Independence Contract Drilling Reports Significant Financial Challenges, Decline in Revenues and Operating Losses

Independence Contract Drilling, Inc. (ICD) reported significant financial challenges in its latest 10-Q filing for the quarter ending September 30, 2024. The company experienced a notable decline in revenue, with total revenues for the three months amounting to $37.99 million, down 14.0% from $44.16 million in the same period of 2023. For the nine months ended September 30, 2024, revenues were $127.96 million, a decrease of 22.1% compared to $164.28 million in the prior year. This decline was attributed to lower contractual dayrates and a reduction in operating days, which fell from 4,341 days in 2023 to 3,898 days in 2024.

The company's operating losses deepened, with an operating loss of $8.93 million for the third quarter of 2024, compared to an operating income of $0.78 million in the same quarter of 2023. For the nine-month period, the operating loss reached $15.94 million, contrasting with an operating income of $13.40 million in the previous year. The net loss for the third quarter was $18.49 million, significantly higher than the $7.60 million loss reported in the same quarter of 2023. Cumulatively, the net loss for the nine months ended September 30, 2024, was $44.20 million, compared to $11.75 million in the prior year.

Total costs and expenses for the third quarter increased to $46.92 million, up from $43.38 million in 2023, driven by higher depreciation and amortization expenses, which rose by 27.0% to $13.0 million. Selling, general, and administrative expenses saw a significant reduction, decreasing by 48.0% to $3.6 million, primarily due to cost-cutting measures.

As of September 30, 2024, the company reported total assets of $356.85 million, down from $394.68 million at the end of 2023. Current liabilities surged, with the current portion of long-term debt increasing to $16.23 million from $1.23 million. Long-term debt also rose to $167.70 million, up from $154.55 million. The total stockholders' equity decreased to $140.07 million from $181.58 million.

Market conditions have been challenging, particularly in the Haynesville Shale, prompting rig relocations to the more favorable Permian Basin. The company anticipates a decline in operating activity levels in Q4 2024, which may further impact revenues and cash flows. Additionally, ICD is facing liquidity challenges, with a reported liquidity of $19.1 million and negative working capital of $9.5 million. The company is exploring strategic alternatives, including discussions with holders of Convertible Notes for potential refinancing, amid concerns about its ability to continue as a going concern.