Good day and welcome to Independence Contract Drilling Incorporated First Quarter 2021 Financial Results and Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. 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, sir.

Good morning everyone, and thank you for joining us today to discuss ICD's first quarter 2021 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.

Hello everyone. Philip will go through the details of our financial results for the first quarter of 2021 in a couple of minutes. In my prepared remarks today, I want to focus on three things: A brief update on our recent quarter, the acceleration of utilization in day rate momentum we're experiencing, in particular within the last 45 days; and update you briefly on our progress regarding ESG. We reported as EBITDA loss, even though we continue to add contracted rigs. Reactivation cost impacted our results by approximately 1.1 million during the quarter. The cold weather freeze that gripped Texas Back in February impacted our results only slightly. It delayed the start up for one rig, and we had another rig going on lower force majeure rate for a short period of time. Our financial results continued to benefit from our cost rationalization and cost control efforts implemented last year, and better absorption of fixed and support cost as a result of more rig activity. Looking forward, we are confident that the past two quarters represent the trough for us as our industry continues to recover from the impacts of the COVID pandemic. Phillip will go through guidance in a minute, but as we sit here today, we have a pretty good line of sight on recovery of positive EBITDA this year, with our goal still intact of exiting the year generating free cash flow. Overall, liquidity at quarter’s end stood at 32.2 million. During the quarter, we did selectively access our equity line of credit and ATM programs, raising approximately 1.5 million in gross proceeds at an average price of $4.85 per share. Overall liquidity consisted of 5.4 million of cash on hand, 7.7 million of availability under our undrawn revolver, under our term loan accordion, and 4.1 million remaining available under our equity line of credit. Now on to the business, contracting activity and day rate improvement during the first quarter were positive. Overall, we operated 12 rigs during the quarter averaging 10.3 rigs during the quarter. Renewals included day rate increases across the board with some rigs receiving rate increases of 1,000 or more per day. More importantly, as I mentioned earlier, positive utilization and day rate momentum for ICD has continued to accelerate during the past 45 days.

Thanks, Anthony. During the quarter, we reported an adjusted net loss of $16.4 million or $2.64 per share, and an adjusted EBITDA loss of $2 million. We operated 10.3 average rigs consistent with guidance provided on our prior conference call. We expect utilization to increase sequentially by over 20% during the second quarter of 2021, compared to our first quarter average, with further sequential increases expected in the back half of the year. Revenue per day of $15,465 based upon one rig operating on a standby basis for most of the quarter, and the expiration of our final legacy pre-pandemic contracts. Revenue per day was slightly higher than guidance, principally due to lower standby days, compared to the expectations. We did not record any early termination revenue during the quarter. Cost per day of $12,663 was higher than guidance, primarily due to lower than expected standby days, and to a lesser extent, perhaps $300 per day or $270,000 in the aggregate of costs associated with a combination of the February freeze and discrete repairs during the quarter. Cost per day excludes $1.1 million associated with rig reactivations and $500,000 of unabsorbed overhead cost during the quarter. Those costs were slightly favorable compared to guidance. SG&A costs of $3.7 million included $700,000 of non-cash compensation expense. Cash SG&A expense increased sequentially from the fourth quarter associated with incentive compensation accruals for the new fiscal year, as well as seasonal year-end audit and related matters. During the quarter, cash payments for capital expenditures net of disposals was approximately $1 million. These payments included approximately $900,000 relating to prior year equipment deliveries. There's approximately $1 million of CapEx accrued at quarter-end, which we expect will flow through during the second quarter of 2021. Overall, right now, our capital budget for 2021 remains unchanged. Our backlog at March 31 stood at $12.1 million, all of which expires in 2021. Obviously, our backlog is substantially below historical levels, as most of our rigs are now operating on short-term pad to pad contracts to capitalize on our view of continued higher dayrates throughout 2021. Moving on to our balance sheet, at quarter-end we reported net debt excluding finance leases, and net a deferred financing costs of $132.1 million. This net debt is comprised of our term loan and $10 million PPP loan. Finance leases reflected on our balance sheet at quarter-end were approximately $7.4 million. Our PPP loan balance does not reflect any potential forgiveness. During the first quarter, we submitted our forgiveness application to our lender requesting forgiveness of the entire $10 million loan. Our forgiveness application, including our assessment of the necessity for and qualification for the loan will be reviewed by both our lender and the SBA, and given the nature of the process, we don't know exactly when a final determination on our application will be made. Anthony mentioned at quarter-end, we had total liquidity of $32.2 million. Looking at the sufficiency of this, we have reported an EBITDA loss for the past several quarters and are generating negative free cash flow. I'll go through guidance in a moment. But as Anthony mentioned, we are moving in the right direction. We elected to pick the payment of our April 1 interest payment, which was under our term loan facility, which increases projected liquidity. We also expect our revolver borrowing base will continue to increase as we continue to reactivate rigs and our operating rig count and AR balances increase. I still believe assuming continued moderate improvements in our operating rig count the back half of the year and steady improvements and revenue per day, we can approach free cash neutrality late in 2021 and meaningfully improve on that in 2022. Given the levers available to us to pull at this time, we're comfortable with our financial liquidity position. Now moving on to second quarter guidance. We expect operating days to approximate 1,130 days, representing 12.4 average rigs working during the quarter. As Anthony walked-through, we expect to exit the second quarter with 15 rigs operating in-line with our 2021 business plan. We expect margin per day to come in between $3,000 and $3,200 per day, representing an approximate 11% sequential increase at the mid-point of this range. We expect revenue per day to come in between $16,300 and $16,400 per day, and cost per day to come in around $13,200 and $13,400 per day. Again, we don't expect any standby days will affect these statistics during the second quarter like they did in the first quarter. These per day amounts exclude pass through revenue and expenses. As Anthony mentioned, further day rate improvement from recently signed contracts will primarily benefit the third quarter onwards. So, we do expect some additional sequential revenue per day improvement after the second quarter, and continued efficiency gains of the cost line as more rigs go to work. We also expect to incur an additional $1.3 million associated with the four planned rig reactivations and the replacement of the 1,000 horsepower rig during the quarter, and $600,000 on unabsorbed overhead costs during the quarter. These costs are not included in and on top of in addition to our cost per day guidance. We expect SG&A expense to approximate $4 million. Included in this estimate is approximately $900,000 of non-cash compensation expense. The sequential increase in non-cash compensation relates to full quarter expensing of at-risk performance-based compensation, which only partially affected the first quarter of 2021. These awards are subject to variable accounting, so the ultimate amount of expense will be based on our stock price at quarter-end and progress towards performance goals. We expect interest expense and depreciation expense to be approximately 3.8 million and 10 million, respectively and tax expense to approximately $100,000. For capital expenditures, we expect approximately 2.3 million to flow through our cash flow statement during the second quarter. And with that, I will turn the call back over to Anthony.

Thanks, Philip. I have no further comments at this time. Operator, let's go ahead and open the line for questions.

Thank you. And the first question will come from John Daniel with Daniel Energy Partners. Please go ahead.

Hey guys, good morning. Hopefully you can .

Good morning, John.

How are you?

I'm good. I just got one question. You noted the customer requirements on rig specs are increasingly, you know, call it a gating item, maybe in terms of the rig contracting process. And I'm just curious as that continues to evolve, how will that limit? Do you think any consolidation opportunities amongst some of the smaller private land drillers?

Yeah, John, thank you for the question. So, I think there will continue to be a need for what we would refer to as pad optimal super spec type equipment. What I was trying to illuminate in the comments really was a subset of the market, a niche that we think is going to continue to grow. Obviously, it's very exciting for us, because we believe we have the equipment to target that. And you know, one of the dynamics that's driving it are bigger pads. I think also the consolidation that's happening within our customers. And you think about the checkerboard acreage that's out there, how they're able to piece things together, it gives them the opportunity to leverage that fixed cost on one pad as opposed to building multiple pads and maybe access more of the reservoir than they would have beforehand. And in order to do that, they're going to need a different type of rig one that can drill a longer lateral, maybe a bigger bore or both. And the punch line is and the point I was trying to make is, the 300 series rigs that we have are ideally suited for that. And I think the fact that you're seeing that evolve right now in the marketplace, and we would expect that to continue is very exciting for us. And that was really where I was trying to go with that.

Fair enough. Okay, appreciate that. And then the last one would be just, any thoughts observations on supply chain? What issues are facing you guys right now? Just any broad commentary would be appreciated.

Yeah, you know, we spend a fair amount of time talking about that. You look around us, you know, in our private lives and others we've all been impacted in different ways. Some of it just because of the pandemic, other computer chips, and stuff like that. But at ICD as a company, you know, we've continued to roll with the punches, not aware of any issues in terms of supply chain access to equipment, stuff like that that's hindering our ability to service our customers today or to continue to prepare the company to, you know, even add rigs to these customers. So, so far, knock on wood, it's not an issue for us.

Okay. That's good. That's all I had guys. Thank you for your time.

Thank you, John.

The next question will come from Daniel Burke with Johnson Rice. Please go ahead.

Yeah, let's see. Good morning, guys.

Good morning, Daniel. How are you?

Fine. Fine, Anthony. So, Anthony, last quarter, you talked about sort of as your rig count got to the mid-to-upper teens, considering taking almost an intentional pause – and I think that reflected the thought that activation – reactivation costs were going to rise, and maybe the rates weren't there to support that yet. I mean, does that to some optimism here this morning on rates certainly. So, we do still see an intentional pause or is the strategy a little different as you sit here today?

No, I think the one thing that maybe has changed slightly from the last time we talked is, we have seen some pretty good day right momentum. Obviously, we're coming off a low base, as I said in prepared remarks. We're not anywhere near where we need to be, but certainly, you know, every renewal that we've had, and certainly every new contract that we've signed, since the last quarter’s call has been at higher dayrates. And that ranges from, you know, minimum $500 a day to in some cases over $1,000 a day. So that certainly has been a positive development. As we look at the fleet as we consider reactivation costs, and stuff like that, you know, we're very comfortable and, you know, the number that we put out , by the end of the second quarter, we've talked about that now for two quarters. You know, maybe there's a couple more, depending on where the market is in Q3, Q4 that we might end by the end of the year. But I don't see us running, you know, very far beyond that number. Unless and until we continue to see this day rate improvement that we're talking about Daniel, but look, everything that we see in the market, certainly what we're hearing from our customers, what's happening with the commodity, the macro picture is, as far as we can tell, is very supportive of, you know, continued increases in rig count, albeit, it's probably more moderated in Q3, and Q4 as it has been in the first four months of this year. But it really sets up a pretty good 2022 in our mind, especially as capital budgets get recharged. In the early part of the year, I would expect to see an increase in demand very similar to what we saw in 2021. It just, like I said it's going to be slower than any of us want, but the punch line for ICD is that assuming using those assumptions, we will continue to add rigs on a very measured pace into what we believe will be an improving market for next – the next several quarters to come, Daniel.

Got it. And I guess then my follow up is, as you guys develop better line of sight and better conviction around getting to, sort of that free cash break over point by the end of this year. I mean, you've used you’ve used equity, you’ve used ATM pretty effectively here over the last year. I mean, is that still part of the strategy as you look forward from today?

Daniel, I think we will be opportunistic when we use those types of things. I think we've done a good job so far. You saw what we did in the first quarter. It wasn't, you know, significant magnitude, but it was at favorable prices. So, we'll look at that as you know, a way to, you know, take advantage of the market when it's available to us.

Makes sense. I'll leave it there guys. Thank you for the time.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Anthony Gallegos for any closing remarks. Please go ahead, sir.

Okay, well thank you, for that. Guys, we want to thank you all for joining us today for our call. Before I sign-off, I'd like to thank the hundreds of hard work and dedicated employees at ICD for their service and sacrifice. Also, I'd be remiss if I didn't mention that here over the summer at ICD we're going to be celebrating our 10th anniversary, our 10th birthday. So, I want to thank all of the ICD employees, former, and current who've contributed to the company's efforts over these years. With that, we look forward to speaking to you again on the next call and hope to catch up with you before then as well. Thank you, everybody. We'll end the call now, operator. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.