ICD - Earnings call transcript Q4 2021 | Independence Contract Drilling, Inc.

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Operator

Good day, and welcome to the Independence Contract Drilling, Inc. Fourth Quarter and Year End 2021 Financial Results Conference Call. [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. ahead. go Please

Philip Choyce

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

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

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

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

Anthony Gallegos

of will of Thanks, results in minutes. Philip. couple results SEC we Philip the fourth everyone. And a presentation for pre-released Hello, the for go investor quarter with most filed our of in and financial fourth the January. the part, financial quarter XXXX our details an through

third in XXXX. I fourth my payments. an goals update let financial to primary I our proud customer of I'm provide want ICD focus report on XXXX. exited cash generating and EBITDA expected market and cash quarter. and that to expectations expected CapEx on expansion for and achieved summary you. a want provide EBITDA you want remarks the positive fourth operating to I entering financial our exceeding We in some I achieved annualized the to company's the to dayrate we maintenance positive goals. And on the XXXX our context as continued much you flow its improved with strategic fleet So summarize during quarter sum the today, that and XXXX interest evolution want and X won't Most in we'll geographic those on quarter. importantly, I prepared was during that Philip Today, for items X things. margin with and close

was ICD our came repricing frequent XXXX, from Achieving revenue posture improved and our fourth the margin our to contract us springboard exited and of per needed utilization, increase dayrate reported contract financial provided of continue to increasing on we cash $X,XXX. and XXX quarter, performance new we of allow improvements placements. a renewals execute we short-term day $XX,XXX function As will the contract In that plan. both driving XXXX, these flow goals for on day and which meaningfully Series our business per

press field-level approximately our incentive per impacted of release, per by day. margin accruals managers in noted year-end day As for compensation was $XXX

reaffirm what day margin approximately first we year of of revenue XX accrual, representing more want $X,XXX, contracted. Philip we quarter, XX% a rigs in We fourth important, was details, that in to sequential with I to per provide More here during Excluding the a increase. but increase XX%. the day per XXXX. ended sequential see achieved expect the will quarter

of day our We adjusted to and XX% fourth most quarter another $X,XXX. to day quarter expect revenue first XX% compared margin importantly, compared to levels, to XXXX XX% quarter XX% per per and improve improve fourth to level between

at reinstatement of fourth the than first Obviously, incentive costs more field of First increases end associated quarter with pay comp. expectations adjustments manager do associated implemented the quarter labor dayrate inflation with quarter. margin offset reflect

we second here well. in As March, the have we quarter as good sit visibility toward

to approximately and the but the of leading teams expect second per strong continues only sales, market are indicative to to XX% fourth operations our compared shorter-term XXX% This belief right to focus margin that we contracts to in would near compared have and seen resolute having maintaining This we some reported we and contracts is benefits reprices quarter increases day exceeding in as reported levels. the of a rapid contract benefiting our XX in in to posture term in will and terms and our are to from short-term improve and ability sequential of We place intentional are our improvements. not margin now, this of margin also and in margin on improvement outstanding levels pad-to-pad forecasted the quarter efforts faster the fourth large is market. we're to stages result we seeing it function to strategy XX% on For the earnings ultimately dayrate cost working, through margins to and have industry our improvement. to second the support quarter, provide on revenue early inflation XX% expansion to allow as things sequential label remain per pass prior improve rigs quarter day These levels. continued in, pre-pandemic related a up cycle primarily based relates in calls focus

more average first geographic or the continue we of supply, rigs case, at all approaching believe in rigs, the XXXX, rigs increases improve, X In in including guidance. rig adjustment contracted will driven I which customers. our to this we year. XX%, least with have fleet. some large very will positive back and or quarter placed more drive quarter, rate by of the in for increases that fourth as recontracted of evolution, our to day which in dayrate roughly for tight which significantly. to margin our mentioned the confidence $X,XXX fourth every expansion our market drives The importantly, half And ICD and increased I second X continues embedded XX% was quarter wanted transformational customer XX discuss occurred regard. this throughout We momentum the with new per During repriced, saw

independent rig, Texas. is XXth which a working our an contracting in ICD large West rig and Series reactivating to addition XXX In public for

geographic rigs Ford Eagle our our Texas rig by Ford mobilizing to Haynesville moving the and all West our West the Texas completed and active the also X consolidation operations. from from into strategy a Eagle to involved third This rigs We Haynesville. active

positive ICD Ford Eagle in we our elected to it After operational West this market. in premier oil to Texas in be the and and to we and oil in America's which West markets, XX% on believe industry, leverage to on unconventional North cost serving of opportunities exposure both our and the strong our XX% While healthy, believe consolidation, natural with gas-directed drilling plays. be and presence very presents and working the we rigs our this operational remain I core balanced that efficiencies. Haynesville, natural are are Texas, working Haynesville gas a will laser-focused drive X activity

with the establish X whom were able relationship X later a relocations, contractual the a cases completing to we're first-time discussing geographic to rig customer number customers increase in rigs with and While already this of year. we ICD multi-rig another contracted second adding

customer We over mix quarter. the also past enhanced our

balanced misunderstood. think I exposure public both private to somewhat ICD's and E&Ps is

So, those one half type E&Ps, any today, working of working today, are I E&Ps are this Basin. for of our of working the in for almost contracted XX rigs, of currently X want private and Permian for largest public out the to operators point

ICD. we how market to the reactivations opportunity for on Moving for view the rig and

and today, of rig is which emphasize operator expectations. it's important minimal driving tight to to available. able dayrate There is rig excess if rigs. find Today, is the market think margin a positive an how lucky super-spec our I is supply they're hot

inability had higher ago, on some you we a about context give to we rig have to pad due free had come weeks significantly our follow-up that this, to customer's available. a commitment of X at dayrates. on a hours Series rig Just XXX within But one

next margins this has industry All-in drilling across rig focused have for million So drilling increases to been We is shareholders. for total meaningful to going reactivate the rig for of the they're costly driving we're industry, our rigs, approximately our we for further in increasing industry stacked than drive for that adds $X day X as reactivations. on rig reactivation have quite per are years, a reactivate and cost the costs ICD at incurred capital estimate to as couple and rates returns increased the more contractor. which to will on rigs believe

the ICD idle to X for in have rigs? So set rigs what We reactivate today. opportunity our is marketed fleet

meeting even $X costing range. contracts margins payback Series all-in point rigs and are of XXX better Rigs demand Series last than day in All X specification supply in year million this our rigs. to of on signed that X $XX,XXX these Series that per it's rig, paybacks more we and for our reactivation for well the greater do reactivations The rig The basis, strong. in on command XXX an shortest most investments would for today for a rigs and industry expect the X will next million $X.X highest generate class exists rigs they reactivation. and these rig reactivation XXX we have will the on cost extremely per are our X are the is under year than dayrates. recent Meaning,

in rigs, which of is financial the these topic ICD's right liquidity, of our course, on brings make indebtedness objectives But managed investments. in and and XXXX. we most are meets the Of final to That reactivated my as and at labor Obviously, market would But opportunities front be to my aggressively all these the always XXXX, there back for liquidity our are which want holding the remarks, resources address to well. rigs us prepared first that is operations and first discuss had goals to headwinds executing us. for providing and and chain have supply the financial that, need and we company I from our to have those already term priority. reliable safest loan after foremost, me

it as current address be loan third financials, classified unlikely challenging. absent will term of extension It we our a It commence we rig quarter refinancing. will October mature XXXX, term the our on be reactivations that an until liability be XXXX doesn't loan Although may additional until a maturity.

believe and exist of if drilling overall performance in to XX-month in the given markets climate, So factors opportune our address financial improvements business we loan ICD. contract liquidity, and the the trailing industry these headwinds term even credit is time overall the now and the in

in a term assure been this, binding with successful seeking been until engaged address securities. this any at publicly regard to not we whether press disclosed commitments working you our in And which opportunities we equity-linked comprehensively can have we to comment we will filings parties. equity from on be involve on but will third the in we've that be or diligently point details As in loan will I have SEC likely our and actively release,

across day market our the Another and company per in where the fleet XXXX and to we we overall company can accelerating, the the to enter believe but can be moving isn't of to be we us. exit is XXXX $XX,XXX entire and This From objective per more. progression we forecast the direction. need going that average based think you earning my or we margin are we position remarks, we're so day where opportunities think that available prior our take right is to see margins on

financial provides to and a we ICD. of ultimately we drilling embedded be our additional believe is for Assuming us value untapping springboard that will towards stakeholders the successful the and progress making this rigs that believe achieving in steady term the loan objective resolution reactivation additional liquidity,

We're of deliver prepared where sequential the next I'm say So delivering proud very positive I'm over out EBITDA meaningful to generating close again continue expecting my to today. to happy remarks, we and improvements quarters. are to and several that

benefit for company demand increased the are the tightness, for supply from opportunities market I believe super-spec rig to super-spec continues as rigs. E&P Given there existing

contracting financial reporting be turn XXX We pricing. what Philip, forward improved per the results call associated and on for very to We so us cycle, up early us. we the can and day quarter opportunities fourth we back company. in are fleet by strategy XXXX we capitalizing mix through he expecting more are this margins a the opportunistic of in With Series pre-pandemic believe were innings the the look driven I'll to to and XXXX walk higher over that, front of than

Philip Choyce

Thanks, Anthony.

$X.XX or million. the reported negligible. adjusted operated quarter XX $XX.X share of rigs cost EBITDA quarter, $X.X During We an quarter. during net and the during were the average million we adjusted loss of Reactivation expense per

half as and stock-based ICD provisions. $XXX,XXX Anthony impacted for average day are well through of costs, more customers. reactivated our deferred SG&A sequentially day, year-end increase $X.X excludes the Obviously, between the first industry the a our few were and quarter than contractual 'XX with costs. during of associated unabsorbed during increase. structure exceeds expense. of incentive adjustments per overhead to approximately reinstituted per for utilization pay accruals field and Cost the field quarter And Anthony to XX% our higher which as pay $XX,XXX offset Cost these to continues for have included rig expect approximately XX% it of our rigs was for mentioned, labor higher at mentioned, per able XXXX. the day per costs million but field-based fully fourth We as levels as $XXX,XXX managers. were quarter $XX,XXX we Anthony our guidance. compensation Costs which quarter compared occurred, drilling manager Field representing Revenue in a per repricing wage instituted XXth came costs have sequential incentive $XXX by and day and began mentioned, day now by back we inflation includes compensation an approximately our mid-January. of we the pre-COVID than transferring

end, at the we XXXX. the December cash There's of at During CapEx $XX.X quarter, net million at of XXXX. approximately term quarter stood during expect accrued all terms which original of of X of through at XXXX, expires which million, contracts million. $X.X capital Backlog will of quarter payments $X.X least were flow XX, disposals in first months with for approximately expenditures

of In the the it second fact, by XX% quarter. of end expires

levels improving as momentum well rigs backlog market. market. of contracts, advantage on are short capitalizes substantially most which now historical are positioned of in take view operating strong is our we below of So term on pad-to-pad our our Obviously, to an dayrate a

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

raised ATM of approximately share. During price programs the line we equity under credit of quarter, and per average our $X.X at an million $X.XX

quarter and a tax in our driven of income line year-end, charge approximately as accordion. loan want at share. deferred tax our revolving under approximately through the This well. I pay available during charge We noncash prior available change expense a ATM our liquidity XXX term After quarter. corresponding hand, prevented The credit million, price $XX also year-end. effect quarter. to the approximately in of million X comment in early January credit on did We financial reporting giving on sheet a carryforwards agreement annual payment million stood relates Also $XX approximately $X.X $X.XX cash limitations. ownership under carryforwards. $X.X kind $XX.X by XXX year-end shareholder to our we $XX.X at to drawdown enter end million equity million in terminated through Our as reduction an reported loss to balance. we million reported that these operating amendment our fourth of million We $X.X in was to limitation our comprised the of approximately on NOL of losses, million interest to liability into our of accordion $XX.X at facility million, raised credit million net large facility $XX us per a of average $XXX proceeds loss subject new balance another of use in subsequent a offerings at our to resulted of in

generate tax a benefits change, will of this losses. begin we result we realizing As book now when

expense franchise will to XXXX. items state continue be tax expect tax We to limited in

year-end The matters. XXXX first and on fiscal year to quarter moving XXXX guidance. Now

million. $XX to million fleet. capital based $X capital budget to for relating relates our XX-rig CapEx, day, is This a carryover Approximately operating upon relates per is operating activation million and discrete rigs to $X,XXX XX $X maintenance spare around of and Our remaining costs XXXX the items.

that CapEx at accrued our in mentioned statement million XXXX. will approximately $X.X through of during flow press XXXX our also cash year-end As release, flow there's

based plan actively which subject noncash relates Depreciation are approximately market. debt, be due accounting pre-COVID the begin $X.X highlighted, to estimated SG&A to XXth with our to of the stock successfully accruals, XXXX Anthony variable Cash address SG&A incentive for $XX.X salary and rig the XXXX is million. compensation some from for approximately for upon a adjustments reactivate to are likely we will closing the approximately primarily our during we noncash normalized price then to existing won't able SG&A our common pay, COVID be cash applicable The until at and of term reporting As that will tightening expense million, end year comprehensively period. the expense $XX on. labor had to lower caveat in expense most which working be return to million SG&A we of increase

to Now quarter guidance. first moving on

to a working We the the during days representing This a quarter. XX% compared to XX.X expect quarter. prior in average operating represents approximate rigs increase X,XXX sequential days, average rigs

have couple the We quarter. moving between during rigs of customers a

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

costs stacked no will not during is second that expansion and cost with associated Unabsorbed our to mentioned the and guidance. We the per a are quarter. come overhead longer contract benefiting quarter dayrate quarter. Anthony of expect the revenue continue as the and per expected $XX,XXX with to increases onetime approximately range is first increases day also only needed. instituted expected fourth between between $XX,XXX at This we dayrate of yard expenses absorb sequentially higher with day the day in $XXX,XXX quarter. on to many be $XXX,XXX is included per the that associated significant partially day increases end into margin and of per Cost $XX,XXX exiting pay per includes roles in $XX,XXX about day,

expect audit $X with expense price driven We reporting by variable adjustments and with Stock-based seasonal cash the million to other accounting approximately $X.X to quarter associated the on the being expected associated approximately the with is incentive increases expense period. million, levels, and of comp increase our professional with return be market to sequential increase sequential end first at be compensation stock based fees. pay SG&A and closing labor pay pre-COVID in a tightening

We depreciation expect million and million. interest to be approximately be $X approximately expense $XX to expense

of flow approximately be And statement net will we XXXX And dispositions expect to first Anthony. million includes benefit flow which back payment $X our cash turn through I with tax expenditures that, for a to during expenditures, Capital call the in We expense $X.X made million. expect of million $X.X the to the this this approximately year. occur quarter. will of over

Anthony Gallegos

Thanks, Philip.

call up the remarks. our of the target super-spec I'd prepared takeaways to key from super-spec Before is our and reputation, ICD questions, fleet, rig our like I open market tight. the markets X for Two, One, extremely quickly reasonable because rig to our line and and XXXX. three, benefiting open outlook operational meaningful attained, market for ahead up this improvements financial achieve let's And tightness. the Operator, will when is for goals questions. allow our and during summarize go from and ICD XXXX are

Operator

first Instructions] question Johnson [Operator with Our Rice. Crist Don from comes

Don Crist

translate a contracts just contract lot many of and about duration if will roll Or many a sense about How a want it reprice you could of year. this higher into pricing Can you different going talked to how give forward? year that going You you're and this kind how talk in way? to your what is? the us contracts

Anthony Gallegos

strategy. Yes, our Don, the contracting I been we've intentional appreciate question. about

in first short that, intentional rigs. up financials, get now, to an as As duration back our needed that as reprice we've about to them so we see But the move a some It's And of appropriate. down more begin maybe flow to that tempting, a you wanting which been keep especially again, result gives quarter. COVID. us you're frequently. is somewhere beginning of through to range term opportunity are know, up, results We to very the to where to rates rates bit very important, quite contract went more

Our quarter fourth was progress.

today and pad especially for here you're see more a months that a X But average the of to is but small pad. to second going contracts of number the in You're very got just we kind are which first talking We've quarter. contract in XX have. us the even couple duration, duration

pretty here at year here repricings the it's more to the question, across here done be through the of repricing X We're expecting expect second much in least of answer early those first to March. the quarter, in and fleet. So then the We've between year. of pad end the some pad. and repricing already We'll now the half we

Don Crist

can to yet? as in that there. you give is I just Isn't leading appreciate color a what XXs us upper the edge And pricing sense today?

Anthony Gallegos

Yes.

at We have that X ICD. market of we rig classes

All in XX, whether I the with our spec. like pipe, The the and people that. We're rigs. of our adders, that priced things XXX are think rigs being dayrates is Series rigs are talking XXX which Series The you're range are certainly it about. the some approaching be drill about seeing super Series XXX heard talk technology, rigs you've

Series XXX rig, XX.X to very high baseline a that's obviously, especially our a those well, class for less, at high. For is good number it one rigs. XX little that demand as of even But bit for see for we they're priced rigs,

the much structure Don. today, pretty rate that's So

Don Crist

any industry, forms obviously, industry on where labor is of the day passing kind the rate back in today. may of do side, side? ability Or arrangements the And just how are seen half or on side? labor the you the just on of it through? has Is uplift contractual energy What through the can all tightened labor to be you that not you Okay. pass that in have the year

Anthony Gallegos

Yes.

a So our contracts in provision have them. escalation wage

career, order exceed is in the on experience plays current to that generally certainly that push playing well, it's part human been role put -- don't my customer. it's in and just because a as capital cycle the repricing. we very here use But we to do in increasing And focused the in back that in ICD it important, there's have short contract. the increase in retention. that at what than to escalation this cost everybody exceed up more just a out customers that recognizes the is cost benefits that the in the so Where want minimum the -- recover have that we provision in would And of your the threshold in in contract to contract to because in increase we're put obviously, Sometimes we margin. duration, on the you dayrate my then

but way -- So the addressed, it's Don. that's

Don Crist

final X mean, one quarter? And what share give for to there’s for obviously, me. ATM I I be Okay. sense been Can first here. the as count, some a should movement the you on using me

Anthony Gallegos

About XX, XX/X.

Operator

This like Gallegos concludes question-and-answer to session. for conference our I over the turn back any would remarks. Anthony closing to

Anthony Gallegos

want We much. so everybody in today. for thank say you you dialing to Thank to

we’ve at good there the last rest here, worked and XX ICD. really happening we’re are As hard things months lot discussed, of forward to get a to We their if over employees. not looking of and motivated to work want be dedication. possible the would of them talented beyond. year for our even for None and this I period hard thank the this

So with we’ll from everyone. you, Thank sign Houston. off that,

Operator

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

disconnect. You may now

Independence Contract Drilling (ICDIQ) 7 Mar 222021 Q4 Earnings call transcript