to lot integration say the well happy summer get on my gone most the ICD extremely importantly over that right to a cost only but has in call,

The we never that's or integration We five are we've but what on. one to a to efforts trying CEO, career, the gone months, perspective, company from involved flag. lead four is, certainly make three, four last been in my fly this one I'm well. point one today, focused been my had over has I've as in extremely

opportunities of to asset, pad-optimal, The companies, has where pick rigs to rigs are to careful integration the there purchase industrial straightforward. acquire we on limited moved a this the Most make have is is fit at. rigs been has going asset, opportunities rigs, there's but [indiscernible] that them. of up demand, around. with we of where of in along, ICD we're to being accretive, in those roll-up fleet where is to look As all pool are can look started started There that not land those quality the clear it's that there. additional opportunities We've challenge of are opportunities we a just way out a additional have

ones you you of off to talk list you October, more that complicated. just point so growth. the are you key with don't Sidewinder obviously, or what ICD, takes scale, quite better, as to tick try can our out we kind and would combined be you one companies make of reach the And given pre-merger you have we pressure immediate to challenge the when but that you need back these actionable, guy another is it's and having do with in have would I I've, work not to. what scale that is it girl, down them, So, think you're most dealing the and Look, the also

and going in we're nice and here the part this wind back position that's going sales we I shareholders of decisions growth with forward. running well. to for the can sit our relates in we're year as think our I good a So, down believe great Company make to in really the really and right have really it

Ryan Pfingst

sense. the so the success guys. Makes Congrats on Thanks, of far. integration

Anthony Gallegos

you. Thank

Operator

And Holt. and ahead. from Taylor Zurcher question our Please next Pickering today of go comes Tudor,

Taylor Zurcher

good Hi, morning.

Philip Choyce

Taylor, how are you?

Taylor Zurcher

exposure for a a even Anthony, different your of you've large from well. wider private. fleet to broad operators majors E&P size, pretty array of Doing independents, got the to

And so my given the of business question pretty is contracting private groups, the behavior to for any meaningful extent again, some on customer the you're just shed at today. hoping could side is, seeing on extent differences between you're a particularly three you light those in piece you To groups? I those the least demand there what between was the differences private side? three seeing are or

Anthony Gallegos

Taylor, mix big community would, in to feeling, tend the a some and the were primarily think and are Street, working certainly that's customers I are that reactive. Wall know, that be that's that from Yes, shareholders big from pressure privates for, little and public returns. and our a you as banking there The investment difference probably I privates on less

they're adjust they're late to budgets, happened certainly all. how year what So going year, as adjust and about this think if I at going last to

months. reacted of the The continue year negotiations working the a of couple So of in that working are uncertainty over have we're lot favorably in on over very that and quarter extensions for four, the already I'm say privates three of of have second midst SCRs couple the that the to in last a to three We've are we got group that for happy a work. privates, have in rolling there. now been market that for that working

answering So I up that's think held well. I'm question. quite Hopefully,

in we're and as I talk about we other It's certainly be We've They of here into couple eight we're there do rollovers what up a we think now. market. to make next there seen as prices about ICD. contract Haynesville. right going market basin going much what's add for optimistic incremental ran since rigs coming pretty and that in quarters, over it of on niche rigs off about got backed kind over The that don't last We've year. then, some but good have to even gas over working possibly would we point the as the really able the up

Taylor Zurcher

helpful. you follow-up very Haynesville. my on And Okay, Thanks. the answered

this between for opportunities doing from So, as and customers given me opportunities, or are is months over are of past perhaps be to periods one and time, basins transitions interested of script, in but last you rigs it, in is market work idle outside to you've covered might something all incremental and just Haynesville your several turn go question them rig forward? most in way additional guess seeing is right I you that Permian the the that put of moving say to plays in the

Anthony Gallegos

Yes.

presence market in be obvious view over target Eagle had years. Ford legacy Ford. few last So, a the have where is an Eagle an the companies is the The there would our both just extension of Permian. Ford Eagle

So the Eagle I in market and the surprised with Texas be we talk about contiguous some Ford end up when is ICD rigs market. see wouldn't our remember, to states. target And

Oklahoma have easily over would course, Mexico out one can to be we've we a of move as and over that now, very but rig we Of in course, expect there, remain got and it's well. efficiently going nice somewhere presence of in North working New Louisiana

So opportunities presented just to Texas around the broader being to on We are surprised that narrow. keep we contiguous and the market, see that some be target within want us in rigs but that's market us. move south to and based wouldn't -- want it keep to the but states,

Operator

the for And I any management concludes over you. this session. team final remarks. and our Thank to would ladies the gentlemen, question-and-answer like back to conference turn

Anthony Gallegos

like we're and more I'd bring achieved, synergies call executing cash achieve close, to we're so as in in projected. integration great is the we previously track place, on ICD on than where to you originally Thank much. not level successfully Look, a we plan confirm to our that flow a

larger, our of to customers, and options enter to make drilling them our with in before enhanceability wider terms customer than into available In ever a strategic addition premium of have base. relationships with we an array provide rig can more rigs to

our we stronger in as balance over of of us investor, everyone financial road safe quarter growth line ICD. when wish We is you productive years. look here and upcoming on heard better second everything dialing an off. everyone cash conferences and a and minutes risk a appreciate you've Friday me we'll nothing first to in next We discuss As progress low very different and all forward the spending a during couple to sign few and the our seeing With Guys, nice you updating changed, today. vis-a-vis We but relations on sight investor sheet we results our with flow at generation substantial quarter security have at weekend. that, say and the before, has results. free

Operator

sir. call. all attending This presentation. today's today's for conference you concludes you, We thank Thank

disconnect You have may wonderful day. and your now a lines

Independence Contract Drilling (ICDIQ) 1 Mar 192018 Q4 Earnings call transcript