Independence Contract Drilling, Inc.

the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Philip Choice, Executive Vice President and CFO. Please go ahead.

Good morning, everyone, and thank you for joining us today. to discuss ICD's first quarter 2024 results. With me today is Anthony Gallegos, our president and chief executive officer. Before we begin, I would like to remind all participants that our comments today will include forward-looking statements, which are subject to certain risks and uncertainties. A number of factors and uncertainties could cause actual results in future periods to differ materially from what we talk about today. For a complete discussion of these risks, we encourage you to read the company's earnings release and our documents on file with the SEC. In addition, we refer to non-GAAP measures during the call. Please refer to the earnings released in our public filings for our full reconciliation of net loss to adjusted net loss, EBITDA and adjusted EBITDA, and for our definitions of our non-GAAP measures. With that, I'll turn it over to Anthony for opening remarks.

Thank you, Philip. Hello, everyone. I want to say thank you for joining us for our first quarter 2024 earnings conference call. During my prepared remarks, I'll talk about the positioning and progress we made during the first quarter, our outlook for the rest of this year, and offer some perspective on the current SuperSpec rig market. But first, just a few comments looking back on the first quarter. Our financial results for the quarter were better than our prior guidance, driven by slightly better utilization and strong cost control during the quarter. ICD's utilization outperformance in a flat to declining overall rig count environment was possible given our brand and reputation in the marketplace and helped by the relocation of a working rig from the Hainesville to our Permian market, where the rig went straight to work for a new customer. Cost efficiencies were driven by the hard work of our rig and support staff and the cost reduction initiatives we implemented early in the quarter. We also completed one additional 200 to 300 series conversion early in the quarter, which is our fifth such conversion. Today, only one of our operating rigs is a 200 series rig, and it is scheduled for conversion later this year with actual timing being dictated by customer preference. Now I'd like to talk about what we're seeing and how we're responding to the market for super spec rigs in our target markets. In summary, our Permian market continues to hold up pretty well, and the Hainesville market remains challenged in the short and medium term. We started 2024 with three rigs working in the Hainesville, and in January we relocated one of those three rigs to West Texas. In the process of relocating that rig, we cannibalized an opportunity we previously had earmarked for an incremental ICD rig app. As a result, today we are working two rigs in the Hainesville, and we expect to run two rigs in that market for the foreseeable future. We want to maintain a presence in the Hainesville and like exposing an appropriate portion of our fleet to nat gas activity, and we appreciate and want to maintain the brand and reputation we've earned over the last decade in the Hainesville. We are optimistic about a longer-term activity rebound in the basin and but we don't expect to see that until the second half of 2025 at the earliest. On the other hand, our West Texas market has been the growth vehicle for ICD over the last year as we've been successful in adding rigs across our customer base and increasing term contract exposure where it makes sense. This is in spite of a steady decline in overall rig count in that basin over the last 12 months. Our reputation for service and professionalism, as well as our 200 to 300 series conversion program, are catalysts for this market outperformance. During the first quarter, we moved the last idle 300 series rig from the Hainesville to the Permian market, and I expect that rig will go to work for one of the most active public E&P operators in West Texas late in the second quarter. The contract's not yet signed, but I feel very good about our chances with this formal customer. Standing here today, all indications are for a flattish overall rig count in the Permian during the first half of this year in the low 300-ish rig range. primarily due to capital discipline and consolidation amongst E&P companies and flattish WTI prices. And my expectation is for our average rig count to be flattish during the second quarter with a bias upwards in the second half of 2024. We also expect elevated churn and rig movement within the Permian market to continue, driven by the rebalancing of fleets following the expected closings of announced E&P consolidation transactions. Thus, incremental rig add opportunities for ICD and the Permian during the second quarter will come primarily from high-grade opportunities where we displace lower spec and underperforming competitor rigs. These opportunities are very competitive, but so far we've been successful in winning more than our fair share. We do expect to see overall Permian rig count tick up in the back half of this year, driven by incremental activity on the part of private E&Ps where ICD has a very strong presence. Right now, we are actively marketing 16 rigs in the Permian Basin, but because of rig churn, we do not expect all of those rigs to be working throughout the quarter. Overall, I would expect us to operate 13 to 14 average net rigs in the Permian over the next quarter and two rigs in the Hainesville with a bias towards 17 average net rigs during the back half of the year based upon our expectations for an increase in private operator rig count that we believe will alleviate the current rig churn that ICD is experiencing. Day rates have generally moved sideways year-to-date in light of flattish overall rig count in the lower 48. We expect this day rate trend to continue the next couple of quarters. Day rate revenues and daily margins for super spec rigs are healthy, but obviously lower than they were a year ago. Day rate revenues in the Permian for our 300-series rigs have remained stable around the $30,000 range, and for our remaining 200-series rigs, the high 20s. Day rate revenues for our two rigs in the Hainesville are lower than these levels. So as I wind down my prepared remarks, I'd like to reiterate that our strategic operating priority today is maintaining current levels of utilization here in the second quarter and growing our reported average rig count by end of year. We have a lot of wood to chop as most of our contracts are short-term in nature, but most of our customers have rig lines that stretch through most, if not all, of this year. I believe we have appropriately positioned our rig fleet through the two additional Hainesville to Permian relocations early in the first quarter. As we expect, the effects of lower NAC gas prices and customer consolidation and capital allocation priorities will continue to put a drag on the Hainesville market the rest of this year. I expect we will continue to see opportunities to solidify our Permian Basin presence as this year plays out. as the benefits of our 300 series rigs combined with our operational and HS&E performance and ICD impact offerings continue to bring new customers into the fold and allow us to expand existing customer relationships. In the face of a likely flat overall Permian rig count through the summer of this year, it is imperative that we continue to punch above our weight class to drive incremental ICD rig utilization. But I believe we've shown that we're more than able to do that. I'll make some additional concluding remarks before opening the call up for questions. But right now, I want to turn the call over to Philip to discuss our financial results and financial outlook in a little more detail.