Q2 2023 Independence Contract Drilling Inc Earnings Call
Welcome to the independence contract drilling second quarter 2023 financial results Conference call.
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I would now like to turn the conference over to Philip Choyce, EVP and CFO . Please go ahead. Good morning, everyone and thank you for joining us today to discuss Icd's second quarter 2023 results.
With me today is Anthony Guy I guess, 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.
Number of factors and uncertainties could cause actual results in future periods to differ materially from what we talk about today.
For complete discussion of these 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 release, and our public filings for our full reconciliation of net income and loss to adjusted net income and loss EBITDA and adjusted EBITDA and for definitions of our non-GAAP measures.
And with that I'll turn it over to Anthony for opening remarks.
Hello, everyone. Thank you for joining us for our second quarter 2023 earnings Conference call.
In my prepared remarks today I want to talk about the following first I want to highlight some significant steps we took during the second quarter toward an important strategic initiatives second I want to update you on the transition efforts around our Haynesville fleet, which are essentially complete third I'm going to talk about the current market for super spec pad optimal rigs and how I see it.
<unk> is performing.
Lastly, I want to close out talking about some things we're doing to position ICD for the future.
First just a few comments on the quarter overall Icd's second quarter results came in ahead of expectations in terms of revenues margin per day and adjusted EBITDA.
I am, particularly pleased with how our reported margin per day held up in the face of market headwinds driven primarily.
With our Haynesville market buoyed by sequential improvement in reported cost per day overall adjusted EBITDA came in at $18 7 million.
During the second quarter, we took the first step and the most important strategic initiative for our company, which is delevering our balance sheet I feel this way because in addition to delivering industry, leading service and professionalism to our customers reducing the debt level of our company is the most impactful action. We can undertake during the quarter, we redeemed 5 million convert.
Notes at par and also reduced revolver borrowings while at the same time, improving our net working capital position I am pleased that we were in a position for our lenders to accept our offer to redeem $5 million of our convertible notes at par at the end of the second quarter.
Also during the second quarter, we essentially completed our fleet geographic rebalancing process. As a reminder, ICD started 2023 with 10 rigs working in the Haynesville market and 10 rigs working in the Permian.
We were more levered than any other drilling contractor to the haynesville and in light of the softening. We saw early this year, we made the decision to relocate several rigs from the haynesville to the Permian.
The chop your Permian market, we experienced in the second quarter impacted the pace at which we were able to re contract ICD rigs relocated from the Haynesville.
As of today, we have four rigs remaining in the Haynesville and three of those are currently contracted.
Although it is possible that we relocate additional rigs from the haynesville, depending on how the markets develop over the next 12 months for the time being our rig transition program is complete.
Overall transition costs, including trucking and crew transition costs totaled approximately $2 8 million during the second quarter and $3 4 million in aggregate below our initial estimates of $4 million total.
Now turning to market conditions in our target markets. The overall U S land rig count is down 105 rigs year to date through the end of the second quarter, although the Permian market has remained strong consistent with our expectations at the beginning of this year, we have seen some softness resulting in an overall Permian rig count decline of about <unk> <unk>.
Seven rigs caused by weaker commodity prices early in the second quarter and the recent banking issues.
These factors resulted in some reshuffling of rigs by E&P operators and more rig on rig competition in.
Despite of all this ICD increased its Permian contracted rig count by 20% year to date.
Numerous competitive pressures.
That speaks to the quality of our people and equipment and our strong brand.
We remain optimistic about market momentum re accelerating in the back part of this year, primarily in the Permian based on recent moves in commodity prices, our customers, having better access to credit.
Current customer inquiries and discussions, we're having and our expectation that W. T. I will continue to strengthen in the back half of 2023 rolling into 2024.
I also think the effects of recharged E&P capital budgets next year, we'll provide additional booster our Permian market.
While we expect some rigs to go back to work in the Haynesville. We believe the gas driven gas markets will remain challenged for at least the rest of this year.
We have however seen inquiries for work in the Haynesville pick up over the last couple of weeks in addition, Permian permitting.
Permitting activity for the Permian and June increased 25% month to month and overall permits for U S land year to date compared to 2022 were up slightly in spite of the softer commodity prices. We saw early second quarter based on all of this we believe U S land rig counts.
Finding a bottom as we speak and will begin increasing in the coming months on.
On the day rate front current leading edge Super spec day rates in the Permian are coalescing in the low to mid 30000 dollar range, including Adders right. Now there are minimal data points for spot day rates in the Haynesville, but I would expect they are just a little bit lower maybe a thousand or $2000 a day compared to the Permian.
In terms of enhancing our fleet. We are planning some 200 to 300 series conversions in the back half of this year, one of which is in process in connection with a contract extension into mid 2020 for which we just executed for a rig working in the Permian basin at a mid $30000 day rate, including the adders.
In this arena, we are seeing customer interest and high torque top drives iron Roughnecks and drill strings increase is a function of e&ps, increasing well lateral lengths and their unrelenting focus on drilling efficiencies. These are trends. We expect will continue in our investors should feel good knowing that the majority of our working rigs already have these capabilities.
Embedded in the rest can be outfitted to have these capabilities with very modest amounts of capex.
As I close out my prepared remarks, I want to mention our efforts regarding our technology rollout, which we call ICD impact, which accelerated during the second quarter. Our strategy. In this arena has been to leverage icd's youngest rig fleet in the industry in the years of effort and investment made by our third party partners by working with their professionals collaborating with our <unk>.
Customers and applying the knowledge skills and inside of our employees we.
We have technology systems deployed on approximately 30% of our active rigs today with objectives to improve this percentage over time as customer demand warrants were excited about what ICD impact means for our customers and other stakeholders going forward.
I'll make some additional concluding remarks before opening the call up for questions, but right now I'd like to turn the call over to Philip to discuss our financial results and outlook in a little more detail.
Thanks Anthony.
During the quarter, we reported an adjusted net loss of $1 million or <unk> <unk> per share and adjusted EBITDA of $18 $7 million.
We operated 15 average rigs during the quarter.
This excludes two average rigs, earning revenue on an early termination basis during the quarter and early termination revenues during the quarter were $5 $1 million.
Moving onto our per day statistics, the statistics exclude both the early termination revenues and transition expenses.
Although we had a number of rigs moving between customers and locations and our overall operating days fell by an average of 4.4 rigs compared to Q1. We're pleased we saw only minimal derogate degradation in our revenue cost per cost and margin per day statistics.
Revenue per day during the quarter was $34467, representing a slight decrease from the first quarter.
Cost per day during the quarter was 19005, representing sequential improvement.
Overall margin per day was $15462, representing only a 1% sequential climb compared to the first quarter.
SG&A costs were $5 $2 million during the quarter, which included $1 $3 million of stock based and deferred compensation expense.
These costs declined sequentially by 22% overall breaking out the components cash SG&A expenses decreased sequentially by 21% compared to Q1 due to lower incentive compensation accruals and cost cutting efforts implemented during the quarter.
Noncash stock based comp.
Compensation expense also decreased sequentially in this case by 27% due to lower due to the effect of a lower quarter end stock price of variable accounting on performance based stock Awards.
Interest expense during the quarter aggregated $8 $3 million. This included $1 $2 million associated with noncash amortization of debt discount and deferred issuance costs, which were excluded when presenting adjusted net income.
Tax benefit for the quarter was de Minimis.
During the quarter cash payments for capital expenditures net of disposals of approximately $11 $5 million.
It includes final payments of capital expenditures on rig react on a rig reactivation program, including our 21st rig that reactivated at the beginning of the quarter.
There was approximately $5 1 million of Capex accrued in accounts payable at quarter end.
Breaking out our $11 $5 million cash payments on capex during the quarter approximately 53% related to rig reactivation in 200 to 300 series conversions, 35% related to maintenance Capex and 12% related investment in drill pipe capital inventory and spares.
For the remainder of the year. So when we move forward towards 18, or so or working rigs by year end, we expect capital expenditures during the back half of the year the aggregate approximately $9 $5 million, which assumes two 200 to 300 series conversions and approximately one and a half million in tubular purchases.
Moving onto our balance sheet as Anthony mentioned, our strategic focus has shifted from rig reactivation overall debt reduction.
It also includes steady improvements in our working capital position as well.
We made progress towards both of these goals during the quarter, we repaid $5 million of convertible notes at par and also reduce revolver borrowings by $5 $3 million during the quarter.
And we were doing we were able to do this while slightly improving our net working capital position as well.
Adjusted net debt at quarter end was approximately 191 $2 million also decreased from March I want to point out our adjusted net debt net debt statistics include accrued interest we have elected to pay in kind on September 30 of.
Of this year.
Our financial liquidity at quarter end was $19 $1 million comprised of cash on hand of $5 6 million and $13 $5 million of availability on our revolving line of credit. This is in addition to the net working capital improvement I just mentioned.
Now moving onto third quarter guidance.
We expect operating days to approximate 1240 to 1250 days, representing approximately 13 and a half average rigs, earning revenue during the quarter.
Let's exclude rigs, earning revenue on an early termination basis, which will be minimal during the third quarter.
Expect margin per day to come in between 14250% and $14750.
The sequential decline related to lower day rates on contract renewals.
We also expect some sequential cost inefficiencies during the quarter associated with a lower operating base and reduced operating days.
From a contract mix standpoint, the vast majority of our rigs are now operating on short term pad to pad contracts and reflect the current day rate environment. For example, during the third quarter, we expect only 25% to 30% of our revenue days to be earned on contracts that were entered into prior to March 31 of this year.
On the Unabsorbed overhead expenses will be about $600000 and also are not included in our cost per day guidance and as Anthony mentioned, our Haynesville. The Permian transition program is complete we do not expect to incur any transition expenses during the third quarter.
We expect third quarter cash SG&A SG&A expense to be approximately $4 $3 million with a small sequential increase primarily tied to expected increases in improving and onboarding costs.
As we began staffing up for expected reactivation in late third quarter and early fourth quarter.
Stock based compensation expense is expected to be approximately $1 $9 million, assuming no material changes to our stock prices are today that would further impact variable awards.
We expect interest expense to be approximately $9 $5 million and of this amount approximately $2 4 million relate to noncash amortization of debt discount and deferred financing costs.
Depreciation expense for the third quarter is expected to be flat with the second quarter.
We expect tax benefit to be flat with the second quarter.
With that I'll turn the call back over to Anthony.
Thanks, Philip before opening the call up for questions I want to briefly summarize where we are as we entered the second half of 2023.
While this may not be the year that we thought it would be 2023 is proving to be a very important year for ICD initiating our efforts to delever, our balance sheet repositioning our rigs to a more appropriate geographic positioning and balance and executing on our technology pathway are all very strategic initiatives, which are happening.
And these initiatives will provide value to the stockholders customers and employees of ICD in the coming years I would like to thank our many operations support and corporate team members, who work hard everyday to deliver high levels of safety performance customer service and professionalism, which our customers expect from ICD and which we expect of ourselves.
With that operator, let's go ahead and open up the line for questions.
Okay.
Thank you we will now begin the question and answer session.
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Your question. Please press Star then two.
We will pause momentarily to assemble our roster.
And today's first question comes from Don Crist of Johnson Rice. Please go ahead.
Good morning, gentlemen, how are you all today.
Doing good thank you will.
I wanted to explore the topic of adding rigs back in late third quarter fourth quarter and possibly in the 'twenty four.
We've heard several antidotes from other companies and just wanted to get your take on what gives you confidence are there.
Significant tenders that are out there today or are they just conversations to that.
Certainly Don the nature of the discussions with customers has changed over the last couple of months.
I think obviously strengthening commodity prices have helped.
The macro picture in the U S and what's happening there I think would help I think those things along with some others have given some customers some confidence.
That.
They they can step back in and add.
Just to give you a little transparency.
We're not we're not doing a lot of work today for the Supermajors are would you work for the independents and we do a lot of work for privates as well and it's in that last bucket, where we've probably seen the most change over the last couple of months.
With the private E&ps remember also you know they were the first ones about a year ago to start laying down rigs.
They kind of sat on the sidelines for last few quarters.
And I think.
As we look out over third and fourth quarter.
For us at least that's where we see opportunities.
To bring rigs out.
And just to take that a step further in the Haynesville.
Or are you getting into conversations now given that the 24 strip is over $3 to actually add some rigs back in the Haynesville I know thats not going to be a priority. Since you moved a lot of rigs out of the area.
Is that market starting to see some tightening versus loosening over the past several quarters.
Yes, certainly over the last couple of weeks Dawn again, those discussions have have also picked up as well.
We bottomed out at two two of the four rigs that we had earning revenue there were three today pretty optimistic the fourth when I go back to work before we talked to you guys again.
And.
Rig count over there has bottomed out around 44 rigs that's down from mid 70%, so quite a quite a drop.
Strip has moved I was looking at it earlier this week.
As you look out past October this year, it's above $3 and in January it's over 370.
And that's what.
What we hear from customers as you know three in quarter, three and a half.
They're thinking about growing.
And.
We're pretty optimistic about being able to put that fourth rig to work.
Probably in the third quarter.
I appreciate that color and just one final one for me on the on the conversions.
Are those customer driven conversions from 200 series, the 300 series and <unk>.
And how many more of those do you think you could do.
Over the next couple several quarters.
Yeah, it's been great I'm really proud that we were able to sign this second one up in both of the instances they were customers that were using our 200 series rig.
Doing a great job for them, obviously, they were very happy.
Our customers would like maximum flexibility as they look out over the coming quarters in coming years to be able to take a rig and work across the spectrum of projects, which they have so in both cases the operators our customers were very supported.
<unk>.
Of the conversion to 300 series capability and I would point out in both cases, we were able to two.
We're going to earn a premium day rate relative to what that rig would have earned had we not converted yet.
So this.
This will be the second one that's in motion as we speak.
We have a handful more that we can do.
We have some kits on the ground.
Our strategy is to use those kits when theres opportunities too.
Earn that incremental payback.
Over the course of the contract and we've been able to do that now twice so its flexibility for us.
Are those when we talk about our 200 series rigs, they're super spec their pad optimal there.
They have all the bells and whistles that the standard Super spec pad optimal rig has but as the unconventional play.
10 years to play out as the laterals continue to get longer.
You know as our if our customers need that added capability, we have the flexibility to be able to offer it.
I appreciate all the color I'll turn it back thanks.
Thank you Tom.
Thank you and our next question today comes from Steve for Arizona with Sidoti. Please go ahead.
Afternoon, Anthony Philip.
Regarding your commentary around day rates in the Permian and then your guidance for.
For margins going into <unk>, it sounds like maybe day rates might be coming down a little bit, but certainly not.
Necessarily significant given how much rig count has dropped what are you seeing in day rates and are the conversations getting harder.
Yeah day rates have softened some state, but just to put it into perspective. When you look at what's happened year to date, the Permian market is only off a dozen or so rigs and 4%.
Since the beginning of the year. So there has been some trimming as you guys know, but there's been some people that have added some rigs as well theres a lot of churn in the background that you.
You probably don't have you don't have the insight into but.
Regardless.
Day rates have obviously held up pretty nicely. When you look at the margin per day that we just reported very proud of that and we're guiding down a little bit as we think about Q3 and were saying Q4 is going to be flat with Q3, and if you think about that especially on a historical basis for these kind of margins.
<unk>.
That's really good and it's another reason why we're we're very optimistic about what the next several quarters are going to allow ICD to do on those big important strategic initiatives that we have underway.
What's your confidence level, now and getting some rigs back to work in Q4.
Very high.
Okay, very high where we're going to we're going to bring out yeah. I think it's three minimum before the end of the year really and yeah, they probably happens sooner rather than later.
Excellent.
Any kind of color you can give around the the early termination where those rigs in the Haynesville and did they have a lot of term left given the $5 million.
Yeah, one is still on contract.
On standby in fact through November of this year. The other one it's early term provision ended here about 10 days ago.
So of the three rigs that we have working in the Haynesville today.
You know only one is sitting there earning standby the other two are on day work basis.
Yes, so the $5 1 million it was really three rigs.
And pretty much all of it.
Ended at the end of by the end of the second.
Okay great.
It took a lot of costs out here.
It helps out a lot how much of that do you think comes back with Rick with getting those rigs back to work was that a lot of very temporary cuts, but was there anything you took out it could be permanent.
On the SG&A side some of it in the second quarter clearly was we werent in hiring mode.
We will go back to that and so when you think about the sequential guide up from the second quarter to third quarter. That's what we're really talking about there theres, probably about $1 million in SG&A that I would consider permanent which is really some head count.
Type of things that we've done in some other efficiency.
Things that we've put in.
And then on the operating side, that's really temporary from the standpoint of operating costs that there isn't going to go up and down as the rig count is up a doubt we will have some choppy when you thought the earlier question on margins.
Part of the guide down is not that all day rate some of it. So we're going to be it's going to be a choppy or third quarter as we put rigs back to work and things like that theres going to be some churn.
And that does affect your cost per day statistics.
Understood perfect. Thanks, Anthony Thanks Philip.
Yes, Sir.
And our next question today comes from the storms with Stonegate capital markets. Please go ahead.
Good morning.
Good morning.
Good morning, Jim.
Hoping you could touch on some of the banking issues that you mentioned that we're seeing in the quarter in our.
It looks like most of them have kind of cleared up do you see any potential for any of that to kind of rear its head again.
Either in the next quarter or further on down the line.
Yeah.
So what I was referring to was really access to.
Credit on the part of our customers and we think.
You guys know better than I do you think back to what was playing out in the second quarter with especially around the regional banking crisis.
Redetermination around credit lines and stuff like that.
We think those issues, while there may not be completely resolved. We think there are better today than they were in early second quarter.
One antidote I would give you guys as we we were awarded or verbally awarded a program back in March.
Big program out in the Permian.
But as a private E&P operator and.
March for a may start well may slip to June as slip to July well now you know we're in the process of papering that up.
And what has changed is that.
The financing side.
The project for the customer.
And that's an anecdote that I would share with you guys, but it's just my understanding and view that.
I think our customers will have more access to capital.
Which you know when we talked about the reasons why our commodity prices.
Are there things like that that are going to help drive that.
That's very helpful. Thank you and then the other thing you mentioned just from rig counts finding a bottom with the increase expected in the coming months can you just help.
Help us get a sense of.
When that demand does come back to breakout between you know what the demand for 300 series rigs first 200 series rigs.
Yeah, we are.
Bottomed out in I think $6 60 is where we are right now maybe it goes to 650.
When you look at.
You know where the rig count rigs are working and rig count about half the rigs are working out in the Permian.
We would expect that percentage to continue and even grow.
Yeah in the Permian, there's the Midland Basin work, there's the della Basin, Delaware Basin work I think you would expect to see some ads in the Delaware basin, just because of the productivity that youre hearing e&ps talk about out there. So you know what.
What's important for US is that we're not making a call in saying the entire market is going to move to 300 series specification, but what's important for us and our stockholders is if that's where it were to go we have a very clear pathway toward being able to meet.
Those opportunities are that incremental demand.
That's perfect. Thank you for taking my question and congrats on the quarter.
Thank you Dave.
Our next question today comes from David Marsh Senior Research. Please go ahead.
Hey, guys. Thanks for taking the questions.
First bill if I could I just wanted to ask a question about the convertible note repurchases it looks like in the cash flow statement.
5 million exactly in a repurchase but then said you know par plus accrued so I just was.
Wanting to get a little color like to make sure I understand did you retire 5 million principal of this note.
Yeah. So it was $5 million and accrued interest was probably a couple of hundred thousand dollars on it.
And that would be up in the and the other part of the cash flow statement.
And the operating piece, so it's $5 million pay down at par yes.
Got it and then are they are they continuously callable at par at this point.
There is a mandatory offer provision where we make an offer at the end of each quarter.
Through 2024 to pay down at par and so it's $5 million each quarter through the end of this year than it was $3 $5 million.
Each quarter.
Through next year and this was the first quarter June 30. This is the first.
Under the this is the first offer that we made and then they accepted it.
Got it got it I understand.
And then.
Are you guys still picking at this point or and can you kind of update us on plan to possibly transition to cash interest payment on this.
Yeah. So I think what we've said publicly is our plan was to pick through March of 2000.
Mark to market through March 24.
Certainly.
With the opportunity to cease picking at September where we sit here today, assuming the mandatory offers are being accepted and thats. What we think is the most likely scenario that that's up to our lenders than we probably would will be funding. The mandatory offers but we probably would go ahead and pick through.
March 24, and then we would our plan would be to start picking at that point in time.
Got it.
I'm guessing that the.
You know kind of refinancing market is still not quite favorable enough for you guys to consider.
Some type of an open market refinance at this point.
So the kind of refinancing window under the indenture doesn't open up until September of next year.
Obviously, we're in a little bit of a down market here as far as our.
EBITDA and reported EBITDA, so it wouldnt be ideal for us to to do something now in my opinion, just because it's a negotiation.
It's pretty early as far as when that window opens up and I think with the opportunity to get some more rigs out I think that that.
Theres, probably some better opportunities.
And discussions we can have next year.
Yeah, Yeah, I would absolutely agree I just you know.
But yeah, just trying to put a finger on the pulse of it.
You guys moved.
You guys called out some costs in the press release with regard to moving rigs from the Haynesville too.
The Permian 600, K in Q1 2.8 in Q Q, how many rigs were moved in total.
Six rigs in total.
Okay perfect that just helps us understand it helps me understand the cost of moving one.
That's really helpful. Appreciate it.
That's all I have let me yield to someone else here.
Thank you David.
Thank you and our next question today comes from Jeff Robertson with Watercolor Research. Please go ahead.
Thank you good morning.
As well as the churn maybe slows down in the Permian Basin do you would you expect at that point that day rates will start to firm up.
Margins start to improve as you put rigs back to work late this year and heading into 'twenty four.
Yeah, I think it's going to be a little a quarter later than what people may expect Jeff and that the reason is that.
Britain route rigs laid down.
Look the big players in the business and maintain good discipline in pricing.
As there are opportunities presented for people to step into the Batter's box, they're there they're going to be aggressive in trying to get their rigs out. The good news is I think it's a relatively limited number.
Of of rigs that we're talking about so because of that dynamic.
Margin probably.
Lags the uptick in utilization by quarter, that's why we're.
We're kind of.
Laying out for you guys you know slight decrease in the third quarter, and then sideways for the fourth quarter, but very optimistic about 2020 for there theres only been 100 rig decline throughout the United States over this year as you know and very few of those had been in the Permian. So the the inflection to get back.
Back to pricing.
Pricing increases I think it's probably sooner than than people may realize but its going to be a little longer and little lighter than we would like.
Do you get the sense that any customers are starting to worry about how they might get a rig back to the haynesville. If they start to look at the back half of 'twenty four.
Maybe a more optimistic view of gas markets then into 'twenty five.
Yeah, absolutely, Jeff we've had guys actually have that conversation with us that they're starting to think about 2020 for it.
Likely becomes a challenge for them I think one of the biggest reasons as.
We talked I think on the last call about how activity in the Haynesville is drifting south and west and what's important to note from an equipment standpoint is that it does it's typically deeper of course, all the laterals are getting longer.
And.
It just requires a bigger rig and if you want to look at some extreme examples look at what I think it's the Comstock that made an announcement earlier this week and what they're doing and the extreme western edge of the Haynesville. This is the stuff over in Texas in Robertson County in that area.
The well results that were published earlier this week I think it was 34 million cubic feet a day of gas.
That's very similar to what a lot of the E&ps are seeing in the Haynesville and then.
As is as exciting as that now they're going to test the deeper Bossier bench over there as well and the reason I point that out is like I said remember the haynesville as it moves west it gets deeper the hook loads get higher Youre talking big equipment, and there's a limited number of those in the industry.
Million pound type rigs.
Big setback capacity things like that and I think that bodes that that dynamic along with just the general haynesville picking up is going to bode really well for contractors that have that kind of equipment and of course, we're one of them.
So that plays migrating toward your rigs in terms of the specifications needed.
Absolutely the 300 series, yes, Sir.
Philip you mentioned that you anticipate that the lenders will accept the redemption offers.
So.
That really drives or should allow ICD to naturally delever between reducing the principal amount of those convertible notes, which also I guess ultimately decreases the refinancing burden, but also it appears you should still be able to add cash to the balance sheet. So your leverage profile its debt refinance window opens up thank.
Thank you mentioned late next year, the company's just natural leverage ratio starts to look a lot better than maybe you have more opportunities is that a fair is that a fair way to think about it.
Yeah, I think it's certainly compared to the guidance that we've provided in the past because I think in the past we haven't really spoken much about them, except because we didn't know until what what their plans would be until we saw what they did this quarter and was then accepting those those mandatory offers.
That's certainly accelerates kind of the debt paydown.
At the beginning now as opposed to really in March of next year. So.
Thank you very much.
Thank you Jeff.
Thank you and our next question today comes from John Daniel with anyone Energy partners. Please go ahead.
Hey, guys. Thank.
Thank you.
Anthony I really don't.
I apologize I missed part of the prepared remarks can you tell me what the working rig count is today.
We have 14 rigs today, earning revenue.
Okay, ICD and then one of the early term are on standby rather.
Okay. So, but 14 are turning to the right or 13 13 are turning to the right perfect. Okay.
And.
Yeah, Don Don Us some pretty good question, so I'm going to follow up with a little add on to his but I know you mentioned some of the incremental rig so you're going to deploy likely go to.
Private operators, but I'm curious you know you guys are probably pretty busy getting ready for earnings and all that but if you listen to all of the E&P earnings calls.
Last week and you know so far this week.
The majority of them are saying flat activity, maybe bleeds, a little bit lower.
And so I'm curious is your sales guys are getting inquiries from customers. How often are you catching any disconnects, where the e&ps are publicly saying one thing but.
They're calling you and asking something else and obviously you don't want to give names, but I'm just curious your thoughts.
Yeah, no problem John .
I wouldn't say, it's a disconnect I think it's just more of a perspective into the market.
We're not working for any of the Supermajors today, although we have in the past.
And so when we're in these discussions is with large independents and especially on the private side.
And the opportunities that we're pursuing with the large independence for the most part our high grade opportunities, where they have an underperforming rig or a rig that may have a lesser capability than a rig that we have we can offer.
And.
Those are the opportunities with with the independents, where we do see or we are seeing the incremental adds as more with the privates and we talked about that earlier in the call.
You know as I look out over a third quarter and certainly by the end of the year, where I see three rigs going back to work.
Two of those are 300 series rigs that we have that we're working just a couple of months ago.
We probably put another 200 series out question is do we upgraded or not to 300 series capability and that's going to depend on the requirement that where we're pursuing and whether or not we think we can get paid for it.
Right. So I wouldn't say, there's as much of a disconnect. It's just the.
Where we fit into the market with those three classes of customers.
Okay.
If you go back the last several months you were probably more clairvoyant than others with respect to the Haynesville rig count where it might trough.
And then if you use bakeries your proxy I think it's low forty's right now.
And I think it was in the last seven days.
When times are popping.
Where do you think we hit in 'twenty four.
What would the inquiry suggests we could be at 24.
Look if you look at the strip you listen to what customers say, there what price they need to stimulate activity.
John I can see a dozen rigs easy over there.
And that's really ignoring what is happening in that extreme western part of the play which I described a second ago, yeah, but just looking at the Haynesville proper that is.
We've all known.
I see it doesn't pretty easy.
And I mean honestly.
Crap happens if we have a cold winter things changed pretty fast, but the inquiries today don't necessarily put us back to where we were in Q4 'twenty. Two that's that's a fair state minutes, knowing it's still early.
Correct, but remember youre available supply is lower than it was two so you probably see a bigger pricing response at a lower rig count in the Haynesville. Then you then you needed before yeah awesome. Thank you for very granular answers.
Yes, Sir.
Thank you.
And as a reminder, ladies and gentlemen, Please press Star then one to ask a question. Our next question comes from <expletive> Ryan with Colliers. Please go ahead.
Thank you Anthony on your strategic initiatives that technology pay off the waves where are you in that rollout.
Can you provide a little commentary what's your ultimate goal will that help you you know be in a better position to take some share in the market can.
Can you just provide a little more commentary on that.
Yeah, that's great I. Appreciate you, let me talk about that <expletive> we haven't talked a whole lot about that.
Looked like like all other industries out there I mean, we would expect the technology and demands for technology and appreciation for what it's gonna do would make its way into oil and gas.
It is in a big way.
We've chosen over the last couple of years to not get into the arms race of trying to develop this technology ourselves you know part of that just to.
Some of the limitations that we have but we also felt that over time. This would there would be a shake out phase.
So our strategy our stated strategy that we wanted to be a very fast second mover on this front, but in the meantime make sure that we have the right platform in place.
To be able to deploy technology, and we do with the AC rigs that we have especially the control systems over half of our rigs are.
Precise controlled.
Rigs. So you think about your operating system on your iPhone you have got to make sure that you have a platform in place to be able to deploy this technology. So as we rolled into 2023 as we were thinking about the business and talking to customers. It was pretty apparent to us that.
Going forward the requirement to.
Have a technological offering and be able to add to our customers' efforts to.
Be productive that those are going to increase over the coming years. So we wanted to spend time in 2023, proving what what I, just described which was to deploy third party technology on our rigs and demonstrate where we can create value.
Not just for our customers, but also for ICD and.
And our stockholders. So I guess the point that I'm trying to make is that that is happening now.
Four of these systems deployed.
We've been very lucky because our biggest customer in the Permian basin has been very supportive of these efforts. So we have a couple of systems that are being.
Being used on a trial basis, we've got some things around the edges, where we are getting paid for this stuff very positive results. So far we have a drill string.
Later, we have some slicks stick slip mitigation software back to bottoms sequencing.
But what we're seeing is that all of those things are being mitigated trip times or <unk>.
Are being improved.
Where do we think this can go you know Philip and I sat around and thought about this look we think there's somewhere between 500 $1500 a day.
Incremental margin that that could come to us now.
Just like with all contractors it may not get deployed on every rig that we have operating but obviously over time. If this thing can prove its values than customers are going to be willing to pay for it and I'm really pleased and proud of the third party partners that we're working with I appreciate the customer that we have working with us.
Like I said, we just haven't talked a lot about this over the last couple of years I didn't want people to think we're not doing anything about it because we have been it's been very quiet, but it's been very deliberate.
But really pleased with what we've been able to show year to date on this front.
Yeah.
So I appreciate the color. Thank you.
Yes, Sir Thank you <expletive>.
Thank you ladies and gentlemen, this concludes our question and answer session I'd like to turn the conference back over to the management team for any final remarks.
Well, we appreciate that I want to thank everybody for making time to participate in today's call and given us the opportunity to update you and talk about the exciting things going on here.
Best wishes to all of you for safety and prosperity until we talk again with that we'll close out. Thank you. Thank you. Thank you. Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.