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Correction to Press Release Announcing Financial Results For the First Quarter Ended March 31, 2022

ICDIQ

HOUSTON, May 16, 2022 /PRNewswire/ -- Independence Contract Drilling, Inc. (the "Company" or "ICD") (NYSE: ICD) today announced a correction to its press release issued on May 5, 2022, announcing the Company's unaudited financial results for the first quarter ended March 31, 2022.

The correction to the press release had no negative impact on the Company's revenues, revenue or cost per day, cash flows, adjusted net loss, or Adjusted EBITDA reported in the press release.

The correction relates to non-cash entries recorded to finalize the valuation and accounting presentation of embedded features associated with the Company's Convertible Senior Secured PIK Toggle Notes due 2026 and conforms reporting and presentation in the press release to the results and presentation as reported in the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

These corrections are reflected in the updated First Quarter 2022 Highlights and the financial statements and related tables below.

First Quarter 2022 Highlights

  • Net loss, as defined below, of $58.8 million, or $5.20 per share.
  • Adjusted net loss, as defined below, of $11.1 million, or $0.98 per share.
  • Adjusted EBITDA, as defined below, of $3.6 million, representing an approximate 146% sequential improvement from the fourth quarter of 2021.
  • Net debt (before debt discount), excluding finance leases and net of deferred financing costs, of $147.1 million.
  • Marketed fleet utilization of 68%.
  • Fully burdened margin of $5,754 per day.

About Independence Contract Drilling, Inc.

Independence Contract Drilling provides land-based contract drilling services for oil and natural gas producers in the United States. The Company constructs, owns and operates a fleet of pad-optimal ShaleDriller rigs that are specifically engineered and designed to accelerate its clients' production profiles and cash flows from their most technically demanding and economically impactful oil and gas properties. For more information, visit www.icdrilling.com.

Forward-Looking Statements

This news release contains certain forward-looking statements within the meaning of the federal securities laws. Words such as "anticipated," "estimated," "expected," "planned," "scheduled," "targeted," "believes," "intends," "objectives," "projects," "strategies" and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to Independence Contract Drilling's operations are based on a number of expectations or assumptions which have been used to develop such information and statements but which may prove to be incorrect. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, and there can be no assurance that actual outcomes and results will not differ materially from those expected by management of Independence Contract Drilling. For more information concerning factors that could cause actual results to differ materially from those conveyed in the forward-looking statements, please refer to the "Risk Factors" section of the Company's Annual Report on Form 10-K, filed with the SEC and the information included in subsequent amendments and other filings. These forward-looking statements are based on and include the Company's expectations as of the date hereof. Independence Contract Drilling does not undertake any obligation to update or revise such forward-looking statements to reflect events or circumstances that occur, or which Independence Contract Drilling becomes aware of, after the date hereof.

INDEPENDENCE CONTRACT DRILLING, INC.

Unaudited

(in thousands, except par value and share data)


CONSOLIDATED BALANCE SHEETS










March 31, 2022


December 31, 2021

Assets







Cash and cash equivalents


$

9,342


$

4,140

Accounts receivable, net of allowance of $0.1 million and zero, respectively



24,231



22,211

Inventories



1,301



1,171

Prepaid expenses and other current assets



4,549



4,787

Total current assets



39,423



32,309

Property, plant and equipment, net



358,760



362,346

Other long-term assets, net



2,201



2,449

Total assets


$

400,384


$

397,104

Liabilities and Stockholders' Equity







Liabilities







Current portion of long-term debt (1)


$

3,902


$

4,464

Accounts payable



18,829



15,304

Accrued liabilities



10,545



15,617

Current portion of merger consideration payable to an affiliate





2,902

Total current liabilities



33,276



38,287

Long-term debt (2)



120,099



141,740

Derivative liability



77,589



Deferred income taxes, net



18,310



19,037

Other long-term liabilities



1,894



2,811

Total liabilities



251,168



201,875

Commitments and contingencies







Stockholders' equity







Common stock, $0.01 par value, 50,000,000 shares authorized; 13,698,851 and 10,287,931
shares issued, respectively, and 13,617,005 and 10,206,085 shares outstanding, respectively



136



102

Additional paid-in capital



545,575



532,826

Accumulated deficit



(392,572)



(333,776)

Treasury stock, at cost, 81,846 shares and 81,846 shares, respectively



(3,923)



(3,923)

Total stockholders' equity



149,216



195,229

Total liabilities and stockholders' equity


$

400,384


$

397,104


(1)

As of March 31, 2022 and December 31, 2021, current portion of long-term debt includes $3.9 million and $4.5 million, respectively, of finance lease obligations.



(2)

As of March 31, 2022 and December 31, 2021, long-term debt includes $1.3 million and $1.3 million, respectively, of long-term finance lease obligations.

INDEPENDENCE CONTRACT DRILLING, INC.

Unaudited

(in thousands, except par value and share data)


CONSOLIDATED STATEMENTS OF OPERATIONS













Three Months Ended



March 31,


December 31,



2022


2021


2021











Revenues


$

34,991


$

15,542


$

28,561

Costs and expenses










Operating costs



27,165



14,541



24,047

Selling, general and administrative



5,228



3,686



3,870

Depreciation and amortization



9,751



9,989



9,671

Asset impairment





43



25

Gain on disposition of assets, net



(516)



(435)



(63)

Other expense







150

Total costs and expenses



41,628



27,824



37,700

Operating loss



(6,637)



(12,282)



(9,139)

Interest expense



(4,675)



(3,709)



(3,899)

Loss on extinguishment of debt



(46,347)





Change in fair value of embedded derivative liability



(1,857)





Loss before income taxes



(59,516)



(15,991)



(13,038)

Income tax (benefit) expense



(720)



34



18,446

Net loss


$

(58,796)


$

(16,025)


$

(31,484)











Loss per share:










Basic and diluted


$

(5.20)


$

(2.58)


$

(3.23)

Weighted average number of common shares outstanding:










Basic and diluted



11,303



6,215



9,743

INDEPENDENCE CONTRACT DRILLING, INC.

Unaudited

(in thousands, except par value and share data)


CONSOLIDATED STATEMENTS OF CASH FLOWS










Three Months Ended March 31,



2022


2021

Cash flows from operating activities







Net loss


$

(58,796)


$

(16,025)

Adjustments to reconcile net loss to net cash used in operating activities







Depreciation and amortization



9,751



9,989

Asset impairment





43

Stock-based compensation



731



537

Gain on disposition of assets, net



(516)



(435)

Non-cash interest expense



3,193



Loss on extinguishment of debt



46,347



Amortization of deferred financing costs



250



279

Amortization of Convertible Notes issuance costs and debt discount



370



Change in fair value of embedded derivative liability



1,857



Deferred income taxes



(727)



34

Bad debt expense



60



Changes in operating assets and liabilities







Accounts receivable



(2,079)



(317)

Inventories



(130)



(33)

Prepaid expenses and other assets



386



323

Accounts payable and accrued liabilities



(2,358)



(685)

Net cash used in operating activities



(1,661)



(6,290)

Cash flows from investing activities







Purchases of property, plant and equipment



(6,279)



(1,742)

Proceeds from the sale of assets



589



654

Net cash used in investing activities



(5,690)



(1,088)

Cash flows from financing activities







Proceeds from issuance of convertible debt



157,500



Repayments under Term Loan Facility



(139,076)



Borrowings under Revolving ABL Credit Facility



1,500



Repayments under Revolving ABL Credit Facility



(2)



(8)

Payment of merger consideration



(2,902)



Proceeds from issuance of common stock through at-the-market facility, net of issuance costs



3,360



521

Proceeds from issuance of common stock under purchase agreement





874

RSUs withheld for taxes



(32)



(11)

Convertible debt issuance costs



(6,601)



Payments for finance lease obligations



(1,194)



(837)

Net cash provided by financing activities



12,553



539

Net increase (decrease) in cash and cash equivalents



5,202



(6,839)

Cash and cash equivalents







Beginning of period



4,140



12,279

End of period


$

9,342


$

5,440










Three Months Ended March 31,



2022


2021








Supplemental disclosure of cash flow information







Cash paid during the period for interest


$

4,262


$

3,171

Supplemental disclosure of non-cash investing and financing activities







Change in property, plant and equipment purchases in accounts payable


$

(701)


$

70

Additions to property, plant and equipment through finance leases


$

604


$

376

Extinguishment of finance lease obligations from sale of assets classified as finance leases


$

(7)


$

Transfer of assets from held and used to held for sale


$


$

(550)

Shares issued for structuring fee


$

9,163


$

The following table provides various financial and operational data for the Company's operations for the three months ended March 31, 2022 and 2021 and December 31, 2021. This information contains non-GAAP financial measures of the Company's operating performance. The Company believes this non-GAAP information is useful because it provides a means to evaluate the operating performance of the Company on an ongoing basis using criteria that are used by the Company's management. Additionally, it highlights operating trends and aids analytical comparisons. However, this information has limitations and should not be used as an alternative to operating income (loss) or cash flow performance measures determined in accordance with GAAP, as this information excludes certain costs that may affect the Company's operating performance in future periods.

OTHER FINANCIAL & OPERATING DATA

Unaudited
















Three Months Ended



March 31,


December 31,



2022


2021


2021














Number of marketed rigs end of period (1)



24




24




24


Rig operating days (2)



1,463




929




1,378


Average number of operating rigs (3)



16.3




10.3




15.0


Rig utilization (4)



68

%



43

%



62

%

Average revenue per operating day (5)


$

21,823



$

15,465



$

19,042


Average cost per operating day (6)


$

16,069



$

12,663



$

15,504


Average rig margin per operating day


$

5,754



$

2,802



$

3,538



(1)

Marketed rigs exclude idle rigs that will not be reactivated unless market conditions materially improve.



(2)

Rig operating days represent the number of days the Company's rigs are earning revenue under a contract during the period, including days that standby revenue is earned.



(3)

Average number of operating rigs is calculated by dividing the total number of rig operating days in the period by the total number of calendar days in the period.



(4)

Rig utilization is calculated as rig operating days divided by the total number of days the Company's marketed drilling rigs are available during the applicable period.



(5)

Average revenue per operating day represents total contract drilling revenues earned during the period divided by rig operating days in the period. Excluded in calculating average revenue per operating day are revenues associated with the reimbursement of (i) out-of-pocket costs paid by customers of $3.1 million, $1.2 million and $2.3 million during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively.



(6)

Average cost per operating day represents operating costs incurred during the period divided by rig operating days in the period. The following costs are excluded in calculating average cost per operating day: (i) out-of-pocket costs paid by customers of $3.1 million, $1.2 million and $2.3 million during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively; (ii) overhead costs expensed due to reduced rig upgrade activity of $0.6 million, $0.5 million and $0.4 million during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively; and (iii) rig reactivation costs, inclusive of new crew training costs, of zero, $1.1 million and zero during the three months ended March 31, 2022 and 2021, and December 31, 2021, respectively.

Non-GAAP Financial Measures

Adjusted net (loss) income, EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures that are used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. In addition, adjusted EBITDA is consistent with how EBITDA is calculated under the Company's credit facility for purposes of determining the Company's compliance with various financial covenants. The Company defines "adjusted net (loss) income" as net (loss) income before: asset impairment, net; gain or loss on disposition of assets, net; intangible revenue; severance and merger-related expenses; gain or loss on extinguishment of debt and other adjustments. The Company defines "EBITDA" as earnings (or loss) before interest, taxes, depreciation, and amortization, and the Company defines "adjusted EBITDA" as EBITDA before stock-based compensation, non-cash asset impairments, gain or loss on disposition of assets, gain or loss on extinguishment of debt and other non-recurring items added back to, or subtracted from, net income for purposes of calculating EBITDA under the Company's credit facilities. Neither adjusted net (loss) income, EBITDA or adjusted EBITDA is a measure of net income as determined by U.S. generally accepted accounting principles ("GAAP").

Management believes adjusted net (loss) income, EBITDA and adjusted EBITDA are useful because they allow the Company's stockholders to more effectively evaluate the Company's operating performance and compliance with various financial covenants under the Company's credit facility and compare the results of the Company's operations from period to period and against the Company's peers without regard to the Company's financing methods or capital structure or non-recurring, non-cash transactions. The Company excludes the items listed above from net income (loss) in calculating adjusted net (loss) income, EBITDA and adjusted EBITDA because these amounts can vary substantially from company to company within the Company's industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. None of adjusted net (loss) income, EBITDA or adjusted EBITDA should be considered an alternative to, or more meaningful than, net income (loss), the most closely comparable financial measure calculated in accordance with GAAP, or as an indicator of the Company's operating performance or liquidity. Certain items excluded from adjusted net (loss) income, EBITDA and adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's return on assets, cost of capital and tax structure. The Company's presentation of adjusted net (loss) income, EBITDA and adjusted EBITDA should not be construed as an inference that the Company's results will be unaffected by unusual or non-recurring items. The Company's computations of adjusted net (loss) income, EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

Reconciliation of Net Loss to Adjusted Net Loss:






















(Unaudited)



Three Months Ended



March 31,


December 31,



2022


2021


2021



Amount


Per Share


Amount


Per Share


Amount


Per Share

(in thousands)



















Net loss


$

(58,796)


$

(5.20)


$

(16,025)


$

(2.58)


$

(31,484)


$

(3.23)

Add back:



















Asset impairment (1)







43



0.01



25



Gain on disposition of assets, net (2)



(516)



(0.05)



(435)



(0.07)



(63)



(0.01)

Purchase agreement costs (3)











150



0.02

Non-cash income tax expense related to IRC Section 382 limitation (4)











18,192



1.87

Loss on extinguishment of debt (5)



46,347



4.10









Change in fair value of embedded derivative liability (6)



1,857



0.17









Adjusted net loss


$

(11,108)


$

(0.98)


$

(16,417)


$

(2.64)


$

(13,180)


$

(1.35)

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA:













(Unaudited)



Three Months Ended



March 31,


December 31,



2022


2021


2021

(in thousands)










Net loss


$

(58,796)


$

(16,025)


$

(31,484)

Add back:










Income tax (benefit) expense



(720)



34



18,446

Interest expense



4,675



3,709



3,899

Depreciation and amortization



9,751



9,989



9,671

Asset impairment (1)





43



25

EBITDA



(45,090)



(2,250)



557

Gain on disposition of assets, net (2)



(516)



(435)



(63)

Stock-based and deferred compensation cost



977



673



808

Purchase agreement costs (3)







150

Loss on extinguishment of debt (5)



46,347





Change in fair value of embedded derivative liability (6)



1,857





Adjusted EBITDA


$

3,575


$

(2,012)


$

1,452


(1)

In the first quarter of 2021, the Company recorded an asset impairment of $43 thousand related to the pending sale of one of our field location facilities.



(2)

In the first quarter of 2022 and 2021, and the fourth quarter of 2021, the Company recorded gains on the disposition of miscellaneous drilling equipment in the respective quarter.



(3)

Purchase agreement costs were recorded in the fourth quarter of 2021 in connection with the Company's committed equity line of credit.



(4)

During the fourth quarter of 2021, the Company recorded non-cash income tax expense related to the inability to utilize net operating loss ("NOL") deferred tax assets to offset deferred tax losses due to an IRC Section 382 change in ownership occurring in October 2021 and the limitations therefrom placed upon the NOLs.



(5)

Loss on extinguishment of debt related to Term Loan unamortized debt issuance costs, non-cash structuring fees settled in shares to the affiliates of our prior Term Loan facility and the fair value of the embedded derivatives attributable to the affiliates of our prior Term Loan facility in the first quarter of 2022.



(6)

Represents the change in fair value of embedded derivative liability between the issuance date of the Convertible Notes and March 31, 2022.

Detail of Long-Term Debt





(in thousands)


March 31, 2022

Convertible Notes


$

157,500

Revolving ABL Credit Facility



7,798

Convertible Notes issuance costs



(8,893)

Convertible Notes debt discount



(37,576)

Finance lease obligations



1,270

Total long-term debt


$

120,099

Independence Contract Drilling (PRNewsFoto/Independence Contract Drilling)

INVESTOR CONTACTS:

Independence Contract Drilling, Inc.
E-mail inquiries to: Investor.relations@icdrilling.com
Phone inquiries: (281) 598-1211

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/correction-to-press-release-announcing-financial-results-for-the-first-quarter-ended-march-31-2022-301548279.html

SOURCE Independence Contract Drilling, Inc.

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