ICD - Earnings call transcript Q2 2021 | Independence Contract Drilling, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Independence Contract Drilling, Incorporated, Second Quarter 2021 Financial Results and Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Philip Choyce, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Philip Choyce

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

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

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

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

Anthony Gallegos

the the minutes. XXXX our will we're on Philip of performance that financial brief details X everyone. prepared things: my some quarter, In a and about outlook. for results want commentary in our recent market today, a current remarks go to Hello, during financial of seeing I trends focus of quarter couple through summary our second the of

adjusted sequential a rationalization in result Margin rig rigs. and adjusted quarter, support of EBITDA only implemented we’ve to represented benefit X.X and this from cost absorption dayrate and drove cost of the working continue improvement but activity. approximately quarterly from fixed as of increase, loss our average of Steady rig XX%. increased generated modest our efforts an of better For results count more a reported average EBITDA last cost control an per by sequential of improvement sequentially day year $XXX,XXX of from much million This XX.X a increase rigs. operating $X.X

the success return in less increases renewals, the but steady getting reactivating during March go generating will track EBITDA free continued dayrate from spent liquidity our expect given quarter's an million, on improvement through rigs adjusted than quarter XXXX, on reactivations $XX.X to Overall, cash exiting on to details, at goal at flow. XX. also third more end of our remain and We positive and stood rig reach contract anticipated. Philip positive we to of

equity During the accessed proceeds in quarter, gross $X.X of credit ATM an price we approximately average selectively programs, of our raising and line per at share. $X.XX million

$X million of under remaining available of under at interest million consisted quarter. accordion our million our interest under line advantage under on our $XX.X hand, As prior the PIK loan respect $XX of our our and availability to took $X.X term cash undrawn equity payment of the mentioned due also revolver, call, of feature beginning the credit. million loan with we second of liquidity our on term Overall

Now on to the business.

rig, X and XXX in an Our and goal reactivated have the by wells as the spudding XX beginning approximate this including since the compared more fourfold the in our Series was of our of ICD baseline, we than July, Overall, X over period. South quarter, XXth X including Series XXXX Series was and with rigs, rigs reactivated rigs in the and rigs Chalk. the XXth and rig contracting for loan are a the a is XXX contracted industry-wide X increase to which by rig. second same replaced August the X in rigs stacked Xx XXXX of XXX in increase second their the Using We X the the that quarter. half Austin Permian, contracted July. in first in and achieved rig first Texas X Haynesville end

in inherent rigs acquired rigs Series ICD good market this in never a the we value why to is the represent time rig these believe XXX highlight proposition we've opportunity environment. until our these But had to Sidewinder merger. We in recently, think ICD. customers an rigs to count improving I underappreciated an

rigs already more X reactivations of For have in XXXX of today example, the to pre-pandemic with and operating operating these X planned continues February market we had improve. as

team marketing a ICD substantially reason value job are fantastic marketing rigs these Our the outperforming done growth to rigs a market. base, and big is overall proposition our customer the has why of these utilization

with only in our reactivations, comprised of the half had the forward predominantly have fleet those expect approximately rigs Series spec spec types we future these of at be this operating XX% of In of our of comparison, operating goal Looking before we pandemic. XXX fleet to to rigs rig. right

margin in historical utilization, drive prior to momentum to even to forward expect strong addition and dayrate comparison in levels. rigs we So these

in the the the slower a quarter, pace was For industry as the trends quarter saw ICD, we continuation second we of albeit acceleration first a at during expected.

For of the rig improvements. year, continue expect remainder see the count to we to

prices, commodity lack capital more these our improvements E&P companies. a the due calendar, of in improvements to pace of to be at the the compared half modest and discipline customers, of continued financial the part first with expect the budget even fiscal we access year However, to on

based rig end the of legacy financial discipline hedges increase CapEx XXXX customers, a count. prices our upon we Even off. in see year, Towards we their step-up and higher year expect demand this do next by with into and commodity to rolling to budgets expect in continued

of inventories We tremendous new directed budgets based year. drilling also the simply compared XXXX on be seen toward throughout DUC expect a in wells, greater the will decrease we've to their proportion

customers contract and are seeing out all in We this our with play of discussions. conversations our in our

the fewer started We need dayrates plays, our improvements current approaching rigs, they our wells. dayrate more these renewals are short-term Haynesville given and more expect to Basin an competition continue customers contract across price also structure, and improvement on contract a be for this this Haynesville, rigs are Thus, compared drill where market function when in the our ICD number more important there to the Overall, is drilling only working very a is the price which evolving industry barometer our remainder technically discussions requirements Permian. to though and begin are and mentioned, with us the the just throughout operating challenging competition. contractors and believe in more short I on I prices are I the competitors in rig not regarding to are of diversity a key and function the such forward. commodity such Series realize going are need and believe continue to recently, racking In rigs year. for on customers year. requirements supply is overall factors a we which in of of is the expertise to on tilted high-temperature Operating with work substantially longer in our the one believe demand term part renewals confidence than expected larger Permian the there And outlook been see contracts customers demanding what to requirements equipment rigs, lower even supply in of tenors, satisfy less recognition and of steady opportunities higher also of a rig and dayrates Haynesville, appear. setback, XXX across to part as high-pressure, institutional operations the is Permian. has these toward as gas but the all and the of player required more competitors intense natural today tightness, While on of prospects have targeting are markets. our and more

of tightens, supply Permian as the executed onset to up the for dayrate However, highest in recently catch is pandemic that work in the our was contracts basin. since starting

teens. Our for opportunities dayrate day which lines supply, that contract work as dayrates $XX,XXX customers in beginning the $XXX activity the beginning with through XXX contracts uptick months, and, market range our in rigs, current renewals, rigs and XXX Series $X,XXX bigger a extend to last commodity in our plus And for currently both spot in same are off. shorter of per now $XX,XXX for match spot this dayrates bias are October of period. on are time And Current been higher to our to predominantly for period. customer the is Compared demand capabilities. the seeing have three for XXX with while incremental we're to demand of continued higher September, much upper hedges are some Series prices contracts. year rigs to we requirements are Series when adders, significant range for rigs. term pad market pad being secure rolling in preparing next able XXXX the presented and to legacy increases increases course, higher those Much begin we the rigs Dayrate mentioned, classes is in as in of we

limited will factors a there lead of improvements, most to continuing is believe are of dayrate So the super-spec but supply lot rigs. we that important

our XX on is idle Series conference realize. have not And discussed true we higher idle rigs super-spec Most utilization there is As rig rig there's This type reprices XXX significant none where rig, for reasons, incremental the be a rig market market. incremental met last today available months. are for that inventory. well incremental importantly, must people super-spec most several generally in an stacked especially than been believe the much demand from rigs minimal contract for call, virtually Thus, over for available.

been premium will working a rigs. Customers places on rigs with on hot want have together it a customer's give crews not program. that experienced to First, up these drilling active

and likely X super-spec rigs count environment. be XXXX. finally, issue walking challenging, the a operating in conversion will forced as Hiring soon, and reach into steadily the point becoming labor with we be the the more as will require works, will necessity true rig cost top investment, into satisfy true already millions capital more stacked Higher expect engines is other our stacked demand. or X,XXX AC underappreciated, rigs coming to dayrates is X skidding rigs, accelerates the And in particular case bigger land for believe on is reach utilization but I economic reactivate, of drilling significantly to discussed. months on will the this of or in like cost and super-spec XX% contractor a Second, of longer industry is horsepower an XX the draw the to higher just There improving and rigs, improves become for margins rigs as this back U.S. overall of is an available, to may reactivations. or this count status inventory be I that to assuming pumps, AC and rig

to this fleet discussions move at which deem we place we time, As market. are forward improvements. improving our depend term short of with contracts become and dayrates total we on have in the very are our this this mentioned, of expect term contracts contracts Today, of it'd in involved. this early to our market beginning given ICD percentage cycle, all future customer customers. we part I The our up on to on type Terming we is year, appear view lock so do contracts. are locked term up the spot term of an of where on contracts believe as will don't the expire I contract fleet think not into but substantial We in current prudent our in see and prudent portion some rig term at cycle, a we're something be dayrate up and interested are

where to that a flow the the cash bit will important and We We need regarding return our time. things. for If operating fleet a today outlook are as considering little of contracts. very of a market possible. our be couple share neutrality dayrates to balance I more spot we term dayrate contracts, are dayrates sign today, only soon we're in doing and continuing want subset all total year. to we as on rigs this of at discussions this and more We're better than these right higher It's increase. some

we've we've and this goal As discussed, been utilization. dayrates towards steadily with improving moving

XXXX. the third positive quarter continue being expect flow during free target to cash as EBITDA we be to positive exit and We

the half as industry levels second from count pace and accelerate as the we navigate of out close current increases to we continuing XXXX, we the fourth As of year. expect rig this quarter approaches the

couple dayrates the of budgets, gas capital and end XXXX this activity E&P continue for X be would oil continued upside companies. we've super-spec for we on higher drilling will year additional before the by with expect In close to reactivate did more during progress remiss if reactivations market span of the I we'll ICD and environment, ESG. rigs expect regarding refreshed rigs start expect rigs XXXX. already current in next rigs. opportunity discussion we bidding another inventory dayrates will for over to mentioned, a XXXX. I especially I with on with the a outlook, DUC depleted would to on X, not reactivated quarters Based the or increase, super-spec prices be our of our I with X expect top As the

line to require utilizing we're All other of lighting customers to dual consider. high crown capable of XX% approximately options. two-thirds customers operating and lighting our environmentally utilize Today, or rigs about offer willing features, crown dual options and rigs and are and them. our provide such more options for our friendly fuel than When are line fuel our high our

reduce issued customers emissions. continue and and options of to utilization and prioritize you for to these carbon eliminate operations plan lookout expect many We sustainability promoting green package designed inaugural efforts for world. rapidly focus as month. the later Also, the increase to our our sustainable be this will company's on be a of towards report, The will report which should more highlight

all are happening good up, summing So at this things ICD.

and We we're punch our expect continue on for from cash and for stakeholders. pathway continued our front, a weight transitioning to flow returns on currently shareholders year's unprecedented objectives We're as downturn. meeting improvement last to we all and EBITDA free positive above and that recover driving

management shareholders and has management if focus flexibility financial and flow team our term, the downturn, winning our longer with over generation improved the incentivized to team financial accordingly Our returns on our XXXX only do. since remains cash

our best are class. support in our systems processes, Our which rigs and and operations, demand in are

Our rig day. maximize accolades every We're service young, our breaking expectations fleet records. manufacturing for customers. We're hard to and professionalism for and flexible, to our engineered efficiencies customers' winning is and working exceed

optimization providing services efficient our Our oil most contiguous for rigs pursuit in reputation and in contract brand firmly the North and market drilling participating which a regions, in strong and alongside implanted capable the initiatives, our and Texas America's gas-producing of drilling with are customers and target prolific reside in safest most states. ESG

over We are quarters. prospects the next share and continue gain to market our about several excited

So with results he quarter that, the us over the so second through I'll to company. for turn the walk call XXXX back Philip, financial can

Philip Choyce

Anthony. Thanks,

average share adjusted loss of primarily Reactivation During rigs per quarter on EBITDA million second rigs, slightly reported XXth the of net $XXX,XXX. reactivating as XX.X guidance in call. The we’ve the our quarter, during July an $XX.X XXth operated costs below quarter $XXX,XXX. or adjusted to to the and loss were relates during $X.XX and quarter. We conference variance opposed the second

per with overhead operations. favorable reactivations line utilization first per of and as in quarter $XX,XXX were termination costs days guidance to initiatives and in increased and with expect to SG&A efficiency costs. with impact not These to third guidance sequentially based the Cost increasing day and associated guidance. sequentially favorably came increase higher standby did quarter $XXX,XXX upon unabsorbed reduced than dayrates cost $XXX,XXX rig Cost quarter. quarter any costs compared approximately million, to day $XXX,XXX increases increases by excludes early was during the quarter compensation continue of record second price year. during at primarily stock-based We sequential XX% Revenue expense in variable end. $XX,XXX quarter. included with day line per fourth $X.X in increase slightly We of the day comp with approximately compared revenue stock-based this per the of on in sequential with deferred which associated accounting XXXX of our prior the stock per of expected of average, approximately attributable was guidance, to further and day to

XXXX. to These we of prior approximately of There's million cash will million. approximately $X.X $X.X quarter, included through equipment third million capital which quarter at approximately expenditures for the end, deliveries. $X of was during CapEx During payments quarter net disposals the accrued relating payments flow expect quarter

Our capital XX-rig fleet. budget was upon based a

to the reactivation half statement Overall, approximately would of $X our $X.X million an flow expect dispositions, million flow budget. by year, end approximately of XXXX for Assuming cash the back original CapEx, of rigs of to by for current expect the increase X net compared additional the through to CapEx we year. our we

Our backlog our in continues backlog which at operating pad-to-pad XXXX, of on XX, at levels our are all as below $XX.X which historical now million, June XXXX. dayrate Obviously, expires view of our contracts, continued most capitalizes short-term stood be of rigs to improvement. on

term This $X.X approximately at sheet Moving quarter on and to debt, leases our our reflected the net comprised on balance of At sheet. balance reported excluding deferred and end, $XXX.X of million net is finance quarter million. loan. PPP end leases we’ve of were million. costs $XX financing loan net debt Finance

balance We application amount forgiveness during our does lender loan during forgiveness. second $XX the forgiveness potential our the our review, million reflect to entire to PPP lenders and requesting our not SBA Our the quarter. submitted quarter, first was application forgiveness following any of submitted loan the

Given know the application by made will determination not the do be we nature of the final when or SBA. process, a

moving Now quarter third guidance. to on

days working our representing well rigs We quarter. will between customers a rigs as during of transferring of approximate and quarter. to the that average expect includes during days, the couple X,XXX reactivation rigs as XX.X have XX while time idle during July operating This XXth

$X,XXX range. day $X,XXX the of per XX% come margin midpoint an day, at and sequential expect increase this in representing approximate per We between to

$XX,XXX quarter per amounts larger Cost gain rolls, day, quarter. and the These revenues contract We to revenue day, we only and $XX,XXX expenses. of expected the the day $XX,XXX base. in increases $XX,XXX a come expect to efficiencies per per between lower pass-through as range second exclude operating continue to than from day third day benefiting per partially with between per and dayrate on is many

fourth contract renewals fully we during our Anthony signed likely mentioned, benefiting the with current the of quarter, this improvement not most continue results dayrate year. until As quarter to on renewals see

per third sequential continued gains more efficiency expect revenue as to the additional cost rigs at we improvement So after day quarter do go line the work. and

the incur planned be in cost We reactivations. day quarter addition an also about on during to not also our guidance. associated $XXX,XXX expenses included not overhead with rig cost are guidance. per our to $XXX,XXX costs will expect day Unabsorbed per top are of, included third additional These in and

flat We is on second component variable the some to expect accounting. subject quarter the with be to stock-based that SG&A with expenses variability

expect expect again, statement with will over We And about of be net through quarter. the consistent And our for million flow expense flow second depreciation third the expense cash quarter that, back to we $X.X as during interest with well. and the dispositions to call turn CapEx, to Anthony. I

Anthony Gallegos

I no further up this Thank Operator, the line you, Philip. at time. go have for comments and ahead questions. let's open

Operator

question come the [Operator ahead Johnson Daniel will first with Burke Instructions] from Please go And Rice.

Daniel Burke

Hey, good morning guys.

Anthony Gallegos

Hey Daniel.

Daniel Burke

future will reflection predominantly and the Series, reactivations understand. the those comment Or that your XXX series? Is being XXX Anthony, side? Series. capability some more mean, I of XXX of rigs. realistically thought function is on incremental of highlighted the of XXX reactivations be Series ready But that wanted a rigs reduced the capabilities to inventory on it of of the a just -- better the I you

Anthony Gallegos

a question, Daniel. great It's

most in our think buck just about from think when rig, also of I we today, a effects the ourselves ICD, marketplace. where a competitors' something last as underappreciated our we we to continue something investment in you it's Premerger very but this continue think I our that played the get of more our think in to the a especially this that's this excited large differentiate bang is people about remarks, reflection and what for we It's the when year. rigs. demand, obviously see little pads, think is all of Very hammered marketplace wells of lateral can the company. needed things. class ideally we recover It's ICD going increasing, those. lengths lot the rigs, merger if the where amongst about count demand competitors suited see But prepared we're to and know, where also think out number our needed function a we U.S. in And different to rig look for our then. of shale needed XXX XX Series, as tool. think that tough uptick the are we second, the larger last certainly, Sidewinder both gave months, market I Unfortunately, which in at X we the continues in that play X developments the And U.S. One, of could as contracted you you on to mature, the certainly rigs since over scale. And that. been has bigger rig out requires us are prosecute you count. shale incremental

Daniel Burke

that's That's three you it guide QX a And looks towards helpful. reactivations, And that of wanted reactivate, start the probably on rigs quarter. fleet correct. see against levels fourth the I what this way in see to like of available inquiry of the tilt the understand just you to dates depth stay that your in likely to at guess then next again, I that is to if from tranche topic two the point?

Anthony Gallegos

with But next the and we've not It's excited the than with year. And fourth certainly, that be just this they're start then with certainly, the we is still in week-to-week amount activity bigger out, they July down. where year that though guide, this when were week. Even fiscal demonstrated clear this from months played there's with has to we're into X dates we of quarter, XXXX another way we it's is have month. X we digits, of actually happened were what That's think consistent. what's has the the break to the seeing pull customers, we type single-digit months ago, what year X, Consistent will evolving I the increasing, start increases really as its see last seen this CapEx that's year, year. customers the into prices, new slowed rig running going out count maybe going a years, budgets for commodity our double consistent it's what it's the to to year, Yes. calendar not specifically get CapEx significant saw third the seen flat is that get work round talking increasing quarter, in August by happen here during That year historically, really this starting discipline over and is we've in that in a year. October. last And the

we're coming. seeing what that's So

it you're right. reading yes, So

need the We are these how got around to that of careful itself. a we on pace rigs. to hire There's that. reactivations. reactivation we be course, also you've the few that a have the lot then goes And select rig. to you've There a reactivate of process do some There's upgrades got -- you crews,

You've mobilize got got up, to you've start it to it.

guide the that a that Philip being way is operate exceed continue provided but to safely, also we that to our expectations. with customers’ So can all consistent to able do in

Daniel Burke

you induce that given I your be contract? flow Got duration, it you one, depend to I premium The When the course, I into to of point need And has on decent think spot marketplace. the you for of if it a there's short And in strategy. market. on coax term then rates the this a term of made spot could upon where side cash being argument to it. maybe to appropriate at Anthony, the shift? staying would mean been it. spot make a playing certainly is you a premium do what but discussing And intuitive discussion currently, do last at type into considering is

Anthony Gallegos

Yes.

next not can said bullish will driven from that going economic but very we've necessity think believe everything year. obviously from it's just just to outlook, an we're today, tell and We your from think about to the increase, supply continue I dayrates the a standpoint, be demand standpoint. by outlook I you certainly

going the capabilities sit on or we from customer we're would type where and from that's we view not. would use today. whether Obviously, rig, the it of is a, do rig relationship And that would in have market contract going a we're to going at customer, rates And say, six months, with months. evaluate type discussion opportunities, think were higher the about over be be spot XX I will if to as the about of average the the down that's think a those think So to a where today, say, is term blended rates period, why it's than we obviously perspective. it term full I to

that the the see over dayrates, that guess average rates call just that what that I the going we've moving to that spot over be couple was do change right, a I And of with period really months, is out conversation. of today you to as If market where you customers consistent highlight that's until have last well. term wanted rate the reach the of here to last had been certainly up over want and not couple months. in

Daniel Burke

comments leave the Thank I’ll guys. you. all it there. Appreciate

Anthony Gallegos

Daniel. you, thank Okay,

Operator

This closing back will ahead, to I any question-and-answer Gallegos for remarks. conclude Please go our session. like would sir. turn the conference over to Anthony

Anthony Gallegos

celebrate as say everyone have joining we former us. the to current, call, I'd thank who to you you end Guys, want want to and today. professionalism efforts we I for and are say that to results focus as customers. also our and those evident I year. Also, all of years you, Thank like for our the The their thank Chuck. here over on success the this to XXth to them ICD focus our employees, Okay. anniversary thank contributed

will that the at presenting to and Annual make XXth. achievement, this all in employees investors XXth Gas I want for service our Also, EnerCom's you Research I for and awarded As a ICD Oil And we that just of XX aware year Energy really to our that. Denver to be through Conference of Point's occurring August I'm the thank third say award just row, for in want professionalism. proud morning, were

of middle ICD. in for on everyone, our to With to support the you as next end So the up I that, you catch in interest Thank here your forward well. and speaking then We call again to the again, with month. we'll call. you before here. hope look

Operator

The has presentation. conference attending now concluded. you today's for Thank

You may disconnect. now

Independence Contract Drilling (ICDIQ) 7 Aug 212021 Q2 Earnings call transcript