Independence Contract Drilling (ICDIQ) 2 Mar 232022 Q4 Earnings call transcript

Hello and welcome to the Independence Contract Drilling Inc. Fourth Quarter and Year End 2022 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. Please go ahead.

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

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

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

we during reconciliation and for and adjusted to public refer to to net addition, definitions In and for loss, EBITDA of filings refer loss non-GAAP income of the call. our net and release measures. earnings measures EBITDA income Please non-GAAP full our a and the adjusted

it will Anthony that, turn opening with over And remarks. to I for

our And I Hello, talk us you earnings for joining today, remarks quarter prepared call. everyone. for want three my things. fourth conference about Thank to during

want I accomplishments. our to XXXX highlight First,

I market pad-optimal that are current how on we and And with navigate for impact we and beyond. out to XXXX want as ICD. close rigs I will describe third, focused super-spec, what want Second, to the

EBITDA. have ICD. per is produced we comments our will But revenue ahead I results were adjusted came revenues, and go that day, out in again adjusted ICD’s of point of but reported first in through quarter results. a the all This detail, expectations per just to for margin EBITDA Overall, want Phillip record quarterly second records few row quarter. on and day margins well a the the fourth quarter in terms

quarter whether revenue more year year will we so per last ICD’s the the history, EBITDA free margin of that positioned by wide to per as or fourth XXXX year. it’s than the addition, saw margin adjusted XXXX increase we out, day well flow. overall And fourth in measuring quarter are Xx by full be In day, played best cash

last additional year, out As we we goals. strategic achieved closed

margin In Both with activated on to XX generating of most those during our the quarter. work fourth rigs ended rig operating, addition exceeding in X to went very good per industry additional the the of we peers, rigs year rigs day contracts. Haynesville

addition, our completed and conversion, important XXX us that to first customer in working for a marketed Texas, the a successfully conversions XXX market commercially are we In we specification now was it with technically proving way. our XXX viable, of fleet that very can series series to us for XXX% involving XXX market our West rig XXX pulls series as if

accomplished safety We performance land to the our the operations expect involving of U.S. high deliver plague and to market unprecedented upon Contractors. our natural and over more continue the challenges, International chain the service, gas average customers noteworthy XX% reported levels Association softness supply in so very than especially labor the teams business of XXXX and given and the professionalism, and ICD. of support On much our from This which in prices. challenges based safety I am Drilling better as operational the continue by was reported proud TRIR front, how which global community performance recently, is customer

prefer XXX our XXX Looking in started Texas target series Odessa, of last be of we was last for reactivation which our Like and rig possesses will this back This in reactivation rigs, today. yard, that ahead, while. other finalizing our project the are our rig a XXst October reactivation our technical series customers the year rig. another capabilities is

with a quarter. expect from be All-in-all, involving position, we percentage cash work very series have stronger. a rigs during and margin increased contract never the materially in perspective marketed this been in ICD Texas negotiations composition a strong contract XXX the mobilized per of where We generation into perspective or are second whether our rig flow fleet XXXX specification. West final maiden for day has and its the will rig ICD entered in

the work we put hard while navigate off display ICD full be bottom positioning bouncing will pandemic of as All have into we New Year. the on the

with means And the what gas to what’s for our XXXX. I that, perspective. natural ICD And everyone’s particular, want strategically market to prices in mind, current shift softness in in on

for utilization in pad-optimal and in above per Today, rigs market super-spec day quarter activity Texas continued super-spec strong. markets First, and let reprice Overall, rollovers driven our we demand for contracted contiguous remains outlook as early me in rigs for in rigs first the margin pad-optimal address the the of year. in overall rig the target contract industry overall we improvement expect last XX% remains our rig by states.

day our that Phillip will more our but and per wanted expect guidance, currently we provide I in quarter of to first $XX,XXX for prior that the day detailed quarter. to ahead $XX,XXX increase highlight to between per guidance margin

the the demand basins. two sharp basin all operating between In that in directed robust and an remains decline we natural overall However, super-spec rig count gas in during primary X a Permian, has the the months prices disparity our uptick XXXX. activity, in created are in is expecting past which

we on to prices, market to week. are Henry $X.XX response Haynesville by is to Haynesville per our gas from natural tied million have softness driven commodity August last rig which market, seeing XX E&P’s the in $X.XX declined the of terms Btu prices, Hub In natural which gas

the takeaway the softer, of prices to gas and gas outlook remain combined the As winter we are natural for levels a longer. in remain on nearing inventory Haynesville, with high basis, end constraints historical

primary see ICD. two impacts market backdrop, we that on With

counts to going decline. First, directed overall the Haynesville rig

relocate West confident informed to customer Texas, relocations Right rig Haynesville us that also commenced. impact operating prior terming the who their zero in they Haynesville have has has X are Several one The And which with fleet place X customers will quarters take active some we rig to year. I the in process. be to that prospective that We and I third relocating will which would moving to particular rigs, without to include during started plates. we out X need in remiss current increase already operational be second a received already whitespace. any have the we primarily point rigs. The are day will if didn’t and now, of rig ICD’s rate this will process

to occur will We We Permian and basin. base relocation, rate the for are rig as to additions as minimal in whitespace also day well in market second enough negotiations our the the increase. demand believe for customer super-spec and our is final strength pad-optimal rigs contract which a with absorb strong

this current the what until maintain and complete overall above XXnd be is actually rig expect rig. slow seeing gets of overall overall Overall, rig or as count to during brought are considerably even rigs from opportunities We process spec reactivations super-spec previously our into lower rig we robust levels, market stop rebalancing reactivations. the process, Thus, Permian reactivation this settled. is a to of absorb utilization. rigs underway. already for are Also some the market and Haynesville utilization we result elected displaced we the XX% remain which would will reserved defer growth have In rig to churn the this expect the environment,

were a prior Principally, occurring result the or is competition pricing. maintain be on happening deck next But or have expect moderate. on drilling As we mentioned rig pricing. the rig able there or in rate the Haynesville, and rig acceleration as will to would some expect where additions we we there what’s going exists. opportunity pace so, I rig over above impact as day are on margin XX% This is two quarters utilization choppiness of will reshuffle be more replacement have to some calls, a increase contractors the to typically where of

expect provide our So rigs as quarter the day basins. for past transitioning market have flatten we margin the we day the to and on quarter. after likely the to the first improvement sideways rates, between until first out quarter market first rate for means all after will and is repriced overall, current move financial ICD more it move outlook, will of following Phillip rigs quarter rebalanced but two or a details I

this the major we WTI relocate of be the beginning back overall we our that will half optimistic again perspective, the upon We remain in expectation our part Permian while of about rigs the based accelerate in towards Permian, utilization to market higher momentum a utilization primarily year, rig expecting XXXX. back to not rate. reduction a From are in

relocations to but Haynesville to during mute rig might into We year during backlog the some but reach of will full our quarter. in operating rigs XX financially we will of or the operate transition expect that this of second in rigs account details, impacts, by utilization effective transitioning. time are the will through of XX year, occur in go third financial on to contracts more would of taking expect and in neighborhood quarter end. while do fourth potential the we rigs Overall, rigs XX the the the average our much have transit, Phillip

ICD will postpone other reactivations. strategically? a expect than impact material and do year how to overall So impact all this we not rig it this have Overall, will

and overall reducing financial remain goals significant leverage All ICD’s strategic generating of and cash regarding flow intact. free

flow per year discuss, perspective. free revenue we day, As from will record margin ICD be a day, expect and for to XXXX a Phillip cash still per EBITDA

and investments net rig In position we as our our near-term on and additional capital flow working reduction free slow putting capital improve reactivations, will balance some our cash debt the fact, in sheet. plans cash accelerate as the we by

our very convertible window the remain focused Strategically, as net for we we creating position a towards decreasing towards pathway notes. debt steadily on move our refinancing

Xx net of the EBITDA is convertible to during our of involving the to goals less than adjusted our long-term window notes. our ratio to meaningfully towards debt X.Xx refinancing reduce range One

exit at market I For around or based same below an the fourth X.Xx And expect on utilizing metric. upon basis results. our reference, described, we the are Xx quarter just we currently using XXXX to annualized levered expectation

ICD So, and do long-term financial its and in place while work regard, goals. achieve we in have is for to everything this some strategic short to

want the more a right turn concluding to I will now, make to additional over our discuss outlook to financial call little remarks. in results some Phillip But and I detail.

essentially Thanks, the in quarter. Anthony. We fourth profitability were from a standpoint breakeven

to our Reported net loss tax $X.XX our completion net adjusted increased third or sequentially XX% we income interest share expense $XX,XXX analysis EBITDA under of Adjusted quarter, compared deductibility an reported the a quarter adjusted loss fourth ‘XX. the the benefit of million. of the regarding impact the EBITDA excludes per recognized During and during of notes. following quarter convertible $XX.X of adjusted of and

third previously day day per margin mentioned were the We operated the XX.X quarter, quarter. average increase records revenue rigs quarterly per XX% ICD. Revenue $XX,XXX our the X% $XX,XXX XX% representing and increase compared compared quarter a of a during represented Anthony metrics. to increase represented fourth to margin a the day quarter for to third third and of compared per quarter sequential

of were and by included to in company’s costs performance over quarter increases approximately safety, compensation SG&A improvements were which performance compensation incentive operational million, accruals upon Sequential goals. million the stock-based expense. deferred the based and $X.X driven third cash $X.X in SG&A compared higher financial

the with $X.X Interest non-cash quarter debt excluded deferred amortization included of adjusted expense presenting discounts, associated aggregated million This $X.X income and when during and million. loss. which costs net were issuance

and out cash XX% During rig maintenance disposals of this to related $XX.X CapEx reactivations to and expenditures, the XX% payments net related approximately million were for quarter, capital CapEx. in approximately upgrades

finance we amount This amount point at the net that reported in debt financing leases. end. we year to was borrowings at interest debt net impacts time our quarter and represents deferred March sheet, out convertible ABL the XXXX. from of balance that debt of notes when to intend want costs this and our adjusted on ignores our I also to $XXX.X in do pay includes end Moving accrued face adjusted and due discounts, quarter the under million

Our backlog rate with $XX.X an was end average day. million, over year day per $XX,XXX at

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

first items to Now XXXX. on to some guidance for and related the moving quarter fiscal

quarter. first the with start me Let

representing operating beginning transition rigs some the expect the during approximately reflecting X,XXX average XX quarter, approximate to Permian. days the Haynesville rigs We days, working to from to

XXst not second rig Our expected reactivate quarter. is to until the

between in come as to mentioned. Anthony day per margin day expect per $XX,XXX We

per is to expect $XX,XXX per day. day per We Cost between per and $XX,XXX range between come revenue and $XX,XXX day in expected $XX,XXX to day.

Unabsorbed $XXX,XXX and in cost about not guidance. per included are overhead be expenses day will our

associated and to expenses to transition related of $XXX,XXX crew approximately estimate also We costs rig the relocations with carrying unreimbursed costs. the during transition principally transportation Permian, period

million expense approximately We quarter top on to be expect stock-based expense is expected million SG&A approximately compensation and to $X first of cash be $X.X that.

the financing We quarter expect non-cash amortization this deferred be to be Of expense for is costs related $X.X approximately discounts. $X.X million. to Depreciation and to of debt were approximately interest $XX expense amount, expected million million. first

will rigs quarters Permian. As movement and of currently be Anthony begun and third the from expect we transitioning QX. we occur has process to mentioned, it XXXX second during the Haynesville already most with to over That the

Anthony time mentioned, occurred between days. first minimal transitional There as some our with could be Although relocation contracts. non-operating

Although is dependent Permian periods, we these our customers on it timing minimize will drilling to look programs. the of

rigs our internal So, rigs of then third rigs full we year XX that processes to approximately quarter we are during generate reactivated effective XX, resumed quarter, XX approximately average the in in on XX end. the budgeting planning second quarter, revenue fourth by the XX our and utilization

due the relocating costs expect estimate exercise the transition total to quarter XXXX. of during the associated million cost brevity to to associated currently crews to be $X We million, majority period. maintain transitional $X with incur with of the We second will approximately occurring this it rigs, transition this with of

million value to of moving and relating stock-based million And SG&A There $XX.X of our and variable cash on million compensation the to is for common component purposes. a and $XX a stock that comprised to for our stock-based expense. of whole, deferred XXXX of SG&A $X.X compensation accounting overall, is tied as fiscal budget is XXXX of guidance

in each be in based during stock will changes that year. price on it period So, some metric the variability end the at of reporting our

relates Breaking to It other that reactivate and planned reactivation assume purchases. we does is million and principally maintenance XXXX million $X.X relates the postponed. associated of rig, upgrade reactivation and our mentioned which rig, million Capital CapEx not costs disposals. budget relates with matters, Anthony our to $XX.X our $X.X have tubular XXnd XXst net capital of out $XX,XXX,XXX budget to we for

expect there. be cash federal effective tax our we XX% income do we rate be overall XXXX, For tax although to expect to not

For weighted of with conversion the outstanding of shares average notes. our associated will shares income, diluted shares net fully full outstanding include the in convertible periods assumed

And with Anthony. back call that, I will the to over turn

Phillip. Thanks,

for positioning Before significantly want opening the all we I for briefly questions, positioning. ICD’s Last summarize and means ICD’s what think our it transformed to and I call up stockholders. strategic company year,

In terms important our three I of about positioning, facts. think

our our pandemic ICD’s as today, leading margins our people, This and out of better. in to been performed First, our has professionalism. are utilization are the exceeding and on the and company of to performance. class. never margin history par and some recognition the Also, customer best continue we with our rig has best coming our quality growth of for speaks industry larger from our peers service earn customers in The company daily assets and

driven The Second, pad-optimal we rigs the fleet. outside have youngest for super-spec and believe the remains best-in-class we rig strong the of gas market basis.

market investments by that We earn on securing continue deferring are contracts rig, and year discipline we expect further investing beyond metrics and the balance our out substantially meaningful other settles XXst have to by we which liquidity and and until full beyond. move debt come CapEx improvements sheet out. And additional finally, in XXXX reactivation this will and early through the improved payback as demonstrate fiscal we simple ratios leverage this our reactivations and

types never has impact position rigs, Although reactivations short-term to softness us of navigate of in markets rig to the been and ICD require will reposition better a will some pace gas challenges. in these

strength customers Our never our stronger. reputation and operational has been with

has improve to ability will never and has and ICD day, and perspective, the penetration our been series our flow per XXX more by valuable. series to market intact the of Our margin is XXXX been From complete fleet cash which for free market many XXX metrics XXX transformed in to rigs day, in outlook and accelerate. a per ways those EBITDA revenue conversions

closing most and will continue place, ICD’s the conventional, toward With we To U.S. looking boxes, between stock summing outstanding or meaningful work to all our you on assets, we ICD to initiatives. for rig all peers focused in in we this in important as up, delivers which plays all valuation metrics. on are base during flow those generate the margins believe XXXX, the and leading execute upon this ICD oil ICD cash rigs checks shale are poised an customer and free gas gap whether best-in-class strategic

let’s With up and go for the open that, ahead line operator, questions.

Thank comes you. [Operator Johnson Today’s Instructions] question first Crist Rice. ahead. from with Please go Don

Good morning, gentlemen. How are morning? you all this

Don. Good,

Good morning, Don.

XXXX? amongst increase possibly, Anthony, do it’s look little bit topical where a We And weak community in the drilling if similar into very to the go and Could But then the think drilling higher contention weak investor like but get comes directed it opportunity analysts I start back for summer go with into And day question shortage the is gas ‘XX. in my that we gas is today. we in rig rates as genesis we to Haynesville ‘XX directed is the all there it’s going fall. to a be wanted and of rig ourselves find days. that macro increases? towards potential the a the that to as to as count level obviously going is we these or what

out. in see back negotiations on we basis, conversation, geographic what likely see where talking opportunities the exactly Based In half to where where spec true of in are the And by rolling not are there are in we the on day able a to rigs you that short-term, listen, picking very, when Haynesville, most to contiguous then people. our over there other our them count that’s I finding That’s sure Permian today. target the levels, some market am customers have XXXX is markets changed that with a months, they – sooner be are are we is keep of Texas busy and strong and that’s Don. am is incremental flat about into make where up activity deep to share about will reducing hard to tranche the to fact maybe next here lower to take rig are adds. very overall a the high-grade than even some the to and the rigs. been rate expect having we when One we this working a maybe is talking us to that our E&Ps to relatively Haynesville. they that XX been getting decline that we the you is first customers the is year of the And the in the that we me certainly, of talk who last interesting they activity I encouraged year. What’s pretty XX Yes, I’d half expecting. the those couple haven’t in a a And maybe of little months, states. of place maybe rigs their opportunities talk anecdote pickup about signal discount see

count it people last a probably tick rig fourth in think it flattish the the of tight first And QX, I it’s environment all year. no, the sooner QX, was – realize. in think we in back know are think that’s relatively than the to how I I up. quarter So that beginning We type half year begin I of begins

heard kind pricing? securing still comments in operators price? And seeing larger XX% have the that We anecdotes that of you but rigs couple ago and of of talk just are going margins. there touched discounts, X% a of equates XX% multiple it kind you on E&Ps or you a – Are about second haggling to E&Ps back any operating on to can

an had come quite day was for a We our rates which any a especially customers to had rollover positioned increase us here in quarter second Haven’t going and little rate ask a opportunity few the to of more. rigs to Haynesville the anyway, and in give rigs to us reduction. the

this would seeing call, question, we for are Just there to if a had less maybe when time compared not would by rates to they have thought at a be last we X,XXX you disaster some give of the what – we X,XXX, than a I a are time feel I year means. day any day that answered are the

and are provided it margins see here quarters first terms said, even you being strong. relatively in flattish. still of the we just in some in very beyond Phillip what guidance very, As on the quarter

the I a one is company. with customers. provides CEO thing, super-spec Don, I as at much of and it in the should as a isn’t E&P that think fleet that was So Houston an dinner probably here appreciated week talking last was rig benefits our

super-spec think lower-spec mode. course, advantage a telling sales am and supply. And XXX% we running. when equipment. Of count AC to with is of going made Haynesville, few of I me that super-spec really running fleet are taken am SCR super-spec the he pad-optimal. for he the to of the And on some in that. out seeing move the pad, rig brunt mode, flattish I investors he has are and the replace in rigs the rigs in, running that, And of our think are We we lower-spec that’s course, an about was right. that’s about pickup AC they rigs a sales the opportunity moving that couple first the increasing bear always already going comment the are And the rigs of that of have rigs that had into I he talked to benefits I’d it’s our point

Don you the how And remember well. with total a of this close and cost rig and the I’d is cost small comment, this, know

million, wisely. money I to million XX% a that. well, less – at since $X when look, make is cost Permian rate than day and of the they our job their typical are XX-day the well, mean, sure rig have look But that you to customers So spending do $X

will sensitive the are day be question So they I of or doing. the how they economics just rates will to would be what sensitive overall how

jump will the in back I color. queue. I appreciate Thanks. all

Don. Thanks, sure. Yes,

with question ahead. from Please Steve Sidoti. go Ferazani next comes The

lot data can some in everyone. morning, A that previous detail of call terms level there the get the competition of the will rigs Haynesville want do morning. to of all on this into you X Permian questions I given Appreciate there here. follow the confidence drilling that and just think there is so that rig over many thinking is seems many how you but It better the programs or challenging replace are a your rigs Permian have to move similar rates. that day rigs, at thinking you be about your Good can just your to that? can you

you do Yes Steve. be the for are going and thank question, I successful. think to we

of second And In we fact, X morning X, already the signed X the basin. is the this one for. contract

in it’s Haynesville increase next contract, its an compare new So when it’s you it’s week. earn going going rate start and in rates. day to what to what And was on day to moving the the

X So right that’s there. of X the out

great have here doing equipment, couple right that first a function Team it’s function a pad-optimal part the is to basins. ICD a look, going the are has the got We But of a the reputation of more that quarter. second in super-spec both come job. of It’s in to having me the equipment.

concentrated target very are of We in our market. terms

knows basins for very for in Eagle other worked reputation. us. Permian Yes, Haynesville I Chalk. in we think markets home these home everybody are Yes, we and have two strong in are a we’ve The have us But where worked the Ford. that.

transition macro. the we terms good bottom yes, think or we X But that that am There is can. end to to for Phillip going I wasn’t of That going quarter, optimistic there. of significantly to day should handful. the quarter. is referred X posted some grade In And we going opportunities might in others as of for you should would a a in suspect very work rates. good if are to move the day And am I people, and don’t – in two that one XX slide dedication what a Pac when the within the year small the on of question. possible rigs, assume you Permian, rigs about that rigs without tool there But But some high a as are see hard rigs. would you rigs. having break call XXX-rig what drop is XX without so are are here able we the of be the really the we yes, a certainly, we able to are at our to by not have very successful that about because running. saw morning. lower said, super-spec hope only that back employing. we have. are But I did the analysis we this second to of single and PowerPoint I are of right, and that where I move I rigs slide, all run talking the be And think be said, of a there fourth this rigs think then are a we roughly process, you to the to be is of Man Are out really I fleet we like move way AC be And know, few. it in mechanical I we right we Hopefully, Steve, Haynesville. confident kind a SCR do pad-optimal I about position would some if it doing up, we we this. we of analysis mass X. rigs XXXX I to be none there. would And ignoring two in to that’s the going that And hit the look am the for work it there spec going XX whitespace? dozen the exodus running for moving in we those only like a probably out XXish But those. are of both the are mechanicals Certainly, put market.

the little bit of takes time a get if of mobilization in but the everyone? on and time pricing to count some you little just how to to you the gave I Appreciate the the detail bit you then a how are in can through downtime interim, excellent. explanation. there costs, Phillip terms some as know terms walk paid detail move Excellent, that Permian of the average you during And XQ rig paid, it explain of just to it from now, move Haynesville in

were Permian it rigs from a rig it’s really Steve, And are to we X Haynesville what – is. we a Yes. look, now long year, moving and ago, is back. year we move going X.X

the So affect XX is to that X entire mobilization days, days. time

Haynesville Our provisions. have demobilization typically the contracts a is demobilization fee. There in

not we the To financial to Houston. top Sometimes the to there to a are impact doing that. would all of the pay lump-sum. Houston, is taking sometimes extent, trucking, mitigate to And we financial have fee demote that’s think. receive really that back are to might big is what we as to of rig that the bring it’s off doing as it we back the And you a hit

because keep to we another, one this location think other plan as the are a short-term moving our contract successful exposure we in if is I to where words, them to contract crews. relatively not is, idle and time, is there is phenomenon, from see the straight

are that, cost? the Is that to but get so it But it is and you anything? done Phillip, them really cost. signed have exposure. crew the the work And two mitigate crew would contracts so would said, that we want to we be all I far going you incur optimistic like

Yes.

was long For costs incremental we really these just transportation of no costs. and there move, incremental other rigs, were going on the mean, really kind no first two, I a are successful crew there than rig when no,

So continuation direct contract of million hard going are on from contract to $X to to going successful to guidance kind zero, the $X to gave that we extent we all that be you to do X. million if go it’s

little right these on would So with we first two. we thought be ahead are we now a where probably

there if how to between small and month the handle a a moves have And so a see. is part we of whitespace will biggest it’s is financial. of not just rig two part just or contracts. big wait it. crews The we The But

how are for one like without saying for toggle the CapEx you year cash of are going – Thanks or be in less than this now, you now you it you given handling the sense. the expecting Last to you me interest switching, sounds previously? are are notes limited are terms that. paying you Make are

Yes.

previously So, we had guided interest March. we would paying in cash to start

could that doing at March look we think of XXXX. I

think beginning could of I interest the we cash is now September. start on table paying what’s

pay and to increase time. got some in we going related look will that now. to you to whether we interest the then reactivated, and our we if XX/XX, we we that think will or improve need pick capital, to that’s cash at items for have decision point I at are and rigs that starting And in September to And at that, our make the pay look balance. cash working

help holders this notes. I beginning don’t will but The year, company offers. that other of mandatory is, to use the will quarter the kind at that’s be us the if $X those of in of not, pay we as the indenture, offering or of to will de-lever June except available par that a under cash, well that million a they whether accept know thing back offers note started

there. So, there different of a couple things is moving

Great. morning. Philip, the thanks for responses Anthony, this

Steve. Yes, sir. Thank you,

The go next Markets. Please ahead. Capital Dave Storms question Stonegate from comes with

my all Appreciate Good call. morning. taking you

if the changed, with sure delta that is I has starting Haynesville XXX changing, with rigs just rigs the Permian? X,XXX, to the So, XXX moving wasn’t there now are thought and quarter you approximately from the I the last remember right, market you rigs. between in

don’t thing And that was that, that the in it’s XXX look, needed XXX Dave, fourth of series converting very were one quarter, from capital right. very, only we we very that and investment it important in positive to we technically, changed. is changed the for those making because its it’s are series. us, prove – the it commercially modest also prove amount, successful and has I think No, but to

that said that. we actually ticked $XXX,XXX, boxes conversion. that and all can think I of earn we return those And on with we

much that. Permian just for show that a that rigs call, are I in think here But the that other that needs little the contracted, mentioned XXX two customer team placement words, pay the moved series have for example, thinking pretty rigs, as softness, can do which have ago on is and willing So, the up. series is we is the the optionality. it, the rigs the we and an to held are marketing today, already we that I the to extent In that of racking they enhanced for except and Basin, predominantly bit sitting moving, XXX second option about the is of the capacity

want Okay. you. you rigs customers the Perfect. the any just their everything do all that because meet Are they Thank need? spec XXX – conversion to not seeing

Yes.

seeing in did. they we going to They pumps, said they rig that And fast the of the performing well And enhancement look, back love couple but it the It’s in you to about ever an very would what, three And We if an let’s it, to one, we the one okay, Gen. in don’t But rig. go. it. they it’s X has pay Ferraris. They a it. you But working that this are the not first biggest everything Basin. are they rigs, can I November want are are operator. when extra XXX you for are one mud here rig. that that have super-spec, feet are. we the Permian moving. these opposite that fact, controlled. to pad-optimal, series love for the make we online yes, thousand private it, lateral, no, them They converted And very, do been they too – are they know are that was to are let rig pitch drill think is made you We a if operator

we So, you very move a XX-day four we where the think are wells. important drilling on time the Midland work, example, to rig customer. And pad about very, moved, is in we drilled and wells for Basin,

them, have an paid their we opportunity but love their customers that love it. advantages, to for to So, they even them have get and them we are more, just given

Absolutely, that you move not exodus great any the expecting the expecting machinery out? could, mass are transport did if color needed operators or Haynesville. are you moving see seeing I and from logistics know you other up. competition for that Are for mention to that’s more you you a One equipment mentioned But I Permian? to

we Dave. haven’t. No, yet, haven’t we And

at see out you that and things mass and exodus of the to I Permian, of looking trucking trucking going expect the going into of the cost. rigs, tighter to cost Haynesville to that One and were were for one is, than right are the up. would are costs of a the If actually we example Philip the we – we talking the go have And in call one less are moved two that about that that we have the to rounds we before bids, already fact, the the move. become latest

it So, confidence gives there little there of exit out more is is a mass just not a me bit Haynesville. that rigs of – the

you perfect. That’s Thank very much.

comes The go with Research. next from question Singular ahead. Please David Marsh

for you questions. the guys. taking Thank Good morning

you? How Hi. are

Thank you. Dave. Good morning

here potentially take come the XXXX. rigs look continues revisit commentary you I as really forward. about the to maybe we agreement? in another I push know reducing leverage opportunity guys ABL leverage to appreciate and as But numbers in, you on to So decline, on, and September took the quickly out that an would that at just move

for our to we costs. we On the yes. ABL, opportunities could, to looking reduce Certainly, are going be always

Great. And mean… I

that, a ABL probably not probably using that zero We and be we year. our paying reduction we much here it predict in this will that. wouldn’t that wouldn’t we to debt be – were wouldn’t I use using

to going And so forward. a us not that’s going significant to cost be

to these have of present the with that open in should your out market you? market, opportunity market, I but on to any the ability of potentially there And converts little touch restrictions a been the are repurchase any

Yes.

are by held to with that the would have closely So, holders. allow. two the wouldn’t holders. two negotiate The indenture converts We

Got it.

their I of at this It’s year. a have they make $X don’t notes we those provisions to offers accept do And those those, them an offer we June. going mandatory do redemption or those to but would We beginning buy the million know June we buy are where would and it’s back them par. option, whether we at to in in not. beginning make quarter,

are the they hopeful, guys know, company. necessary leverage the the We on we very to on certainly going down offer, the accept doing that bring to are are focused things redemption you

I that. are think do on we to a glide path

taken it can anyway. are we actually can progress. sooner net-net sooner basis, So, progress mind. out my the we But do in make on the Certainly better the notes, a we and make going to

on like luck Absolutely. are going the It guys Well, good congrats a on quarter sounds and again path. forward. great you

you, Great. Dave. Thank

The Tower ahead. question Please Water with next go Robertson comes from Research. Jeff

quarter, Thank you you the look the into am you. third as exposed how the much to XX Good of posted transitions your backlog this spot will fourth morning. you have Slide exposure. Permian? deck you And pretty impact about impact spot you Anthony, I on market? morning, are quarter ‘XX, the and Can of re-pricing that when to talk market ‘XX and and rig sorry,

Yes. put on We the to in year some made the quarter backlog last second books. of decision the

Fourth the would spur the and contracts we year, going be remember, advantage to that what to take we was activity commodity that thought have prices did seen of quarter increasing As might about our lot that. you this is with with why Jeff, six backlog that That’s you positioning market a along. pad-to-pad, fact was that doing. and contract down X the level more opportunities are of or there. combined what it’s which Right we come year there months, the out where is not fine is now,

it’s quarters this think we of for to couple take a So, out. shake going to

happen have as have quarter they that generation, we we for made point guys that the not at have things next fact to an these in our Philip for execute you tells that cash are going the going to XXXX, inflection where that the free look being the on perspective. the a be CapEx be to mentioned kind to you couple our cash is the around playing generating enhancing that here next flow good sideways XXnd notes just year But year, those. think a that is still decision all of rig And well. now to that the – redeem customers margin And the as about you you bring the see is actually quarters. going making opportunity It’s is ago to sure and this leverage second perspective, itself of of as working programs to today in ICD. company, the fourth going guidance from I begin in year a this good announced going to EBITDA move from that be we importantly, are more is but provided Philip pretty down where to when accelerated capital, out. presents terms we This

to the When three, Permian, would you that contracts the am the rigs you have go to are waiting Permian, Are you remaining like that rigs to to move. on sorry, put so three correct? they Haynesville I the you move is those move to that remaining you in work immediately, –

any have rigs. Well, they are all today, idle Jeff. We don’t working

finish that the today do one want we the would in second about Permian, one. Haynesville, with do goal to contract the what commitment with all the are the we that’s we move them. we that’s so hopefully finish able have pad-to-pad. going second to and So, to Haynesville in in And Hopefully, with the to what – the as will that be got contract here to our as we off have first are the That’s quarter. that did And in happen we have a the one. we we

there a in the Haynesville? And difference is rigs then of much between margin versus lastly, Permian the operating

work significant. terms in not like in some function is on margin improvement that, longer, but it’s you there little bit It’s duration, think pads things of we wells a longer of are Haynesville. when a We the of a

Thank Okay. you.

you, Thank Yes. Jeff.

Oak Ryan Ridge with The next ahead. comes from Please go Financial. Dick question

on Thank good you quarter. a congratulations and

Philip Man operator to bringing So, flexibility chart, was you things And for asked, motivates allow contracts? when any at most have new but Permian? that a discussing rate terms higher of What are does the these my your those Anthony. the pay questions you I and been looking into on Pac day

Yes.

year, pad-optimal, before talking that the the have market weren’t remember the operators rig, you point, and are able several On we that’s to because configuration got would like tightness, last bells they But of all super liked whole. about, something that and first were the whistles, spec there a contract to. to

over, the just So, rigs for we to that obvious they logical – target bringing meet a know the I we… described and are because what that’s very

Yes.

intelligence to If reactivation. take and super, an the or fourth And only us, you you a in that’s recall, stack seeing way additional all an our different on get rig what contractor, of contractual could rig investment lot quarter the is, get $X for was drilling we were contract to year our are payback, of lot million a to longer or that. reasons that we requiring by couldn’t sign to million would the of a are a willing $XX operators require just

before. the to need have those to going they take to didn’t have they take that have rigs, again, market rig count if obviously, from opportunities, settles, obviously, maybe does – come chance they tick-up will after and to then and a opportunity So they maybe if be reactivation. back they didn’t are out a back the incremental And rig an

we will see when have that to occurs. So,

team, Scott, our add, Mark, marketing did they amazing job. would Dick, an also I

And that active today some opportunities the wouldn’t any are see of on rigs contracting the we of the with opportunities coming Haynesville customer are that chart. out you

or year great of they half last there super-spec in So, in are year. on program back of get first couldn’t a the down they the the a guys we maybe hands And that their whole New rig idle, wound there. half were of successful with are Year, in job, wide a said, touch the a array we did stayed in very very, being And customers. are season. Like guys new now a budget

of here a rig to to have the them number an increasing try okay, in a first opportunities the quarters, create clients to And underperforming rig, we like been in so now of have discussions of going but we else’s. it. opportunities. And that And couple the out there. that But look we sister multi-rig addition of of that. basin, next part it’s the to more the those rig, maybe with been kinds in around guys Like I as like churn that able year. kind have that we see right and what’s some execute have we to for, working have already someone are look are of over good we In said, go of you those won’t we not ours, pretty

Okay. congratulations. you Great. Thank and

you Thank so Dick. much

ahead. follow-up Research. Water Please The Tower Jeff question with a is next from Robertson go

conventional? as and that will options refinancing the on But kind of window mentioned the as you cash a about can think earlier, and window improve build What you balance much into the going notes more pick little metrics talk to with Anthony, out XXst options for about sheet? you talked something balance sheet the you the Thanks. stronger push just refinance notes. the you the alternatives into activation give that that

Yes.

with what something of are our can kind right limited negotiating we Jeff. We in now our do partners, outside creditors of creditors, or great

we in put have. that to going about take we As we you last to and… enter cash. that know, we sure as period And this cash we mandatory have defeasance are want have the to we make redemption this And year. build place, note – opportunities are And to to to convertible these going continue build of advantage time we

early, a the then is so that that. that under make-whole fee terms So, the of XXXX, of September in – period begins there and

time. in it point pretty it’s So, to that expensive at do

do have point it that we look So, to and would that time available to at make would economic what’s at sense. in

they maturity, cheaper. gets to closer move we As

on the to doing alternatives the what the and is interested looks market holders as September that’s are ‘XX. what begin like, So, make-whole. see ahead. the say of of hard also And as in well. the when we terms the note as up. what will there opens now, far it’s opportunities what But until And But window indenture, will there be it’s lie depends

expensive So, we as it’s maturity. pretty move closer cheaper it at gets to September, and

have making and that and from away taken discussions. things for this going these hope a what we call last down year in to to, when accomplish had like the progress get year operating But not be kinds goals be able of is to that I we worked ICD, would maybe a to seriously I to spite industry the the this But bruises so that the importantly, cyclical coming the everything everybody kinds to a headache, can to things accomplish think scale It’s about an a bumps add, scale, that and able glad one to that kinds more am Philip that of give so had years. be couple where these Haynesville of hard I ours like survive of of a mean of sure, you making have is And pretty are just or thought good towards to we XXXX thinking we progress. these just Jeff, year over so good I this we are three We months any of four now. about function operating of is ago. that has presents. months long-term all softness about think our going making still out being able we pathway pretty

Looking at a Slide as terms testament the transition to XX, the seems in leverage just rigs, like strength de-leveraging you strong of ratio, the the business? profile it of pretty

I would agree. you. sir. Yes, Thank

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

to Well, work our thank very, of on ICD. soon. on want to results Obviously, thank you I MJ. are excited that around make the say we there many to done. as here, quarter tables the where especially good you things our Look, I XXXX, updating about I so sure gets forward team pretty report you here, rotary are going heard hope those very has members here everybody first we the all when looking progress here, at

your wish then, now. and endeavors want will So, safety and we you until success all to sign-off Thank you. we in

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

You may disconnect. now