- Earnings call transcript Q3 2022

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Operator

Good day, and welcome to the Independence Contract Drilling Third Quarter 2022 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. to ahead. conference like Choyce, to now go Please would turn over the Philip I

Philip Choyce

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

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

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

public I loss EBITDA and In loss, make today, did non-GAAP non-GAAP Please to during will I addition, turn adjusted to call. before our over be to EBITDA refer full and Anthony, our of definitions available the measures with along to reconciliation with of for to just investor adjusted filings file a and net well. release net on the our we press our measures. presentation want as for updated which refer We earnings comment. release the And website one SEC

take go over they that, I'll to to remarks. people look chance. turn Anthony encourage And we at that when it a a So have with for opening

Anthony Gallegos

us our third for for quarter today Philip. call. you, joining Thank conference everyone. Thank you Hello, earnings

on to couple want During key remarks focus a I my today prepared of topics.

continued significant progression, bright. the quarter which the third and our First, expansion margin prospects for that margin during continued are

are XXXX some look additional quarter overall outlook and for as into third, we rig And during beyond. laying achievements third groundwork the for operational our the Second, strategic objectives we forward reactivations. and

XX% and reactivations, forecasting of to reported was stronger we're per reported continue. report Market overall, quarter quarter much affect expectations EBITDA when continued were this put rigs in prepared in we the really record we're day, This quarters few demand pad-optimal, in be pleased excitingly, a time meaningful to coming day comments records margin recognition day at ICD revenues, which XX% momentum ICD's continues to by the we of results. per numbers reported and but and XXX which will detailed improvements on But expect and well day, a day value beyond. EBITDA today margin increase our all quarter, The the driven increase this were our for report per items the reported performance our XX margins And higher a compared of to expectations. margin expect per second in plan super-spec perspective, significant further $XX.X robust. reported We that between adjusted margin quarterly per by ahead highlight his third XX% had I second which quarter, margin expect day this our Phillip quarter well-positioned through EBITDA day More from third any pipeline. XX%. believe the provide the revenue rig our and of including which per is day. the to we market first series into increase rigs history. for ICD. during we is revenue the of out day first quarter per SG%A rigs, about innings and additional the Overall adjusted of reported in currently higher conditions to remarks. ICD are per rig forward highlights for want quarters quarter, time point in increase in and over XX% provided our during And in March We of and $XX,XXX. still results more into to adjusted conversion $XX,XXX our one early we go fourth to operated upcycle We've per We only will of fleet, to per $XX,XXX quarter quarter, fourth looking has given our $XX,XXX are To to the opportunities came we opportunities, some by look to are is in to how than only to of EBITDA. Phillip just quarter. a guidance third than series million, our quarter, increasing XXX increase penetration revenue I XXX wanted also that XXXX results operating. rigs the time day this on XX and all

as it's not or our operations best on peers. and are just rig the public those that our Now value par margins well. provide of with class We exceeding company our believe our are to customers in larger we

much lot driving day our XXX drilling we this contractors it's because customer work satisfaction. I field recognized who also well-site out but were us such of research, every hard operating at of during rigs one the rig third consecutive our fifth exceed year, the ICD And point be party the operating we contractor is received the customers our series land information. States, a talk So leading and we rated professionalism and three and This personnel the source evidence cabinet penetration, to energy award. same E&P the proud for tangible about by quarter ultimately to to industry the point United some in this, of service companies were that success. highest expectations we drilling provide poll of U.S. have this so overall third for for is our which

quarter, the we one work to third which went year During XXth our reactivated a rig, contract. under

also high and fourth XXth under our later contracted for these one a simple reactivation is rigs Our less both of additional rigs XXth CapEx to and Haynesville the rig quarter. the work to mobilization contract generate in mobilizing XXs, us in year day will in year. is in rig now revenue scheduled than and the payback achieve Both per going allowing one are

quarter for work is rigs XXX during we XXnd next In and the last program, reactivation first XXst our our call, had Series reactivation to commissioned. XXX and slated conversion have the already underway. which year, mentioned I We

we is The speak an customer existing progress in first and later conversion week. as for this completed of be ICD will

customer I more is on contract have labor continued business accomplished field and performance, which come have levels expect to have so We backlog. and This the deliver especially our our customers operations much service high continued to noteworthy and ICD. this I to want be couldn't and supply touch year of the proud market chain, the of which personnel how challenges global community. involving from unprecedented given to play

on months. securing term While in continued our day or pad-to-pad to recovery has the thus three rates as strategy and accelerate strengthen last shorter have four been contracts, over far the

begun sense secure XX% term our $XXX have it XX% extends customer. makes when of of this second into increased both the our Since have our backlog. backlog this XXXX. and million. backlog contracts ICD We cut rates to to for We our not Approximately backlog to increasing quarter, we've did

All approximately margin our based XXXX In of fact, extending margin $XX,XXX the over metrics great costs of contain per into our upon This the quarter increases. that beyond term cost day, day day equivalent deal our gives is margin us XX,XXX protect priced contracts at about a per XXXX protection further quarter of third confidence features other XXXX margins just backlog and I progression guidance of contracted inflationary against provided. pricing first labor backlog

the portion sense market our of will opportunities today, up. a portion generating regarding opportunities, and help will strategic investments margin reactivate to day market days our we Instead, laying our in and in the for our While makes over be backlog, continued significant for rigs with now the helping as required available we top future the right of term us And of increases like near to This to three we day means. calling exposure are cash rigs not longer more consider least once future increasing termed rate contract now margin to at meanwhile, six it feel reprice to available lock are the capital to approach because our by us per next position our we any months. contractual progression flow backlog, on provide a large about think we initiatives. in are of some most

balancing we be of think rig, As additional factors. about XXnd a rig reactivations we'll variety conversions beyond and our strategic

and look and First been to reactivations for all we'll foremost, continue full payback rig we've contractual conversions, what for doing. essentially

to for close, than Does plan Working want cycle as competing customers towards back of summer and bring future for may necessary for rate that toward dilution things expected we prepared sacrificing decreasing say of windows several will to environment these refinancing contract I ICD, from a anchored evaluating to the or our are reduce remarks XXXX the against the we the it end based where notes. we our our level position very move that we've doing earlier XXXX, us considering marketing will during we're today improvements. the our previously especially here desire which example, a up of in are to and eliminate steadily we PIK half XXrd put seen year. we're additional in budgeting able contractual window to creating believe timing debt this on to indicated ourselves factors focused be XXth without around the in consider these to PIK working ability net in of to our liquidity persist. projects be we the addition, capital convertible those of terms also the interest, pushing including rising and capital because pathway interest a bring what rigs while I In on position look rigs, our stop we if additional and toward balance this annual reactivations to in allows of reactivate we backlog, opening

increasing ratio to term goals We through operating and meaningfully. reactivations. additional to and a as net free and accompanying EBITDA to One cash of EBITDA flow rig our our slow generation this of reduce debt do we investments intend eventually adjusted combination our is scale, our adjusted build long

For our reference, are on at using third we annualized currently times basis an results. lever quarter X.XX

progress goal while forward towards rig more and want will a results make margin to reactivations beyond. So additional to this our we visibility financial little in have I'll that meaningful in bit confidence gives I and some regard, to over progression make work to great concluding but of this deal right a outlook call remarks, turn in relating we some XXXX do us the to detail. and discuss Philip now,

Philip Choyce

Anthony. Thanks,

and SG&A so and net the during I a rigs will per were $XX.X compensation stock-based awards quarter. expense of During cash of incentive of based $X.X performance, granted related quarter prepared excluded year, the increases than quarter costs metric, share, million, approximately day We quarter. Benefit carnival was were included quarter higher during the deferred full accrued quarter my $X on end $X.X over $X stock which issuance quarter based million comp and we second revenue compensation we loss company's the with expense. approximately was SG&A and margin income. reported on our But presenting or cash couple expensing increases expense previously higher which net million financial XX.X the SG&A million. impacted improvements focus guidance remarks. million. in convertible do Anthony an this the during discount, of June of dispute $X.XX expense costs sequential the million This our amortization Interest compensation and average aggregated Tax those in based for upon stock and also items. in negatively of not driven by in associated operated $X.X were per accruals to by settlement Cash included at SG&A EBITDA tied paid debt $XXX,XXX adjusted adjusted deferred when interest $XXX,XXX. per the and and We day notes non mentioned adjusted of cash of

investments pipe based inventory to upon XXX XX% supply $X.X and chain drill for related spare forward approximately net approximately million. to other and this series as disposals reactivations in related trending to related drill capital pipe spares. capital expenditures, reactivation of CapEx purchases, expenses. During constraints the CapEx were capital X% as causing is cash quarter out XXX rig Breaking us and CapEx higher XX% to maintenance conversions. bring and rig well to payments

time lead also XXst course, we pressures. there Of items long quarter earlier during particular, rigs In aggregating $X ordered inflationary approximately the expected million. and our for than XXnd

on amount on balance of Moving finance debt impacts our on amount quarter. during was did our ATM and ABL million from program leases. quarter adjusted issue to the not our discounts, our face We notes sheet any end. and represents shares the debt borrowings financing convertible This at $XXX.X net and deferred ignores

of Our available and facility. financial revolving end liquidity million cash the under $XX.X on hand was comprise credit our million at $X.X quarter million $XX.X

Moving guidance. quarter on to fourth

approximate We representing expect quarter. XX.X the days, operating days average during X,XXX to working rigs

exit second to rigs year of our XXnd rig. quarter and XXst the case expect early with rigs We of the XX the first reactivating and operating potentially during or the XXXX quarter in XXnd

come We margin expect $XX,XXX in per day per $XX,XXX to between day. and

and and $XX,XXX quarter expect per expect with rolls, day. quarter. benefiting $XX,XXX costs margins per come expected $XX,XXX $XX,XXX increases the guidance. is day day. $XX,XXX on per rate on Based fourth Cost to We many day and per between remain about to Unabsorbed Right day contract and day $XXX,XXX revenue overhead pricing only in contracts we day, of between quarter be to $XX,XXX would the the in are in hand first between now, partially per range market and not come costs in our included XXXX spot will per for cost and assuming stable. fourth operating

expense be approximately cash expect compensation to $X.X million. $X quarter fourth expect million, SG%A approximately stock-based We to be expenses

amount expect discounts. deferred expense of the approximately expense flat approximate We and this quarter benefit. third amortization $X.X financing to quarter interest with be debt non to million relate Depreciation Of is will million. cash to expected a fourth $X for

visible. to tax or the We during be expect expense fourth any benefit net quarter

purchase our lead through statement the time as XXnd the flow during of expenditures of and million the XXth The completion capital this the net flow to approximately $XX.X as items to relate fourth will quarter. of our cash For for of rigs. rigs, majority our dispositions expect we XX acceleration XXst long well of and

customers. Anthony. to Some to call With by I'll we also upgrades turn be which for back reimbursed the relates that, will over

Anthony Gallegos

Thanks Philip.

ICD call to think it I the questions, summarize means I stockholders. for up opening ICD strategic want for Before what and briefly positioning

the As think we much I company step and to and transformed important truly for XXXX. investors positioning, our as opportunities round highlight XXXX our how think it's about this into forward we far, we've going out thus

growth off up our industry best-in-class. the professionalism. out the are for in working contractors than rig on best of First, started leading coming fleet today, pandemic of bottom, Also, exceeding and our utilization and in each margin contract service bottom. rigs continue the as as company drilling Since peers, daily pandemic at from anyone the earn pandemic our is larger margins more are par percentage industry with the coming ICD's history else we we've of and recognition some and to customers our a customer

pad-optimal only that We we've this believe visible as ever is have into The reactivated And the super-spec rig seen. contractors rigs drilling best-in-class we few market of market. be for tight one economically as fleet. the a youngest capacity rig ICD is excess with can

the investing. have And reactivation improved metrics We we we payback on debt substantially our sheet leverage are continue and meaningful building and in and and expect are contracts liquidity and we improvements securing CapEx finally, discipline simple and we XXXX to as beyond. full backlog ratios other by move contractual demonstrate our through that balance fiscal are

gas and of shale those metrics. unconventional, oil So outstanding rig this checks base in margins, summing for the U.S. whether or upon strategic this all important are open ICD results go customer the plays let's or the continue historical any up, all and closing you're best-in-class and delivers the on closing between And valuation us ICD an most focused all our all company place leading assets, to rigs that With on work will operations in these boxes, ICD With for execute between peers ICD we financial up peers. and operator, gap initiatives. as stock ahead public efforts questions. we and our line and believe gap larger toward looking

Operator

Thank you.

Please will now Johnson with session. Don Instructions] answer question begin come ahead. question Crist the first and from will Rice. We the [Operator And go

Don Crist

y'all How gentlemen. are today? Morning,

Philip Choyce

Good, you? Don. How are

Anthony Gallegos

Doing great, Don.

Don Crist

average delta numbers what slide that and day for Series today? on something the And operators and and revenue backlog less have touch differences your the XXX contracted I of know, wanted just from there's and that rigs that And Or an it contract on I numbers? know presentation to to with to XXXX, couple Series are XX% wanted just you your X XX those of per or be? rigs. representative is be average between is I across ask, fleet of rigs would like that? Would contracted entire

Philip Choyce

Yes.

our in that the high for day a be less, and but little rig, end, it's Series revenue XXs be XXX for the at per and have a on a little rates, -- the have particular in presentation, that mix in But mix customer. could of be XXX and a a seeing a and out backlog could and not our quarter, rigs the a is a the more The do the stable for So that in not Series high -- fourth and depending day we with application be the or again, $X,XXX There's quite over rig and them XXX many probably putting day. that XXX the Series we the XXX XXth what's we're reactivations, throughout a And of quarters. rigs the is going have XXX It contracts there's backlog. XXth couple that there, be to -- couple of towards a rigs we we contracted. be could high $X,XXX end contract for a high end, the $XX,XXX on going obviously could rig it's rigs Series the rigs rig Series that are between day to a Series on delta

Don Crist

Okay.

numbers across for kind looking purposes correct an good So that these to fleet. Is what your of the kind modeling average you say? at that are of just

Philip Choyce

That be more Series I XXX on its rates. certainly -- the would wouldn't day the say, towards higher

Don Crist

Okay.

ahead. go Sorry,

Philip Choyce

a -- going a the type be equipment there's perspective, just going to leading customers edge, talked rigs, not different about, as From Yes. to leading customer drilling going to get but have of rig of same mix edge, we're get not is every rate every or requires what different day a I because programs.

Don Crist

Right.

you're one far interest about the a on what's And Series you last doing to in as XXX upgrades? to of the in many the quarter, pipeline? pipeline. more your XXX we And And first level talked as them there do stand upgrades, Where how a of obviously, your couple obviously, the Okay. now, majority XXX Series but that? complete

Anthony Gallegos

the first noted one, underway, of Don, by Yes. is be we the the as will week. end completed,

field, are rig We than in a so move, on longer Obviously, that. little with customers doing the that's that board normal.

that's So talked year, of We timing them XXXX. slipped end that of requirement a by And being by second, the kind of on anything else. than couple driven into be complete. the third will really one the the customers is more the doing about

In of never return terms to there's an our converting that that, us and that do don't incremental opportunity know going I do CapEx. of where we'll we've do in that. we're have it to invest all CapEx going only We're that. said the to to fleet, incremental there for on

Notwithstanding with of we've able the pleased our with to our up with fleet. really Day rest series they like perform to continue are So, very move rigs to what good. those upgrades, continue the been on do rates rigs. XXX

customers, how on That's customers is when to is that marketing thinking something and ground, to really we execute something have optimistic So, quickly. we them. company. couple the XXX And easily of class our of about prospective more we're can series XXX on for team that so current we it's very conversion that at and that do talking the rig a look kits of very

Don Crist

thoughts pricing. final just started Obviously, one term up fleet And XXXX, you is you've of bit is? Okay. plus advantage mid little to for a to year your of the part XX% contracted your one fleet of as you versus Do of your around with one me. there here take XX% What the Or optimal get want level term what's that? backlog? or

Philip Choyce

Yes.

free about will to want in into available cash we are that generating Certainly, well. So, decision obviously, are the we where the that flow opportunities think as cycle. factor

maybe how might other So, not longer the portfolio long at just what if CapEx. and it we we've Whereas fleet, bigger -- for Where incremental a said, see about the perspective. from looking of rigs, the as better don't go a maybe think investing opportunities, roll put to we you on part you're the into quite bit more that it is on us that and to begin those. our ample backlog But try in have provide I plans optimal opportunities going are, XXXX. to look find XXXX, around the would especially days as to what term we'll we to books their announce expect available customers that's amount of relative those as

number. expect I more So from would it's Don. upside hard have. some everything not add not just a to us but that to there's commit backlog, and continue where fast We today, look to we are think we

Don Crist

appreciate I the queue. I'll all in get back color.

Anthony Gallegos

Yes. you. Thank

Operator

question the Sidoti. you. comes go And from Ferazani Please Thank next Steve with ahead.

Steve Ferazani

diversification the call. coming any most Appreciate seeing out any there any folks. out, more And all targeting? in the you're pockets? demand. color like the recent on morning, Wanted Sounds the areas particular Are in rigs any into shifts rigs and you'd get coming demand sending you're a Haynesville? the are two are strong that sense if to Good be

Philip Choyce

played to pleased Permian. our happening the we market really markets And about of the represent the able share example, over year, obviously excited, to in with the quarter. the out have over were what's the XX% third way compared geographic share there about about grow, in X% for been over very, very the Steve Haynesville We've in our We market currently Haynesville.

relative there. It to to advantage exploit we standpoint or a an we there, just continue that higher. from but competitive especially the Haynesville, presence us So, want view standpoint, on over requirements prior have and about -- allows technical to contractors, over build in from not how we in the talked that the some calls to operational other

year, up more in last So, bit about play ICD, been optimism the a of in months. lot that flat little gas very, very things of obviously, here going a prices within over that. the coming this a certainly markets over have part the of moved But, the And a lot can years. I'm industry, we couple over excited optimism gas have where

Steve Ferazani

more any to or in there other, -- versus no there term Are want are likely one is the customers Haynesville are or Permian -- it difference?

Philip Choyce

think not I operational the fragmented requirements better a as Haynesville to a opportunities in in I No, and for our higher. quite the it It's and certainly maybe back example, of little just the the push as term that Permian, technical gets requirements to like market. number said, little players it are is in bit the

So, market put is Haynesville to on in Permian. The books frankly, more the we that is the the term probably backlog. compared where

yes, us Haynesville for would there today. respect the I acknowledge in an is So in advantage that that

Steve Ferazani

Great.

As your roughly having add XX, rigs, as you you're crews that do adding, you're adding crew people these becoming? you're you're per out up XX How to the rolling rig to assuming I'm two mix how And is sizes? challenging

Philip Choyce

and that rigs, people people with put culture. fleet, us and understand know XX XX our within that into manage per while that existing our lot get don't fleet, It's Yes, hire out, rig they coming starting new associated to way processes XX of with you're bought had your on. that numbers from people, and rigs, but our spot XX going bring coming are up a to on is And systems we we it, risk you the been XX or to them people out. that rig a dispersed operating and

the of has the retention and talent, attracting it In that been, that problem the is had at terms we've company. entry really The the of those been challenge is in retaining and lowest had how us have And around a that within challenge really not people. I company. them has and level bringing hard think all problem level

enhance somebody one You're likely things. be just dealing impacts of first demanding impacts is to it's have especially a productivity, very that to And not finding safety, entry to we to positions young, continue all that creative and very $X as because our ways retention, are. going There's in client impact. try time job, level to with is satisfaction, to be those to efficiency, most

to the ready sure to continue have rigs to next very that take that that's and answer continued out, people call step very, up have company that which in is bring be been able to to as development, and we on your talent have we making question, what position. find we focused So, talent we

Steve Ferazani

Thanks, the time. Thanks, Anthony. Phil. Appreciate

Philip Choyce

Steve. Thank you,

Operator

will The Jeff ahead. go Water next question Robertson be from Please from Tower Research.

Jeff Robertson

Thank you. Phillip. rig. Anthony talked morning, about Anthony and Good

believe is the incremental assumptions bit how of the about PIK specifics reactivations? You capital to PIK talked also to first of about the where process want reactivating the what for more part around little your mentioned, I next talk long you continuing a just through are. your decisions middle thought you interest how of rigs it's around you quarter into year. note, on And XXXX XXXX, and given rates Can XXXX and interest that plays

Anthony Gallegos

cycles we this company. the that take we and pipeline deliberate XX then simply is to But ending the you let and quarter, live -- our it want in uncertainty. When that want along, we investment year rigs and and don't look, all give very grow. give be we we've XX goal capital that couple to just the goals with us Jeff, going in oilfield ICD believe scale we today that decisions. Philip meet prior views, the said making where of will a versus longer another in undeniable in I'll are rigs margins I'll running, and where Its term as well. to want with grow chime to the out we're to my in as achieve times going XX Very we difference come certainly in to today in to big world with services to tremendous we're about live thinking first are very, pleased proud operating,

to incremental be have period. where today startups. on million rigs time kind on $X mindful do going CapEx of this is we're You of in Look, be plus spending to

interest know, debt has variable Our rate you on it. as

going is up rates interest as service well. have as So moved that cost up,

do So about I'm that's anything? want to it. Philip, how kind add And thinking of you

Philip Choyce

Yes.

It working things capital sheet important PIK there position. on our debt the a But the on rigs our reactivate feature for us do does capital remove revolver. to some We borrowed other to So it's gives do and allowing some us. of that. now. improve to it, piece have balance us interest cash have to two to goals our We all add right

better to we're fall, the where of that budget, get an remove, because actually have that revolver So, where could may PIK of closer for that we the we're can to if rig to interest, last can putting marketing that payment, that's of way if million, customers in interest, put rig. out because and picking -- our we -- opportunity the no interest interest million a budgeting if PIK example, kind and that's a our if opportunity And cost middle a cash about like we a we is out an it's summer there's we $XX think season. we a company. capital push we'd rig to to the windows, about think we $XX debt, if that component And

of part And so that analysis return we're as as at well. our looking

how we would that or the it. be think So reason about

Jeff Robertson

something the refinance convertible leverage target advantage on XX, to follow in capital market Phillip, could really company is slide Just alternative where of ratio and more to conventional? point ratio. sort the in potential take potential about think the you time debt you notes the some of or where where a reduction, talk improvement into up consider the a there a leverage

Philip Choyce

Yes.

maturity. So the XX period has of begins convertible defeasance months prior the kind to notes

[Indiscernible]. going to early that's XXXX So be an

window low do can doing look think I really want to to the So where we alternatives. debt And -- trying doing Anthony is refinancing have would than to to expensive EBITDA in later. is That in as possible. earlier be mentioned, it and at that net as that's ratio what window debt more that our we're point at it we time

refinance, with and slide the them is. talking there's free you're in that we that going the first portion there, are -- and need off can that consistent where cash about look flow, if at guidance regular we're our to pay we're a right And So, not refinance entirety on with either refinancing. a way, notes going, margins quarter what we're we if we're and do assuming to or their you

feel to that think this time. so market good constructive that of is ability be do in a to going during about And we period we very our

Jeff Robertson

The taking growing balance I benefit that big those notes. this the you Yes. with for think you showing morning. you're my to questions thank a would about cash should like options be as

Philip Choyce

Jeff. you, Thank

Operator

question go Thank ahead. Storms you. will Stonegate. Please from And be next from Dave the

Dave Storms

for Good and call. taking morning, gentlemen, my thanks

Don's to on expand lengths. you regards if back length contracts? we Just want to the further? would to rise contract happy that with expect lengths Are Or question with begin see the even contract currently of should circle to rates

Anthony Gallegos

starting you right will some Dave, contracts, year to I now tell we're layer on an one contract month in well. and XX month discussions six on as

in pad-optimal to much So rigs that yes, on opportunities the incremental rates opportunities than -- that's in more be certainly into move I create the the that would believe up. competition super-spec, I going around coming programs continue environment, everything. to environment, those contract see is for the demand advantage And even one so longer year. to us backlog you rig will demand contracting not and And there expect put to that day for would take to books. market XXXX that Again, expect of

advantage these take the of want I to that. torque we would want that think, the the economics, going pad-to-pad We of we're I kinds to expect provide. But contracts exposure. certainly us

Philip Choyce

the the is think expensive. reactivating just are us, There's things to I that. more reactivating other thing that the Dave, like supply getting and -- there's inflation, And about but chain are constraints the not rigs industry, think

well. cost going you reactivate improve. And tenders and need ensure not out. to one reinvestments, only what even -- to rigs you're the you're contract want as or need as see to you of want to at your possibly Because ICD reactivate you payback those to go probably you're are returns of competitors going rates looking going our at to those contractual see look but So to rigs,

Dave Storms

costs customers the to where any it win-win, Or when interest some of as able do you these well also you seeing to to some in of of some these it's a And are lock rates? kind defeat negotiate their essentially from you're for So, of in rigs? they pushback go contracts? best these reactivating see

Anthony Gallegos

But that There as probably no, -- know in a historical continue U.S. they not phrase is some sticker there's that But will are believe rates played they at to optimistic that we're very I of day rates in go that -- optimistic XXXX Yes. it increase. pushback, shock, maybe rates reached they've we're maybe day word. continue I ceiling. been levels we've day would terms to don't land, E&Ps up. right will the not out, clearly as

that of cost number of you types of about returns being this earn generate go the And the talk think current for around any value. maintenance water look to drawing our You today, continues example, investments our of we have to competitors, up capital. you've And treading have look, at that returns the capital, if about excess that to well. cost end our made, of as regard. of listened maybe to economics is capital of in CapEx, when in the excess we're day, in or at which But we are

this necessity is just believe increase to other difference oilfield all no prior standpoint. that that in So thinking we're things that believe continue to another tells rates big economic today, compared day an I from And in services I about that, reason, me way. cycles all for it's will

Dave Storms

perfect. That's Thank you.

Anthony Gallegos

you, Thank Dave.

Operator

Please next is David Research. The Instructions] Marsh [Operator from ahead. from Singular go question

David Marsh

the Hey, questions. guys. Thanks for taking

days? press something above of consider the there for on stock you closes convert, any allow the of to Is guys note feature if of it a would conversion the the on at the is that that would guys quickly you all? kind certain strike Just price number convertible in

Philip Choyce

not the As a is in it's drafted that. -- not there's now, conversion mandatory convert there like feature

the it's holder. So the the of conversions at option

David Marsh

math, value And it XX.X were about at it. is converted, the some that fully if the number? shares doing just I'm par current million getting right quick Got

Philip Choyce

by million XXX.X divided be XXX. It'd

Like Yes. is. your background? number that whatever So,

David Marsh

Okay.

it's know planning CapEx I stages. that, you Beyond probably still for guys budget have a little XXXX the in yet? a bit Do

Philip Choyce

work just rigs are now. a XXXX. going operating No, variables that many we is two ultimately, on what bring on we're big maintenance how The out per incremental for but to will rig basis, CapEx be, our to also, starting

So we have started that process.

But any it's a We guidance are to early you working now. bit give guys today. on it

David Marsh

regards kind where here idea Sure. is in the Completely understand. industry utilization? and of look have lastly, when of think going. industry, pretty across do the strong kind you're U.S. your And the you you Where of I globally we mean, in a to with obviously, utilization

Philip Choyce

I When plays. look those today reason think you And the very I in high. that States, it's utilization U.S. call in XX%. demand order look is unconventional tell United say be within have -- rig. above And we when the is is you super-spec, in market we best what at where from if effective, at to the coming a plays, have you to it's can well today, that you pad-optimal their

some companies only that that's that terms reasonable of to is -- where come there's can incremental is come people four But controlled today, from, ICD out like? XXXX one half Another what or five rigs. that that economics. get key at going of most look more in me incremental supply out there. capacity compared that over months. going ranging something has where incremental only the by came there rigs XX months. handful to XX% XXX there's supply talk at there's going And cycles and to There's is is next from is, is about out XX of it. the difference you guy, bring be by held rigs when what look to one numbers it's XX companies. rigs one said, of I And out super-spec I really company. the just obviously, consensus that out really prior a excited he's is capacity guy think in next when is will of of XX And just But gets for demand to excited

we So people. how XXXX. going under strong today it But I how is that's probably in think to something speaks is this strong the be appreciated market it's and by to believe

very obviously, of excited reasons. for those So we're all

David Marsh

guys. great That's insight. appreciate Thank Thanks, you. Really it.

Anthony Gallegos

Thank you, Dave.

Operator

up Please follow go a Don from is question from question Rice. next ahead. Crist The Johnson

Don Crist

supply it just some in was and just market you chain? X.X-inch pipe. Thanks specifically And me reported about ago for see ask kind chain couple that to drill half supply of about drill a I their Can growing first the letting wanted pipe, into overall the the days more just for in there talk major backlog and suppliers back said trending weakness that one because guys. and of of where you of XXXX?

Philip Choyce

we pipe That's our are rates that. We're don't some day there we don't drill -- their buy in rigs. and X.X rent and contractors not that. that -- things So, their actually inch like drilling not do with included

buying So not buying of pipe. drill we type we're We're it. X-inch that pipe typically buy when

to nine You're looking at six months.

So delivery seeing we're times. what

But Its out. manageable, that's but so you're there. pushing pushed little bit. And really what it's out looking for is a it

Don Crist

so? or it is. or about as it what been other same for or six the worse, reactivation And months over about it's just call the last the getting Is the components better

Philip Choyce

its out, talking equipment. brand mud been one pumps rigs, we're that used think rigs buying overhauling of the And put just went out. a of And really when inventory. months drives we're end the not a a out lot first top engines about new pumps I that we're like drive, pushed and while. our other six to with engines, out we We're were them for all and reactivating that the now kind little bit. of our the contractors, at of put ago, If talk haven't we top easiest

constrained. a are end. just like So shops a lot front maintenance of and that those the spend having lot on [ph] it's supply a we're to And really of CapEx also everyone is supply ways of constrained, lot

So we've into later. than sooner to rather got get queue

some it on And keep the XXth rig, the ordered that well. thing for just we've so, items queue. and why rigs particular, in lot a the to in of same the XXrd And already of that's doing we'll needed we rig, like, forward brought March as because be we've

months, but that So or to we're It's going there's seven out lot. reactivated. not things to a before months pushed order six rigs XX having be

Don Crist

color. Thanks. I appreciate the

Operator

Gallegos Anthony over our to would turn question for closing the answer back to conference any remarks. and Ladies concludes like session. this and I gentlemen,

Anthony Gallegos

and Thank you. want in you. and a thank call. participating I safe here And be to and All wish their brief want you this to time I in right. for productive dialing Thank morning everyone just day. and all our

Operator

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

You may now disconnect.

Independence Contract Drilling (ICDIQ) 1 Nov 222022 Q3 Earnings call transcript