Independence Contract Drilling reported financial results for the three months ended 30 June 2018.
In Q2 2018, the company reported record quarterly revenues of $25.8 million, a net loss of $3.3 million, or $0.09 per share, an adjusted net loss of $3.2 million, or $0.08/share, and adjusted EBITDA of $5.0 million. This compares to revenues of $25.6 million, a net loss of $4.1 million, or $0.11/share, an adjusted net loss of $4.3 million, or $0.11/share, and adjusted EBITDA of $3.9 million in Q1 of 2018, and revenues of $21.3 million, a net loss of $6.3 million, or $0.17/share, an adjusted net loss of $5.0 million, or $0.13/share, and adjusted EBITDA of $3.2 million in Q2 of 2017.
“Demand for pad-optimal rigs is robust and improved throughout Q2, driving sequential improvements in ICD revenue/day and average dayrates in backlog, which now exceeds $21,000/day. We also realized a full quarter of benefits associated with efficiency efforts that drove improvements in cash costs at the rig level, which combined with our top-line growth, contributed to sequential improvements in margin/day of over 20% during Q2,” Byron Dunn, Chief Executive Officer, said. “With rigs continuing to roll to higher dayrates, and the completion of our 15th ShaleDriller rig, which commenced operations in the Permian on budget and ahead of schedule in July, we expect to again see sequential margin improvement in the upcoming quarter. We remain on schedule with respect to our recently announced transaction with Sidewinder Drilling, and still expect a closing to occur early in Q4 2018.”
Quarterly operational results
In Q2 2018, the company’s fleet operated at 99.3% utilization and recorded 1,265 revenue days, compared with 100.0% utilization and recorded 1,259 revenue days in Q1 2018, and 93.9% utilization and 1,111 revenue days in Q2 2017.
Operating revenues in Q2 2018 totaled $25.8 million, compared with $25.6 million in Q1 2018 and $21.3 million in Q2 2017. On a revenue-per-day basis, revenues were $19,411/day in Q2 2018, compared with $19,055 in Q1 2018 and $18,201 in Q2 2017. Sequential revenue/day improvements were driven by increased pricing on contract renewals.
Operating costs in Q2 2018 totaled $18.0 million, compared with $18.9 million in Q1 2018 and $15.8 million in Q2 2017. Fully-burdened operating costs, excluding reactivation and rig construction costs, were $13,034/day in Q2 2018, compared with $13,414 in Q1 2018 and $12,926 in Q2 2017. The sequential decrease in cost/day related primarily to recently implemented labor efficiency initiatives.
Q2 2018 fully-burdened rig operating margins, excluding reactivation and rig construction costs, were $6,377/day, compared with $5,641/day in Q1 2018 and $5,275/day in Q2 2017.
Selling, general and administrative expenses in Q2 2018 included $0.4 million of costs directly associated with the recently announced merger agreement with Sidewinder Drilling. Excluding these costs, selling, general and administrative expenses in Q2 2018 were $3.5 million (including $0.7 million of non-cash stock-based compensation), compared with $3.5 million (including $0.6 million of non-cash stock-based compensation) in Q1 2018 and $3.4 million (including $1.2 million of non-cash stock-based compensation) in Q2 2017.
Drilling operations update
The company’s 30 June 2018 backlog of revenues from contracts with original terms of six months or more was $103.7 million. Approximately 53% of this backlog is expected to be realized during the remainder of 2018.
Capital Expenditures and Liquidity Update
Aggregate cash outlays for capital expenditures in Q2 2018, net of disposals, were $6.6 million, including $4.6 million of payments for Q1 2018 deliveries. The company’s aggregate capital expenditure budget for 2018 is $23.5 million, including $10 million associated with the completion of the company’s 15th ShaleDriller rig, which commenced operations in July 2018.
As of 30 June 2018, the company had drawn $58.8 million on its $85.0 million credit facility and had net debt, excluding capital leases, of $56.2 million. The borrowing base under the company’s credit facility was $104.9 million as of 30 June 2018.