10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-36590

Independence Contract Drilling, Inc.

(Exact name of registrant as specified in its charter)

Delaware	37-1653648
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
20475 State Highway 249, Suite 300 Houston, Texas	77070
(Address of principal executive offices)	(Zip code)

(281) 598-1230

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading symbol(s)	Name of each exchange where registered
Common Stock, $0.01 par value per share	ICD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	x
		Emerging growth company	¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨  No x

3,816,258 shares of the registrant’s Common Stock were outstanding as of May 6, 2020.

INDEPENDENCE CONTRACT DRILLING, INC.

Index to Form 10-Q

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 (Unaudited)	4
Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (Unaudited)	5
Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019 (Unaudited)	6
Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (Unaudited)	7
Notes to Consolidated Financial Statements (Unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	34
Item 4. Controls and Procedures	35
Part II. OTHER INFORMATION
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	39
Item 5. Other Information	39
Item 6. Exhibits	40
Signatures	41

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in this Quarterly Report on Form 10-Q, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future revenues, income and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “plan,” “goal,” “will” or other words that convey the uncertainty of future events or outcomes. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. These risks, contingencies and uncertainties include, but are not limited to, the following:

• Inability to predict the duration or magnitude of the effects of the COVID-19 pandemic on our business, operations, and financial condition and when or if worldwide oil demand will stabilize and begin to improve;

• a decline in or substantial volatility of crude oil and natural gas commodity prices;

• a sustained decrease in domestic spending by the oil and natural gas exploration and production industry;

• fluctuation of our operating results and volatility of our industry;

• inability to maintain or increase pricing of our contract drilling services, or early termination of any term contract for which early termination compensation is not paid;

• our backlog of term contracts declining rapidly;

• the loss of any of our customers, financial distress or management changes of potential customers or failure to obtain contract renewals and additional customer contracts for our drilling services;

• overcapacity and competition in our industry;

• an increase in interest rates and deterioration in the credit markets;

• our inability to comply with the financial and other covenants in debt agreements that we may enter into as a result of reduced revenues and financial performance;

• unanticipated costs, delays and other difficulties in executing our long-term growth strategy;

• the loss of key management personnel;

• new technology that may cause our drilling methods or equipment to become less competitive;

• labor costs or shortages of skilled workers;

• the loss of or interruption in operations of one or more key vendors;

• the effect of operating hazards and severe weather on our rigs, facilities, business, operations and financial results, and limitations on our insurance coverage;

• increased regulation of drilling in unconventional formations;

• the incurrence of significant costs and liabilities in the future resulting from our failure to comply with new or existing environmental regulations or an accidental release of hazardous substances into the environment; and

• the potential failure by us to establish and maintain effective internal control over financial reporting.

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this Form 10-Q and Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Independence Contract Drilling, Inc.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value and share amounts)

	March 31, 2020			December 31, 2019
Assets
Cash and cash equivalents	$	9,753		$	5,206
Accounts receivable, net	26,893			35,834
Inventories	1,181			2,325
Assets held for sale	5,014			8,740
Prepaid expenses and other current assets	4,803			4,640
Total current assets	47,644			56,745
Property, plant and equipment, net	437,505			457,530
Other long-term assets, net	2,754			2,726
Total assets	$	487,903		$	517,001
Liabilities and Stockholders’ Equity
Liabilities
Current portion of long-term debt	$	3,268		$	3,685
Accounts payable	14,981			22,674
Accrued liabilities	12,958			16,368
Merger consideration payable to an affiliate	2,932			3,022
Current portion of contingent consideration	2,814			2,814
Total current liabilities	36,953			48,563
Long-term debt	145,291			134,941
Deferred income taxes, net	610			652
Other long-term liabilities	1,198			1,249
Total liabilities	184,052			185,405
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock, $0.01 par value, 50,000,000 shares authorized; 3,888,137 and 3,876,196 shares issued, respectively, and 3,809,548 and 3,812,050 shares outstanding, respectively	38			38
Additional paid-in capital	506,375			505,831
Accumulated deficit	(198,649		)	(170,426		)
Treasury stock, at cost, 78,589 shares and 64,146 shares, respectively	(3,913		)	(3,847		)
Total stockholders’ equity	303,851			331,596
Total liabilities and stockholders’ equity	$	487,903		$	517,001

The accompanying notes are an integral part of these consolidated financial statements.

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Independence Contract Drilling, Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

	Three Months Ended March 31,
	2020			2019
Revenues	$	38,494		$	60,358
Costs and expenses
Operating costs	30,229			39,333
Selling, general and administrative	3,761			4,545
Severance and merger-related expenses	1,076			1,081
Depreciation and amortization	11,516			11,313
Asset impairment (insurance recoveries), net	16,619			2,018
(Gain) loss on disposition of assets, net	(46		)	3,220
Total costs and expenses	63,155			61,510
Operating loss	(24,661		)	(1,152		)
Interest expense	(3,604		)	(3,761		)
Loss before income taxes	(28,265		)	(4,913		)
Income tax benefit	(42		)	(2,540		)
Net loss	$	(28,223	)	$	(2,373	)
Loss per share:
Basic and diluted	$	(7.53	)	$	(0.63	)
Weighted average number of common shares outstanding:
Basic and diluted	3,750			3,785

The accompanying notes are an integral part of these consolidated financial statements.

5

Independence Contract Drilling, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

	Common Stock
	Shares		Amount		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
Balances at December 31, 2019	3,812,050		$	38	$	505,831		$	(170,426	)	$	(3,847	)	$	331,596
RSUs vested, net of shares withheld for taxes	11,941		—		(26		)	—			—			(26		)
Purchase of treasury stock	(14,443	)	—		—			—			(66		)	(66		)
Stock-based compensation	—		—		570			—			—			570
Net loss	—		—		—			(28,223		)	—			(28,223		)
Balances at March 31, 2020	3,809,548		$	38	$	506,375		$	(198,649	)	$	(3,913	)	$	303,851

	Common Stock
	Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
Balances at December 31, 2018	3,853,909	$	39	$	504,178		$	(109,638	)	$	(3,046	)	$	391,533
Common stock issuance costs	—	—		(177		)	—			—			(177		)
Stock-based compensation	—	—		387			—			—			387
Net loss	—	—		—			(2,373		)	—			(2,373		)
Balances at March 31, 2019	3,853,909	$	39	$	504,388		$	(112,011	)	$	(3,046	)	$	389,370

The accompanying notes are an integral part of these consolidated financial statements.

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Independence Contract Drilling, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities
Net loss	$	(28,223	)	$	(2,373	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization	11,516			11,313
Asset impairment (insurance recoveries), net	16,619			2,018
Stock-based compensation	570			387
(Gain) loss on disposition of assets, net	(46		)	3,220
Deferred income taxes	(42		)	(2,540		)
Amortization of deferred financing costs	204			203
Bad debt expense (recovery)	16			(45		)
Changes in operating assets and liabilities
Accounts receivable	8,925			(105		)
Inventories	(27		)	(45		)
Prepaid expenses and other assets	(462		)	843
Accounts payable and accrued liabilities	(5,959		)	(5,271		)
Net cash provided by operating activities	3,091			7,605
Cash flows from investing activities
Purchases of property, plant and equipment	(9,139		)	(10,832		)
Proceeds from the sale of assets	628			536
Proceeds from insurance claims	—			1,000
Collection of principal on note receivable	145			—
Net cash used in investing activities	(8,366		)	(9,296		)
Cash flows from financing activities
Borrowings under Revolving Credit Facility	11,038			2,403
Repayments under Revolving Credit Facility	(38		)	—
Common stock issuance costs	—			(177		)
Purchase of treasury stock	(66		)	—
RSUs withheld for taxes	(26		)	—
Financing costs paid under Term Loan Facility	—			(5		)
Financing costs paid under Revolving Credit Facility	—			(12		)
Payments for finance lease obligations	(1,086		)	(216		)
Net cash provided by financing activities	9,822			1,993
Net increase in cash and cash equivalents	4,547			302
Cash and cash equivalents
Beginning of period	5,206			12,247
End of period	$	9,753		$	12,549

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	Three Months Ended March 31,
(in thousands)	2020			2019
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	3,541		$	3,514
Supplemental disclosure of non-cash investing and financing activities
Change in property, plant and equipment purchases in accounts payable	$	(5,285	)	$	(1,753	)
Additions to property, plant and equipment through finance leases	$	55		$	520
Extinguishment of finance lease obligations from sale of assets classified as finance leases	$	(204	)	$	—
Transfer of assets from held and used to held for sale	$	—		$	(2,285	)

The accompanying notes are an integral part of these consolidated financial statements.

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INDEPENDENCE CONTRACT DRILLING, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. Nature of Operations and Recent Events

Except as expressly stated or the context otherwise requires, the terms “we,” “us,” “our,” “ICD,” and the “Company” refer to Independence Contract Drilling, Inc. and its subsidiary.

We provide land-based contract drilling services for oil and natural gas producers targeting unconventional resource plays in the United States. We own and operate a premium fleet comprised of modern, technologically advanced drilling rigs.

Our rig fleet includes 29 marketed AC powered (“AC”) rigs and a number of additional rigs requiring conversions or upgrades in order to meet our AC pad-optimal specifications.

We currently focus our operations on unconventional resource plays located in geographic regions that we can efficiently support from our Houston, Texas and Midland, Texas facilities in order to maximize economies of scale. Currently, our rigs are operating in the Permian Basin, the Haynesville Shale and the Eagle Ford Shale; however, our rigs have previously operated in the Mid-Continent and Eaglebine regions as well.

Our business depends on the level of exploration and production activity by oil and natural gas companies operating in the United States, and in particular, the regions where we actively market our contract drilling services. The oil and natural gas exploration and production industry is historically cyclical and characterized by significant changes in the levels of exploration and development activities. Oil and natural gas prices and market expectations of potential changes in those prices significantly affect the levels of those activities. Worldwide political, regulatory, economic and military events, as well as natural disasters have contributed to oil and natural gas price volatility historically, and are likely to continue to do so in the future. Any prolonged reduction in the overall level of exploration and development activities in the United States and the regions where we market our contract drilling services, whether resulting from changes in oil and natural gas prices or otherwise, could materially and adversely affect our business.

COVID-19 Pandemic and Market Conditions Update

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (“COVID-19”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The continued spread of the COVID-19 virus and the responses taken to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, has caused significant declines in global demand for crude oil. This reduction in demand has occurred concurrent with the initiation of a crude oil price war between members of the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (collectively, the “OPEC+” group). Even with recent production cuts announced by the OPEC+ group and others on April 9, 2020, and the cessation to the crude oil price war, crude oil inventories have continued to rise and to test storage capacity and logistics networks. These factors have led to a collapse in oil prices, with the WTI price for May delivery closing at negative $37.63 per barrel on April 20, 2020. Downward pressure on oil prices is expected to continue for the foreseeable future, and the long-term effects on production and demand are unknown at this time. Currently, there is considerable uncertainty regarding measures to contain the virus and what potential future measures may be put in place, therefore we cannot predict when worldwide demand for oil will stabilize and if or when it will begin to improve or reach pre-COVID-19 levels.

In response to these adverse market conditions, North American exploration companies, including all of our customers, have rapidly reduced planned capital expenditures and drilling activity. As a result, demand for our products and services began to rapidly decline late in the first quarter of 2020, and we expect demand for our products and services to continue to decline and remain low as our customers continue adjusting their operations in response to market conditions. During the first quarter of 2020, our operating rig count reached a peak of 22 rigs. Based upon customer actions to date, we expect our operating rig count to fall to six rigs by the end of the second quarter of 2020. However, due to the lack of visibility and confidence towards customer intentions, we cannot assure you that our operating rig count will not fall below these levels by that period of time or thereafter. Our current backlog of contracts stands at 3.2 average rigs during the third quarter of 2020 and 1.8 average rigs during the fourth quarter of 2020, and none of our current drilling contracts have terms extending into 2021 or beyond. As a result of this rapidly declining operating level coupled with downward pressure on dayrates we charge for our contract drilling services, we will experience corresponding reductions in revenue, operating margins and cash flows.

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Due to these rapidly declining market conditions, we took the following actions at the end of the first quarter of 2020 in order to reduce our cost structure:

• Salary or compensation reductions for substantially all our employees, including members of executive management;

• Suspension of all cash-based incentive compensation, including all members of executive management;

• Reducing the number of executive management positions by two;

• Reducing the number of directors from seven to five, which would become effective following director elections at our 2020 Annual Meeting of Stockholders currently scheduled to occur on June 12, 2020;

• Annual compensation reductions for our directors; and

• Reducing headcount for non-field-based personnel by approximately 40%.

Depending upon the nature and duration of the COVID-19 pandemic, the nature of containment measures taken in the future, it could have a material adverse effect on our business, results of operations and financial condition.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.    

On April 27, 2020, we entered into an unsecured loan in the aggregate principal amountof $10.0 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”), sponsored by the Small Business Administration (the “SBA”) as guarantor of loans under the PPP. The PPP is part of the CARES Act, and itprovides for loans to qualifying businesses in a maximum amount equal to the lesser of $10.0 million and 2.5 times the average monthly payroll expenses of the qualifying business. The proceeds of the loan may only be used for payroll costs, rent, utilities, mortgage interests, and interest on other pre-existing indebtedness (the “permissible purposes”).

The application for these funds required us to, in good faith, certify that current economic uncertainty made the loan request necessary to support our ongoing operations. This certification further required us to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. In making our certification, we considered numerous factors, including (i) current market and economic conditions, including the significant declines in worldwide demand and oil prices as a result of the COVID-19 pandemic and the uncertainty and inability to predict when market conditions will stabilize and begin to improve, (ii) the actions and communications from our customers that have caused and will cause our operating rig count to fall (from a high of 22 rigs during the first quarter of 2020, to an estimated six rigs by the end of the second quarter of 2020 and potential further reductions depending on when oil supply and demand fundamentals rebalance and U.S. land rig counts stabilize and begin to improve), (iii) whether our current sources of liquidity, comprised of cash and cash equivalents, availability under our revolving credit facility and accordion under our term loan facility, would be sufficient to finance our operations and required expenditures while industry and market conditions remain distressed, (iv) our status as a micro-cap public company, and (v) our belief, after inquiry, that capital markets were not reasonably available or open to us at such time for new issuances of debt or equity.

We cannot predict the length of time that the market disruptions resulting from the COVID-19 pandemic will continue; or when, or if, oil and gas prices and demand for our contract drilling services will begin to improve or return to pre-COVID-19 levels. The extent to which our operating and financial results are affected by the COVID-19 pandemic will depend on various factors and consequences beyond our control, such as the duration and scope of the pandemic; additional actions by businesses and governments in response to the pandemic; and the speed and effectiveness of responses to combat the virus. As a result, our business, operating results and financial conditions are subject to various risks, many of which are aggravated as a result of the declining market conditions and significant uncertainty caused by the COVID-19 pandemic.

The CARES Act did not have a material impact on our income taxes.  Management will continue to monitor future developments and interpretations for any further impacts on our financial condition, results of operations, or liquidity.

Reverse Stock Split

Following approval by our stockholders on February 6, 2020, our Board of Directors approved a 1-for-20 reverse stock split of our common stock. The reverse split was effective March 11, 2020, and all share and earnings per share information have been retroactively adjusted to reflect the reverse stock split and the associated decrease in par value was recorded with the offset to additional paid-in capital.

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2. Interim Financial Information

These unaudited consolidated financial statements include the accounts of ICD and its subsidiary, and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These consolidated financial statements should be read along with our audited consolidated financial statements for the year ended December 31, 2019, included in our Annual Report on Form 10-K for the year ended December 31, 2019. In management’s opinion, these financial statements contain all adjustments necessary to fairly present our financial position, results of operations, cash flows and changes in stockholders’ equity for all periods presented.

As we had no items of other comprehensive income in any period presented, no other components of comprehensive income is presented.

Interim results for the three months ended March 31, 2020 may not be indicative of results that will be realized for the full year ending December 31, 2020.

Segment and Geographical Information

Our operations consist of one reportable segment because all of our drilling operations are located in the United States and have similar economic characteristics. Corporate management administers all properties as a whole rather than as discrete operating segments. Operational data is tracked by rig; however, financial performance is measured as a single enterprise and not on a rig-by-rig basis. Further, the allocation of capital resources is employed on a project-by-project basis across our entire asset base to maximize profitability without regard to individual geographic areas.

Asset Impairments, net

As a result of the rapidly deteriorating market conditions described in "COVID-19 Pandemic and Market Conditions Update", we concluded that a triggering event occurred and, accordingly, an interim asset impairment test was performed as of March 31, 2020. As a result, we recognized further impairment of $3.3 million associated with the decline in the market value of our assets held for sale and $13.3 million related to the remaining assets on rigs removed from our marketed fleet, as well as certain other component equipment and inventory. Due to the uncertainty around COVID-19 and current market conditions, we may have to make further impairment charges in future periods relating to, among other things, fixed assets and inventory.

Additionally, in the first quarter of 2019, we recorded $2.0 million of asset impairment expense in conjunction with the sale of miscellaneous drilling equipment at auctions in April of 2019.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, as additional guidance on the measurement of credit losses on financial instruments. The new guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. In addition, the guidance amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The new guidance is effective for public companies for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. In October 2019, the FASB approved a proposal which grants smaller reporting companies additional time to implement FASB standards on current expected credit losses (CECL) to January 2023. As a smaller reporting company, we will defer adoption of ASU 2016-13 until January 2023. We are currently evaluating the impact this guidance will have on our accounts receivable.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes. The amendments in the update are effective for public companies for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We plan to adopt this guidance on January 1, 2021 and are currently evaluating the impact of adoption on our consolidated financial statements.

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3. Sidewinder Merger

We completed the merger with Sidewinder Drilling LLC on October 1, 2018.

During the three months ended March 31, 2019 we recorded $1.1 million of merger-related expenses comprised primarily of severance, professional feesand various other integration related expenses. There were no merger expenses recorded during the three months ended March 31, 2020.

Certain intangible liabilities were recorded in connection with the Sidewinder merger for drilling contracts in place at the closing date of the transaction that had unfavorable contract terms as compared to then current market terms for comparable drilling rigs. The intangible liabilities are amortized to operating revenues over the remaining underlying contract terms. During the three month period ended March 31, 2019, $1.0 million of intangible revenue was recognized as a result of this amortization. The intangible liabilities were fully amortized in the second quarter of 2019.    

In addition, at the time of consummation of the Sidewinder Merger,  Sidewinder owned 11 mechanical rigs and related equipment (the "Mechanical Rigs") located principally in the Utica and Marcellus plays. As these rigs are not consistent with ICD’s core strategy or geographic focus, ICD agreed that these rigs can be disposed of, with the Sidewinder unitholders receiving the net proceeds. As a result of this arrangement, on the merger date, we recorded the fair value of the Mechanical Rigs less costs to sell, as assets held for sale, with an offsetting liability in contingent consideration. Subsequently, a majority of these assets were sold at auction for substantially less than the appraised fair values on the merger date. As a result, the contingent consideration liability was reduced by the appraised fair values on the merger date and the proceeds were recorded as merger consideration payable to an affiliate on our consolidated balance sheets. We are required to pay out the related net proceeds in the second quarter of 2020. 

4. Leases

We have multi-year operating and financing leases for corporate office space, field location facilities, land, vehicles and various other equipment used in our operations. We also have a significant number of rentals related to our drilling operations that are day-to-day or month-to-month arrangements. Our multi-year leases have remaining lease terms of greater than one year to five years.

The components of lease expense were as follows:

(in thousands)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating lease expense	$	149	$	125
Short-term lease expense	1,281		1,193
Variable lease expense	134		86
Finance lease expense:
Amortization of right-of-use assets	$	392	$	265
Interest expense on lease liabilities	195		32
Total finance lease expense	587		297
Total lease expense	$	2,151	$	1,701

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Supplemental cash flow information related to leases is as follows:

(in thousands)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	160	$	103
Operating cash flows from finance leases	$	194	$	32
Financing cash flows from finance leases	$	1,086	$	216
Right-of-use assets obtained or recorded in exchange for lease obligations:
Operating leases	$	178	$	955
Finance leases	$	54	$	520

Supplemental balance sheet information related to leases is as follows:

(in thousands)	March 31, 2020			December 31, 2019
Operating leases:
Other long-term assets, net	$	1,095		$	1,033
Accrued liabilities	$	545		$	475
Other long-term liabilities	1,198			1,250
Total operating lease liabilities	$	1,743		$	1,725
Finance leases:
Property, plant and equipment	$	13,774		$	14,375
Accumulated depreciation	(1,352		)	(1,425		)
Property, plant and equipment, net	$	12,422		$	12,950
Current portion of long-term debt	$	3,268		$	3,685
Long-term debt	6,654			7,472
Total finance lease liabilities	$	9,922		$	11,157
Weighted-average remaining lease term
Operating leases	3.3 years			3.6 years
Finance leases	2.5 years			2.7 years
Weighted-average discount rate
Operating leases	8.00		%	8.07		%
Finance leases	7.66		%	7.64		%

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Maturities of lease liabilities at March 31, 2020 were as follows:

(in thousands)	Operating Leases			Finance Leases
2020	$	505		$	2,861
2021	616			3,661
2022	444			3,517
2023	370			164
2024	47			—
Thereafter	—			—
Total cash lease payment	1,982			10,203
Add: expected residual value	—			832
Less: imputed interest	(239		)	(1,113		)
Total lease liabilities	$	1,743		$	9,922

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5. Revenue from Contracts with Customers

The following table summarizes revenues from our contracts disaggregated by revenue generating activity contained therein for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
(in thousands)	2020		2019
Dayrate drilling	$	34,478	$	56,451
Mobilization	1,541		1,260
Reimbursables	2,448		1,604
Early termination	27		—
Capital modification	—		10
Intangible	—		1,033
Total revenue	$	38,494	$	60,358

The following table provides information about receivables and contract liabilities related to contracts with customers. We had no contract assets as of March 31, 2020 or December 31, 2019.

(in thousands)	March 31, 2020			December 31, 2019
Receivables, which are included in “Accounts receivable, net”	$	26,752		$	35,378
Contract liabilities, which are included in “Accrued liabilities - deferred revenue”	$	(505	)	$	(311	)

Significant changes in the contract liabilities balance during the period are as follows:

	Three Months Ended March 31,
(in thousands)	2020			2019
Revenue recognized that was included in contract liabilities at beginning of period	$	311		$	732
Increase in contract liabilities due to cash received, excluding amounts recognized as revenue	$	(505	)	$	(479	)

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2020. The estimated revenue does not include amounts of variable consideration that are constrained.

	Year Ending December 31,
(in thousands)	2020		2021		2022		2023
Revenue	$	505	$	—	$	—	$	—

The amounts presented in the table above consist only of fixed consideration related to fees for rig mobilizations and demobilizations, if applicable, which are allocated to the drilling services performance obligation as such performance obligation is satisfied. We have elected the exemption from disclosure of remaining performance obligations for variable consideration. Therefore, dayrate revenue to be earned on a rate scale associated with drilling conditions and level of service provided for each fractional-hour time increment over the contract term and other variable consideration such as penalties and reimbursable revenues, have been excluded from the disclosure.

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Contract Costs

We capitalize costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligations under the contract and (iii) are expected to be recovered through revenue generated under the contract. These costs, which principally relate to rig mobilization costs at the commencement of a new contract, are deferred as a current or noncurrent asset (depending on the length of the contract term), and amortized ratably to contract drilling expense as services are rendered over the initial term of the related drilling contract. Such contract costs, recorded as “Prepaid expenses and other current assets”, amounted to $0.5 million and $0.1 million on our consolidated balance sheets at March 31, 2020 and December 31, 2019, respectively. During the three months ended March 31, 2020 and 2019 contract costs increased by $1.2 million and $0.5 million, respectively, and we amortized $0.8 million and $0.7 million of contract costs.

6. Financial Instruments and Fair Value

Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 Unadjusted quoted market prices for identical assets or liabilities in an active market;

Level 2 Quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets or liabilities; and

Level 3 Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.

This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The carrying value of certain of our assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities approximates their fair value due to the short-term nature of such instruments.

The fair value of our long-term debt is determined by Level 3 measurements based on quoted market prices and terms for similar instruments, where available, and on the amount of future cash flows associated with the debt, discounted using our current borrowing rate for comparable debt instruments (the Income Method). Based on our evaluation of the risk free rate, the market yield and credit spreads on comparable company publicly traded debt issues, we used an annualized discount rate, including a credit valuation allowance, of 38.8%. The following table summarizes the carrying value and fair value of our long-term debt as of March 31, 2020 and December 31, 2019.

	March 31, 2020				December 31, 2019
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Term Loan Facility	$	130,000	$	62,559	$	130,000	$	138,567
Revolving Credit Facility	$	11,000	$	4,464	$	—	$	—

The fair value of our assets held for sale is determined using Level 3 measurements. In the first quarter of 2020, we obtained a third-party appraisal to determine the fair value of our assets held for sale. Fair value measurements are applied with respect to our non-financial assets and liabilities measured on a non-recurring basis, which would consist of measurements primarily of long-lived assets.

7. Inventories

All of our inventory as of March 31, 2020 and December 31, 2019 consisted of supplies held for use in our drilling operations.

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8. Accrued Liabilities

Accrued liabilities consisted of the following:

(in thousands)	March 31, 2020		December 31, 2019
Accrued salaries and other compensation	$	2,177	$	3,500
Insurance	2,007		2,861
Deferred revenues	505		701
Property and other taxes	2,569		4,716
Interest	3,104		3,244
Operating lease liability - current	545		475
Other (1)	2,051		871
	$	12,958	$	16,368

(1) Accrued Liabilities - Other includes $1.1 million in accrued severance, as of March 31, 2020, in connection with our cost reduction measures instituted in response to the COVID-19 pandemic and current deteriorating market conditions.

9. Long-term Debt

Our long-term debt consisted of the following:    

(in thousands)	March 31, 2020			December 31, 2019
Term Loan Facility due October 1, 2023	$	130,000		$	130,000
Revolving Credit Facility due October 1, 2023	11,000			—
Finance lease obligations	9,922			11,157
	150,922			141,157
Less: current portion	(3,268		)	(3,685		)
Less: Term Loan Facility deferred financing costs	(2,363		)	(2,531		)
Long-term debt	$	145,291		$	134,941

Credit Facilities

On October 1, 2018, we entered into a term loan Credit Agreement (the “Term Loan Credit Agreement”) for an initial term loan in an aggregate principal amount of $130.0 million, (the “Term Loan Facility”) and (b) a delayed draw term loan facility in an aggregate principal amount of up to $15.0 million (the “DDTL Facility”, and together with the Term Loan Facility, the “Term Facilities”). The Term Facilities have a maturity date of October 1, 2023, at which time all outstanding principal under the Term Facilities and other obligations become due and payable in full.

At our election, interest under the Term Loan Facility is determined by reference at our option to either (i) a “base rate” equal to the higher of (a) the federal funds effective rate plus 0.05%, (b) the London Interbank Offered Rate with an interest period of one month (“LIBOR”), plus 1.0%, and (c) the rate of interest as publicly quoted from time to time by the Wall Street Journal as the “prime rate” in the United States; plus an applicable margin of 6.5%, or (ii) a “LIBOR rate” equal to LIBOR with an interest period of one month, plus an applicable margin of 7.5%.

The Term Loan Credit Agreement contains financial covenants, including a liquidity covenant of $10.0 million and a springing fixed charge coverage ratio covenant of 1.00 to 1.00 that is tested when availability under the ABL Credit Facility (defined below) and the DDTL Facility is below $5.0 million at any time that a DDTL Facility loan is outstanding. The Term Loan Credit Agreement also contains other customary affirmative and negative covenants, including limitations on indebtedness, liens, fundamental changes, asset dispositions, restricted payments, investments and transactions with affiliates. The Term Loan Credit Agreement also provides for customary events of default, including breaches of material covenants, defaults under the ABL Credit Facility or other material agreements for indebtedness, and a change of control.

The obligations under the Term Loan Credit Agreement are secured by a first priority lien on collateral (the “Term Priority Collateral”) other than accounts receivable, deposit accounts and other related collateral pledged as first priority collateral (“Priority Collateral”) under the ABL Credit Facility (defined below) and a second priority lien on such Priority Collateral, and are unconditionally guaranteed by all of our current and future direct and indirect subsidiaries. MSD PCOF Partners IV, LLC (an affiliate of MSD Partners, L.P. "MSD Partners") is the lender of our $130.0 million Term Loan Facility. 

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MSD Partners, together with its affiliate, MSD Capital, L.P. (“MSD Capital”) own approximately 30% of the outstanding shares of the Company’s common stock.

In July 2019, we revised our credit agreement to explicitly permit the repurchase of equity interests by the company pursuant to the stock purchase program that was approved by our Board of Directors.

Additionally on October 1, 2018, we entered into a $40.0 million revolving Credit Agreement (the “ABL Credit Facility”), including availability for letters of credit in an aggregate amount at any time outstanding not to exceed $7.5 million. Availability under the ABL Credit Facility is subject to a borrowing base calculated based on 85% of the net amount of our eligible accounts receivable, minus reserves. The ABL Credit Facility has a maturity date of the earlier of October 1, 2023 or the maturity date of the Term Loan Credit Agreement.

At our election, interest under the ABL Credit Facility is determined by reference at our option to either (i) a “base rate” equal to the higher of (a) the federal funds effective rate plus 0.05%, (b) LIBOR with an interest period of one month, plus 1.0%, and (c) the prime rate of Wells Fargo, plus in each case, an applicable base rate margin ranging from 1.0% to 1.5% based on quarterly availability, or (ii) a revolving loan rate equal to LIBOR for the applicable interest period plus an applicable LIBOR margin ranging from 2.0% to 2.5% based on quarterly availability. We also pay, on a quarterly basis, a commitment fee of 0.375% (or 0.25% at any time when revolver usage is greater than 50% of the maximum credit) per annum on the unused portion of the ABL Credit Facility commitment.

The ABL Credit Facility contains a springing fixed charge coverage ratio covenant of 1.00 to 1.00 that is tested when availability is less than 10% of the maximum credit. The ABL Credit Facility also contains other customary affirmative and negative covenants, including limitations on indebtedness, liens, fundamental changes, asset dispositions, restricted payments, investments and transactions with affiliates. The ABL Credit Facility also provides for customary events of default, including breaches of material covenants, defaults under the Term Loan Agreement or other material agreements for indebtedness, and a change of control. We are in compliance with our covenants as of March 31, 2020.

The obligations under the ABL Credit Facility are secured by a first priority lien on Priority Collateral, which includes all accounts receivable and deposit accounts, and a second priority lien on the Term Priority Collateral, and are unconditionally guaranteed by all of our current and future direct and indirect subsidiaries.  As of March 31, 2020, the weighted-average interest rate on our borrowings was 9.84%.  At March 31, 2020, the borrowing base under our ABL Credit Facility was $20.1 million, and we had $8.6 million of availability remaining of our $40.0 million commitment on that date.

10. Stock-Based Compensation

Prior to June 2019, we issued common stock-based awards to employees and non-employee directors under our 2012 Long-Term Incentive Plan adopted in March 2012 (the “2012 Plan”). In June 2019, we adopted the 2019 Omnibus Incentive Plan (the “2019 Plan”) providing for common stock-based awards to employees and non-employee directors. The 2019 Plan permits the granting of various types of awards, including stock options, restricted stock and restricted stock unit awards, and up to 275,000 shares were authorized for issuance. Restricted stock and restricted stock units may be granted for no consideration other than prior and future services. The purchase price per share for stock options may not be less than the market price of the underlying stock on the date of grant.As of March 31, 2020, approximately 87,532 shares were available for future awards under the 2019 Plan. In connection with the adoption of the 2019 Plan, no further awards will be made under the 2012 Plan. Our policy is to account for forfeitures of share-based compensation awards as they occur.

A summary of compensation cost recognized for stock-based payment arrangements is as follows:

	Three Months Ended March 31,
(in thousands)	2020		2019
Compensation cost recognized:
Restricted stock and restricted stock units	570		387
Total stock-based compensation	$	570	$	387

No stock-based compensation was capitalized in connection with rig construction activity during the three months ended March 31, 2020 or 2019.

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Stock Options

We use the Black-Scholes option pricing model to estimate the fair value of stock options granted to employees and non-employee directors. The fair value of the options is amortized to compensation expense on a straight-line basis over the requisite service periods of the stock awards, which are generally the vesting periods.

There were no stock options granted during the three months ended March 31, 2020 or 2019.

A summary of stock option activity and related information for the three months ended March 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	Options	Weighted Average Exercise Price
Outstanding at January 1, 2020	33,458	$	254.80
Granted	—	—
Exercised	—	—
Forfeited/expired	—	—
Outstanding at March 31, 2020	33,458	$	254.80
Exercisable at March 31, 2020	33,458	$	254.80

The number of options vested at March 31, 2020 was 33,458 with a weighted average remaining contractual life of 2.0 years and a weighted average exercise price of $254.80 per share. There were no unvested options or unrecognized compensation cost related to outstanding stock options at March 31, 2020.

Time-based Restricted Stock and Restricted Stock Units

We have granted time-based restricted stock and restricted stock units to key employees under the 2012 Plan and 2019 Plan.

Time-based Restricted Stock

Time-based restricted stock awards consist of grants of our common stock that vest over five years. We recognize compensation expense on a straight-line basis over the vesting period. The fair value of restricted stock awards is determined based on the estimated fair market value of our shares on the grant date. As of March 31, 2020, there was $3.0 million in unrecognized compensation cost related to unvested restricted stock awards. This cost is expected to recognized over a weighted-average period of 1.9 years.

A summary of the status of our time-based restricted stock awards and of changes in our time-based restricted stock awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	Shares	Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	62,817	$	64.40
Granted	—	—
Vested	—	—
Forfeited	—	—
Outstanding at March 31, 2020	62,817	$	64.40

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Time-based Restricted Stock Units

We have granted three-year time vested restricted stock unit awards where each unit represents the right to receive, at the end of a vesting period, one share of ICD common stock with no exercise price. The fair value of time-based restricted stock unit awards is determined based on the estimated fair market value of our shares on the grant date. As of March 31, 2020, there was $2.3 million of total unrecognized compensation cost related to unvested time-based restricted stock unit awards. This cost is expected to be recognized over a weighted-average period of 1.1 years.

A summary of the status of our time-based restricted stock unit awards and of changes in our time-based restricted stock unit awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	RSUs		Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	44,439		$	59.71
Granted	62,534		11.98
Vested and converted	(9,561	)	38.80
Forfeited	(3,031	)	38.80
Outstanding at March 31, 2020	94,381		$	30.88

Performance-Based and Market-Based Restricted Stock Units

We have granted three-year performance-based and market-based restricted stock unit awards, where each unit represents the right to receive, at the end of a vesting period, up to two shares of ICD common stock with no exercise price. Exercisability of the market-based restricted stock unit awards is based on our total shareholder return ("TSR") as measured against the TSR of a defined peer group and vesting of the performance-based restricted stock unit awards is based on our cumulative return on invested capital ("ROIC") as measured against ROIC performance goals determined by the compensation committee of our Board of Directors. We used a Monte Carlo simulation model to value the TSR market-based restricted stock unit awards. The fair value of the performance-based restricted stock unit awards is based on the market price of our common stock on the date of grant. During the restriction period, the performance-based and market-based restricted stock unit awards may not be transferred or encumbered, and the recipient does not receive dividend equivalents or have voting rights until the units vest. As of March 31, 2020, there was unrecognized compensation cost related to unvested performance-based or market-based restricted stock unit awards totaling $0.5 million. This cost is expected to be recognized over a weighted-average period of 1.3 years.

A summary of the status of our performance-based and market-based restricted stock unit awards and of changes in our restricted stock unit awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	RSUs	Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	23,480	$	33.90
Granted	24,854	12.50
Vested and converted	—	—
Forfeited	—	—
Outstanding at March 31, 2020	48,334	$	22.90

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11. Stockholders’ Equity and Earnings (Loss) per Share

As of March 31, 2020, we had a total of 3,809,548 shares of common stock, $0.01 par value, outstanding. We also had 78,589 shares held as treasury stock. Total authorized common stock is 50,000,000 shares.

Basic earnings (loss) per common share (“EPS”) are computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation of the numerators and denominators of the basic and diluted losses per share computations is as follows:

	Three Months Ended March 31,
(in thousands, except per share data)	2020			2019
Net loss (numerator):	$	(28,223	)	$	(2,373	)
Loss per share:
Basic and diluted	$	(7.53	)	$	(0.63	)
Shares (denominator):
Weighted average common shares outstanding - basic	3,750			3,785
Weighted average common shares outstanding - diluted	3,750			3,785

For all periods presented, the computation of diluted loss per share excludes the effect of certain outstanding stock options and RSUs because their inclusion would be anti-dilutive. The number of options that were excluded from diluted loss per share were 33,458 during the three months ended March 31, 2020 and 33,458 during the three months ended March 31, 2019. The number of RSUs, which are not participating securities, that were excluded from our basic and diluted loss per share because they are anti-dilutive, were 142,715 for the three months ended March 31, 2020 and 20,480 for the three months ended March 31, 2019.

12. Income Taxes

Our effective tax rate was 0.1% and 51.7% for the three months ended March 31, 2020 and 2019, respectively. Taxes in both periods relate to Louisiana state income tax and Texas margin tax. In the first quarter of 2020, the rate is largely driven by the recording of a valuation allowance against the Louisiana deferred tax assets, caused by the asset impairment recorded. In the first quarter of 2019, our effective tax rate was significantly higher based on our then full year forecast of net income before taxes and the application of our estimated annual rate to our year-to-date results.  We finished 2019 with an annual effective rate of 0.2%.

13. Commitments and Contingencies

Purchase Commitments

As of March 31, 2020, we had outstanding purchase commitments to a number of suppliers totaling $2.9 million related primarily to the operation of drilling rigs. All of these commitments relate to equipment and services currently scheduled for delivery in 2020.

Contingencies

We may be the subject of lawsuits and claims arising in the ordinary course of business from time to time. Management cannot predict the ultimate outcome of such lawsuits and claims. While lawsuits and claims are asserted for amounts that may be material should an unfavorable outcome be the result, management does not currently expect that the outcome of any of these known legal proceedings or claims will have a material adverse effect on our financial position or results of operations.

14. Related Parties

In conjunction with the closing of the Sidewinder Merger on October 1, 2018, we entered into the Term Loan Credit Agreement for an initial term loan in an aggregate principal amount of $130.0 million and a delayed draw term loan facility in an aggregate principal amount of up to $15.0 million. MSD PCOF Partners IV, LLC (an affiliate of MSD Partners) is the lender of our $130.0 million Term Loan Facility.  MSD Partners, together with MSD Capital, own approximately 30% of the outstanding shares of the Company’s common stock as of March 31, 2020.

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We made interest payments on the Term Loan Facility totaling $3.2 million and $3.3 million for the three months ended March 31, 2020 and 2019, respectively.

Additionally, we have recorded merger consideration payable to an affiliate of $2.9 million related to proceeds received from the sale of specific assets earmarked in the Sidewinder Merger agreement as assets held for sale with the Sidewinder unitholders receiving the net proceeds. We are required to make this payment to MSD, the shareholders’ representative, in the second quarter of 2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 2, 2020 (the “Form 10-K”). This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described in the section titled “Cautionary Statement Regarding Forward-Looking Statements” and those set forth under Part 1“Item 1A. Risk Factors” or in other parts of the Form 10-K.

Management Overview

We were incorporated in Delaware on November 4, 2011. We provide land-based contract drilling services for oil and natural gas producers targeting unconventional resource plays in the United States. We own and operate a premium fleet comprised of modern, technologically advanced drilling rigs. Our first rig began drilling in May 2012. On October 1, 2018, we completed a merger with Sidewinder Drilling LLC. As a result of this merger, we more than doubled our operating fleet and personnel.

Our rig fleet includes 29 marketed AC powered (“AC”) rigs and a number of additional rigs requiring conversions or upgrades in order to meet our AC pad-optimal specifications. We do not intend to complete these conversions or upgrades until market conditions improve.    

We currently focus our operations on unconventional resource plays located in geographic regions that we can efficiently support from our Houston, Texas and Midland, Texas facilities in order to maximize economies of scale. Currently, our rigs are operating in the Permian Basin, the Haynesville Shale and the Eagle Ford Shale; however, our rigs have previously operated in the Mid-Continent and Eaglebine regions as well.

Our business depends on the level of exploration and production activity by oil and natural gas companies operating in the United States, and in particular, the regions where we actively market our contract drilling services. The oil and natural gas exploration and production industry is historically cyclical and characterized by significant changes in the levels of exploration and development activities. Oil and natural gas prices and market expectations of potential changes in those prices significantly affect the levels of those activities. Worldwide political, regulatory, economic, and military events, as well as natural disasters have contributed to oil and natural gas price volatility historically, and are likely to continue to do so in the future. Any prolonged reduction in the overall level of exploration and development activities in the United States and the regions where we market our contract drilling services, whether resulting from changes in oil and natural gas prices or otherwise, could materially and adversely affect our business.

Significant Developments

COVID-19 Pandemic and Market Conditions Update

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (“COVID-19”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The continued spread of the COVID-19 virus and the responses taken to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, has caused significant declines in global demand for crude oil. This reduction in demand has occurred concurrent with the initiation of a crude oil price war between members of the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (collectively, the “OPEC+” group). Even with recent production cuts announced by the OPEC+ group and others on April 9, 2020, and the cessation to the crude oil price war, crude oil inventories have continued to rise and to test storage capacity and logistics networks. These factors have led to a collapse in oil prices, with the WTI price for May delivery closing at negative $37.63 per barrel on April 20, 2020. Downward pressure on oil prices is expected to continue for the foreseeable future, and the long-term effects on production and demand are unknown at this time. Currently, there is considerable uncertainty regarding measures to contain the virus and what potential future measures may be put in place, therefore we cannot predict when worldwide demand for oil will stabilize and if or when it will begin to improve or reach pre-COVID-19 levels.

In response to these adverse market conditions, North American exploration companies, including all of our customers, have rapidly reduced planned capital expenditures and drilling activity. As a result, demand for our products and services began to rapidly decline late in the first quarter of 2020, and we expect demand for our products and services to

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continue to decline and remain low as our customers continue adjusting their operations in response to market conditions. During the first quarter of 2020, our operating rig count reached a peak of 22 rigs. Based upon customer actions to date, we expect our operating rig count to fall to six rigs by the end of the second quarter of 2020. However, due to the lack of visibility and confidence towards customer intentions, we cannot assure you that our operating rig count will not fall below these levels by that period of time or thereafter. Our current backlog of contracts stands at 3.2 average rigs during the third quarter of 2020 and 1.8 average rigs during the fourth quarter of 2020, and none of our current drilling contracts have terms extending into 2021 or beyond. As a result of this rapidly declining operating level coupled with downward pressure on dayrates we charge for our contract drilling services, we will experience corresponding reductions in revenue, operating margins and cash flows.

Due to these rapidly declining market conditions, we took the following actions at the end of the first quarter of 2020 in order to reduce our cost structure:

• Salary or compensation reductions for substantially all our employees, including members of executive management;

• Suspension of all cash-based incentive compensation, including all members of executive management;

• Reducing the number of executive management positions by two;

• Reducing the number of directors from seven to five, which would become effective following director elections at our 2020 Annual Meeting of Stockholders currently scheduled to occur on June 12, 2020;

• Annual compensation reductions for our directors; and

• Reducing headcount for non-field-based personnel by approximately 40%

Depending upon the nature and duration of the COVID-19 pandemic, the nature of containment measures taken in the future, it could have a material adverse effect on our business, results of operations and financial condition.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.    

On April 27, 2020, we entered into an unsecured loan in the aggregate principal amountof $10.0 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”), sponsored by the Small Business Administration (the “SBA”) as guarantor of loans under the PPP. The PPP is part of the CARES Act, and itprovides for loans to qualifying businesses in a maximum amount equal to the lesser of $10.0 million and 2.5 times the average monthly payroll expenses of the qualifying business. The proceeds of the loan may only be used for payroll costs, rent, utilities, mortgage interests, and interest on other pre-existing indebtedness (the “permissible purposes”).

The application for these funds required us to, in good faith, certify that current economic uncertainty made the loan request necessary to support our ongoing operations. This certification further required us to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. In making our certification, we considered numerous factors, including (i) current market and economic conditions, including the significant declines in worldwide demand and oil prices as a result of the COVID-19 pandemic and the uncertainty and inability to predict when market conditions will stabilize and begin to improve, (ii) the actions and communications from our customers that have caused and will cause our operating rig count to fall (from a high of 22 rigs during the first quarter of 2020, to an estimated six rigs by the end of the second quarter of 2020 and potential further reductions depending on when oil supply and demand fundamentals rebalance and U.S. land rig counts stabilize and begin to improve), (iii) whether our current sources of liquidity, comprised of cash and cash equivalents, availability under our revolving credit facility and accordion under our term loan facility, would be sufficient to finance our operations and required expenditures while industry and market conditions remain distressed, (iv) our status as a micro-cap public company, and (v) our belief, after inquiry, that capital markets were not reasonably available or open to us at such time for new issuances of debt or equity.

We cannot predict the length of time that the market disruptions resulting from the COVID-19 pandemic will continue; or when, or if, oil and gas prices and demand for our contract drilling services will begin to improve or return to pre-COVID-19 levels. The extent to which our operating and financial results are affected by the COVID-19 pandemic will depend on various factors and consequences beyond our control, such as the duration and scope of the pandemic; additional actions by businesses and governments in response to the pandemic; and the speed and effectiveness of responses to combat the virus. As a result, our business, operating results and financial conditions are subject to various risks, many of which are aggravated as a result of the declining market conditions and significant uncertainty caused by the COVID-19 pandemic.

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The CARES Act did not have a material impact on our income taxes.  Management will continue to monitor future developments and interpretations for any further impacts on our financial condition, results of operations, or liquidity.

Asset Impairments, net

As a result of the rapidly deteriorating market conditions described in "COVID-19 Pandemic and Market Conditions Update", we concluded that a triggering event occurred and, accordingly, an interim asset impairment test was performed as of March 31, 2020. As a result, we further impaired $3.3 million associated with the decline in the market value of our assets held for sale and $13.3 million related to the remaining assets on rigs removed from our marketed fleet, as well as certain other component equipment and inventory. Due to the uncertainty around the COVID-19 pandemic and current market conditions, we may have to make further impairment charges in future periods relating to, among other things, fixed assets and inventory.

Additionally, in the first quarter of 2019, we recorded $2.0 million of asset impairment expense in conjunction with the sale of miscellaneous drilling equipment at auctions in April of 2019.

Reverse Stock Split

Following approval by our stockholders on February 6, 2020, our Board of Directors approved a 1-for-20 reverse stock split of our common stock. The reverse split was effective March 11, 2020, and all share and earnings per share information have been retroactively adjusted to reflect the reverse stock split and the associated decrease in par value was recorded with the offset to additional paid-in capital.

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Our Revenues

We earn contract drilling revenues pursuant to drilling contracts entered into with our customers. We perform drilling services on a “daywork” basis, under which we charge a specified rate per day, or “dayrate.” The dayrate associated with each of our contracts is a negotiated price determined by the capabilities of the rig, location, depth and complexity of the wells to be drilled, operating conditions, duration of the contract and market conditions. The term of land drilling contracts may be for a defined number of wells or for a fixed time period. We generally receive lump-sum payments for the mobilization of rigs and other drilling equipment at the commencement of a new drilling contract. Revenue and costs associated with the initial mobilization are deferred and recognized ratably over the term of the related drilling contract once the rig spuds. Costs incurred to relocate rigs and other equipment to an area in which a contract has not been secured are expensed as incurred. If a contract is terminated prior to the specified contract term, early termination payments received from the customer are only recognized as revenues when all contractual obligations, such as mitigation requirements, are satisfied. While under contract, our rigs generally earn a reduced rate while the rig is moving between wells or drilling locations, or on standby waiting for the customer. Reimbursements for the purchase of supplies, equipment, trucking and other services that are provided at the request of our customers are recorded as revenue when incurred.  The related costs are recorded as operating expenses when incurred. Revenue is presented net of any sales tax charged to the customer that we are required to remit to local or state governmental taxing authorities.

Our Operating Costs

Our operating costs include all expenses associated with operating and maintaining our drilling rigs. Operating costs include all “rig level” expenses such as labor and related payroll costs, repair and maintenance expenses, supplies, workers’ compensation and other insurance, ad valorem taxes and equipment rental costs. Also included in our operating costs are certain costs that are not incurred at the “rig level.” These costs include expenses directly associated with our operations management team as well as our safety and maintenance personnel who are not directly assigned to our rigs but are responsible for the oversight and support of our operations and safety and maintenance programs across our fleet.

How We Evaluate our Operations

We regularly use a number of financial and operational measures to analyze and evaluate the performance of our business and compensate our employees, including the following:

• Safety Performance. Maintaining a strong safety record is a critical component of our business strategy. We measure safety by tracking the total recordable incident rate for our operations. In addition, we closely monitor and measure compliance with our safety policies and procedures, including “near miss” reports and job safety analysis compliance. We believe our Risk-Based HSE management system provides the required control, yet needed flexibility, to conduct all activities safely, efficiently and appropriately.

• Utilization. Rig utilization measures the percentage of time that our rigs are earning revenue under a contract during a particular period. We measure utilization by dividing the total number of Operating Days (defined below) for a rig by the total number of days the rig is available for operation in the applicable calendar period. A rig is available for operation commencing on the earlier of the date it spuds its initial well following construction or when it has been completed and is actively marketed. “Operating Days” represent the total number of days a rig is earning revenue under a contract, beginning when the rig spuds its initial well under the contract and ending with the completion of the rig’s demobilization.

• Revenue Per Day. Revenue per day measures the amount of revenue that an operating rig earns on a daily basis during a particular period. We calculate revenue per day by dividing total contract drilling revenue earned during the applicable period by the number of Operating Days in the period. Revenues attributable to costs reimbursed by customers are excluded from this measure.

• Operating Cost Per Day. Operating cost per day measures the operating costs incurred on a daily basis during a particular period. We calculate operating cost per day by dividing total operating costs during the applicable period by the number of Operating Days in the period. Operating costs attributable to costs reimbursed by customers and rig construction costs are excluded from this measure.

• Operating Efficiency and Uptime. Maintaining our rigs’ operational efficiency is a critical component of our business strategy. We measure our operating efficiency by tracking each drilling rig’s unscheduled downtime on a daily, monthly, quarterly and annual basis.

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Results of Operations

The following summarizes our financial and operating data for the three months ended March 31, 2020 and 2019:

	Three Months Ended
(In thousands, except per share data)	March 31, 2020			March 31, 2019
Revenues	$	38,494		$	60,358
Costs and expenses
Operating costs	30,229			39,333
Selling, general and administrative	3,761			4,545
Severance and merger-related expenses	1,076			1,081
Depreciation and amortization	11,516			11,313
Asset impairment (insurance recoveries), net	16,619			2,018
Gain (loss) on disposition of assets, net	(46		)	3,220
Total cost and expenses	63,155			61,510
Operating loss	(24,661		)	(1,152		)
Interest expense	(3,604		)	(3,761		)
Loss before income taxes	(28,265		)	(4,913		)
Income tax benefit	(42		)	(2,540		)
Net loss	$	(28,223	)	$	(2,373	)
Other financial and operating data
Number of marketed rigs (end of period) (1)	29			32
Rig operating days (2)	1,738			2,728
Average number of operating rigs (3)	19.1			30.3
Rig utilization (4)	66.0		%	94.8		%
Average revenue per operating day (5)	$	19,823		$	20,755
Average cost per operating day (6)	$	14,648		$	13,302
Average rig margin per operating day	$	5,175		$	7,453

(1) Number of marketed rigs as of March 31, 2020 decreased by three rigs as compared to the number of marketed rigs as of March 31, 2019 as a result of the removal of three rigs from our marketed fleet in the third quarter of 2019. Marketed rigs exclude idle rigs that will not be reactivated until upgrades or conversions are complete.

(2) Rig operating days represent the number of days our rigs are earning revenue under a contract during the period, including days that standby revenues are earned.

(3) Average number of operating rigs is calculated by dividing the total number of rig operating days in the period by the total number of calendar days in the period.

(4) Rig utilization is calculated as rig operating days divided by the total number of days our drilling rigs are available during the applicable period.

(5) Average revenue per operating day represents total contract drilling revenues earned during the period divided by rig operating days in the period. Excluded in calculating average revenue per operating day are revenues associated with the reimbursement of (i) out-of-pocket costs paid by customers of $4.0 million and $2.7 million during the three months ended March 31, 2020 and 2019, respectively, and (ii) revenues associated with the amortization of intangible revenue acquired in the Sidewinder merger of $1.0 million during the three months ended March 31, 2019.

(6) Average cost per operating day represents operating costs incurred during the period divided by rig operating days in the period. The following costs are excluded in calculating average cost per operating day: (i) out-of-pocket costs reimbursed by customers of $4.0 million and $2.7 million during the three months ended March 31, 2020 and 2019,

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respectively, and (ii) overhead costs expensed due to reduced rig upgrade activity of $0.6 million and $0.3 million during the three months ended March 31, 2020 and 2019, respectively.

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Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

Revenues

Revenues for the three months ended March 31, 2020 were $38.5 million, representing a 36.2%decrease as compared to revenues of $60.4 million for the three months ended March 31, 2019. This decrease was attributable to a decrease in operating days to 1,738 days as compared to 2,728 days in the prior year comparable quarter. The decrease in operating days was primarily attributable to the current drastic downturn in market conditions as a result of the COVID-19 pandemic and the concurrent initiation of a crude oil price war between members of the “OPEC+” group. On a revenue per operating day basis, which excludes the impact of intangible revenues, our revenue per day decreased by 4.5% to $19,823 during the three months ended March 31, 2020, as compared to revenue per day of $20,755 for the three months ended March 31, 2019. This decrease in revenue per day was the result of declining dayrates as compared to the prior year quarter.

Operating Costs

Operating costs for the three months ended March 31, 2020 were $30.2 million, representing a 23.1%decrease as compared to operating costs of $39.3 million for the three months ended March 31, 2019. This decrease was primarily attributable to a decrease in operating days to 1,738 days as compared to 2,728 days in the prior year comparable quarter. The decrease in operating days was primarily attributable to the current drastic downturn in market conditions as a result of the COVID-19 pandemic and the concurrent initiation of a crude oil price war between members of the “OPEC+” group. On a cost per operating day basis, our cost increased to $14,648 per day during the three months ended March 31, 2020, representing an 10.1%increase compared to cost per operating day of $13,302 for the three months ended March 31, 2019. This increase was primarily attributable to increased labor costs associated with inefficiencies and transitory downtime resulting from rig releases and the reduction of operating rigs during the current quarter.

Selling, General and Administrative

Selling, general and administrative expenses for the three months ended March 31, 2020 were $3.8 million, representing a 17.2%decrease as compared to selling, general and administrative expense of $4.5 million for the three months ended March 31, 2019. This decrease as compared to the prior year comparable quarter primarily relates to lower cash incentive pay, travel, training and professional fees in the current quarter.

Severance and Merger-related Expenses

Severance expense of $1.1 million was recorded for the three months ended March 31, 2020 in connection with our cost reduction measures instituted in response to the COVID-19 pandemic and current deteriorating market conditions.

Merger-related expenses of $1.1 million were recorded for the three months ended March 31, 2019, primarily comprised of severance, professional fees and other merger-related expenses.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended March 31, 2020 was $11.5 million, representing a 1.8%increase compared to depreciation and amortization expense of $11.3 million for the three months ended March 31, 2019.

Assets Impairment, net

As a result of the rapidly deteriorating market conditions described in "COVID-19 Pandemic and Market Conditions Update", we concluded that a triggering event occurred and, accordingly, an interim asset impairment test was performed as of March 31, 2020. As a result, we further impaired $3.3 million associated with the decline in the market value of our assets held for sale and $13.3 million related to the remaining assets on rigs removed from our marketed fleet, as well as certain other component equipment and inventory. Due to the uncertainty around COVID-19 and current market conditions, we may have to make further impairment charges in future periods relating to, among other things, fixed assets and inventory.

Additionally, in the first quarter of 2019, we recorded $2.0 million of asset impairment expense in conjunction with the sale of miscellaneous drilling equipment at auctions in April of 2019.

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(Gain) Loss on Disposition of Assets, net

A gain on the disposition of assets totaling $46.0 thousand was recorded for the three months ended March 31, 2020 compared to a loss on the disposition of assets totaling $3.2 million in the prior year comparable period. In the current year period the gain relates to the sale of miscellaneous drilling equipment. In the prior year period, the loss relates primarily to the sale of certain surplus assets, acquired in the Sidewinder Merger, at auctions during the quarter.

Interest Expense

Interest expense for the three months ended March 31, 2020 was $3.6 million, as compared to $3.8 million for the three months ended March 31, 2019.

Income Tax Benefit

Income tax benefit recorded for the three months ended March 31, 2020 and 2019 amounted to $42.0 thousand and $2.5 million, respectively. Our effective tax rates for the three months ended March 31, 2020 and 2019 were 0.1% and 51.7%, respectively. Taxes in both periods relate to Louisiana state income tax and Texas margin tax. In the first quarter of 2020, the rate is largely driven by the recording of a valuation allowance against the Louisiana deferred tax assets, caused by the asset impairment recorded. In the first quarter of 2019, our effective tax rate was significantly higher based on our then full year forecast of net income before taxes and the application of our estimated annual rate to our year-to-date results.  We finished 2019 with an annual effective rate of 0.2%.

Liquidity and Capital Resources

Our liquidity at March 31, 2020 consisted of cash on hand of $9.8 million, other net working capital of $0.9 million,$8.6 million of availability under our revolving credit facility and $15 million available under the accordion feature of our term loan facility. As a result of the extreme and rapid nature of the decline in market conditions caused by the COVID-19 pandemic, our liquidity and capital resources are being impaired and will continue to be impaired until market conditions stabilize and improve. Currently, we expect our operating rig count to fall to six rigs by the end of the second quarter of 2020, and based upon our declining backlog of contracts for the second half of 2020, there is substantial risk that the rig count could fall to even lower levels. Because availability under our revolving credit facility is determined based upon a borrowing base tied to eligible accounts receivable, the amount we are able to borrow under our revolving credit facility is expected to decline as our accounts receivable balances fall in proportion to our reduction in operating activity. Looking forward past March 31, 2020, we currently estimate that required non-operating cash payments for interest under our credit facilities, maintenance capital expenditures and finance lease payments will approximate $18.7 million for the remainder of 2020. Because our cash flows from operations will be materially impacted by operating declines caused by the COVID-19 pandemic, we plan to draw down funds pursuant to the $15 million accordion feature under our term loan to meet required non-operating expenditures and to fund operations. In addition, on April 27, 2020, we entered into the $10 million PPP Loan pursuant to the Paycheck Protection Program (the “PPP”). We will use the proceeds of the loan for payroll costs, rent, utilities, mortgage interests, and other permitted purposes. We currently believe that these sources of liquidity are sufficient to fund or operations for the next twelve months. However, due to the uncertainty regarding the duration of the COVID-19 pandemic and its effects on the oil and gas industry and our business and operations, there can be no assurance in this regard.

Net Cash Provided By Operating Activities

Cash provided by operating activities was $3.1 million for the three months ended March 31, 2020 compared to cash provided by operating activities of $7.6 million during the same period in 2019. Factors affecting changes in operating cash flows are similar to those that impact net earnings, with the exception of non-cash items such as depreciation and amortization, impairments, gains or losses on disposals of assets, stock-based compensation, deferred taxes and amortization of deferred financing costs. Additionally, changes in working capital items such as accounts receivable, inventory, prepaid expense and accounts payable can significantly affect operating cash flows. Cash flows from operating activities during the first three months of 2020 were lower as a result of an increase in net loss of $25.9 million, adjusted for non-cash items, of $28.8 million for the three months ended March 31, 2020 compared to $14.6 million for non-cash items during the same period in 2019. Additionally, working capital changes increased cash flows from operating activities by $2.5 million for the three months ended March 31, 2020 compared to a reduction of cash flows of $4.6 million during the same period in 2019.

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Net Cash Used In Investing Activities

Cash used in investing activities was $8.4 million for the three months ended March 31, 2020 compared to cash used in investing activities of $9.3 million during the same period in 2019. During the first three months of 2020, cash payments of $9.1 million for capital expenditures were offset by proceeds from the sale of property, plant and equipment of $0.6 million and the collection of principal on a note receivable of $0.1 million. During the 2019 period, cash payments of $10.8 million for capital expenditures were offset by insurance proceeds of $1.0 million and proceeds from the sale of property, plant and equipment of $0.5 million.

Net Cash Provided by Financing Activities

Cash provided by financing activities was $9.8 million for the three months ended March 31, 2020 compared to cash provided by financing activities of $2.0 million during the same period in 2019. During the first three months of 2020, we made borrowings under our revolving credit facility of $11.0 million. These proceeds were offset by repayments under our revolving credit facility of $38.0 thousand, the purchase of treasury stock of $66.0 thousand, restricted stock unit’s withheld for taxes paid of $26.0 thousand and payments for finance lease obligations of $1.1 million. During the first three months of 2019 we made borrowings under our revolving credit facility of $2.4 million. These proceeds were offset by common stock issuance costs of $0.2 million and payments for finance lease obligations of $0.2 million.

Long-term Debt

On October 1, 2018, we entered into a term loan Credit Agreement (the “Term Loan Credit Agreement”) for an initial term loan in an aggregate principal amount of $130.0 million, (the “Term Loan Facility”) and (b) a delayed draw term loan facility in an aggregate principal amount of up to $15.0 million (the “DDTL Facility”, and together with the Term Loan Facility, the “Term Facilities”). The Term Facilities have a maturity date of October 1, 2023, at which time all outstanding principal under the Term Facilities and other obligations become due and payable in full.

At our election, interest under the Term Loan Facility is determined by reference at our option to either (i) a “base rate” equal to the higher of (a) the federal funds effective rate plus 0.05%, (b) the London Interbank Offered Rate with an interest period of one month (“LIBOR”), plus 1.0%, and (c) the rate of interest as publicly quoted from time to time by the Wall Street Journal as the “prime rate” in the United States; plus an applicable margin of 6.5%, or (ii) a “LIBOR rate” equal to LIBOR with an interest period of one month, plus an applicable margin of 7.5%.

The Term Loan Credit Agreement contains financial covenants, including a liquidity covenant of $10.0 million and a springing fixed charge coverage ratio covenant of 1.00 to 1.00 that is tested when availability under the ABL Credit Facility (defined below) and the DDTL Facility is below $5.0 million at any time that a DDTL Facility loan is outstanding. The Term Loan Credit Agreement also contains other customary affirmative and negative covenants, including limitations on indebtedness, liens, fundamental changes, asset dispositions, restricted payments, investments and transactions with affiliates. The Term Loan Credit Agreement also provides for customary events of default, including breaches of material covenants, defaults under the ABL Credit Facility or other material agreements for indebtedness, and a change of control.

The obligations under the Term Loan Credit Agreement are secured by a first priority lien on collateral (the “Term Priority Collateral”) other than accounts receivable, deposit accounts and other related collateral pledged as first priority collateral (“Priority Collateral”) under the ABL Credit Facility (defined below) and a second priority lien on such Priority Collateral, and are unconditionally guaranteed by all of our current and future direct and indirect subsidiaries. MSD PCOF Partners IV, LLC (an affiliate of MSD Partners) is the lender of our $130.0 million Term Loan Facility.  MSD Partners, together with MSD Capital, own approximately 30% of the outstanding shares of the Company’s common stock.

In July 2019, we revised our credit agreement to explicitly permit the repurchase of equity interests by the company pursuant to the stock purchase program that was approved by our Board of Directors.

Additionally on October 1, 2018, we entered into a $40.0 million revolving Credit Agreement (the “ABL Credit Facility”), including availability for letters of credit in an aggregate amount at any time outstanding not to exceed $7.5 million. Availability under the ABL Credit Facility is subject to a borrowing base calculated based on 85% of the net amount of our eligible accounts receivable, minus reserves. The ABL Credit Facility has a maturity date of the earlier of October 1, 2023 or the maturity date of the Term Loan Credit Agreement.

At our election, interest under the ABL Credit Facility is determined by reference at our option to either (i) a “base rate” equal to the higher of (a) the federal funds effective rate plus 0.05%, (b) LIBOR with an interest period of one month, plus 1.0%, and (c) the prime rate of Wells Fargo, plus in each case, an applicable base rate margin ranging from 1.0% to 1.5% based on quarterly availability, or (ii) a revolving loan rate equal to LIBOR for the applicable interest

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period plus an applicable LIBOR margin ranging from 2.0% to 2.5% based on quarterly availability. We also pay, on a quarterly basis, a commitment fee of 0.375% (or 0.25% at any time when revolver usage is greater than 50% of the maximum credit) per annum on the unused portion of the ABL Credit Facility commitment.

The ABL Credit Facility contains a springing fixed charge coverage ratio covenant of 1.00 to 1.00 that is tested when availability is less than 10% of the maximum credit. The ABL Credit Facility also contains other customary affirmative and negative covenants, including limitations on indebtedness, liens, fundamental changes, asset dispositions, restricted payments, investments and transactions with affiliates. The ABL Credit Facility also provides for customary events of default, including breaches of material covenants, defaults under the Term Loan Agreement or other material agreements for indebtedness, and a change of control. We are in compliance with our covenants as of March 31, 2020.

The obligations under the ABL Credit Facility are secured by a first priority lien on Priority Collateral, which includes all accounts receivable and deposit accounts, and a second priority lien on the Term Priority Collateral, and are unconditionally guaranteed by all of our current and future direct and indirect subsidiaries.  As of March 31, 2020, the weighted-average interest rate on our borrowings was 9.84%.  At March 31, 2020, the borrowing base under our ABL Credit Facility was $20.1 million, and we had $8.6 million of availability remaining of our $40.0 million commitment on that date.

In addition, on April 27, 2020, we entered into an unsecured loan in the aggregate principal amountof $10.0 million (the “PPP Loan”) pursuant to the PPP, sponsored by the SBA as guarantor of loans under the PPP. The PPP is part of the CARES Act, and itprovides for loans to qualifying businesses in a maximum amount equal to the lesser of $10.0 million and 2.5 times the average monthly payroll expenses of the qualifying business. The proceeds of the loan may only be used for payroll costs, rent, utilities, mortgage interests, and interest on other pre-existing indebtedness (the “permissible purposes”).

The application for these funds required us to, in good faith, certify that current economic uncertainty made the loan request necessary to support our ongoing operations. This certification further required us to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. In making our certification, we considered numerous factors, including (i) current market and economic conditions, including the significant declines in worldwide demand and oil prices as a result of the COVID-19 pandemic and the uncertainty and inability to predict when market conditions will stabilize and begin to improve, (ii) the actions and communications from our customers that have caused and will cause our operating rig count to fall (from a high of 22 rigs during the first quarter of 2020, to an estimated six rigs by the end of the second quarter of 2020 and potential further reductions depending on when oil supply and demand fundamentals rebalance and U.S. land rig counts stabilize and begin to improve), (iii) whether our current sources of liquidity, comprised of cash and cash equivalents, availability under our revolving credit facility and accordion under our term loan facility, would be sufficient to finance our operations and required expenditures while industry and market conditions remain distressed, (iv) our status as a micro-cap public company, and (v) our belief, after inquiry, that capital markets were not reasonably available or open to us at such time for new issuances of debt or equity.

Additionally, included in our long-term debt are finance leases. These leases generally have initial terms of 36 months and are paid monthly.

Other Matters

Off-Balance Sheet Arrangements

We are party to certain arrangements defined as “off-balance sheet arrangements” that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.  These arrangements relate to non-cancelable operating leases and unconditional purchase obligations not fully reflected on our balance sheets (see Note 13 “Commitments and Contingencies” for additional information).

Critical Accounting Policies and Accounting Estimates

We review our assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets that are held and used is measured by comparison of the estimated future undiscounted cash flows associated with the asset to the carrying amount of the asset. If the carrying value of such assets is less than the estimated undiscounted cash flow, an impairment charge is recorded in the amount by which the carrying amount of the assets exceeds their estimated fair value.  

As a result of the rapidly deteriorating market conditions described in "COVID-19 Pandemic and Market Conditions Update", we concluded that a triggering event occurred and, accordingly, an interim asset impairment test was performed as of

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March 31, 2020. As a result, we further impaired $3.3 million associated with the decline in the market value of our assets held for sale and $13.3 million related to the remaining assets on rigs removed from our marketed fleet, as well as certain other component equipment and inventory. Due to the uncertainty around COVID-19 and current market conditions, we may have to make further impairment charges in future periods relating to, among other things, fixed assets and inventory.

For a complete discussion of our critical accounting policies and accounting estimates, please see our Annual Report on Form 10-K for the year ended December 31, 2019.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, as additional guidance on the measurement of credit losses on financial instruments. The new guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. In addition, the guidance amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The new guidance is effective for public companies for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. In October 2019, the FASB approved a proposal which grants smaller reporting companies additional time to implement FASB standards on current expected credit losses (CECL) to January 2023. As a smaller reporting company, we will defer adoption of ASU 2016-13 until January 2023. We are currently evaluating the impact this guidance will have on our accounts receivable.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes. The amendments in the update are effective for public companies for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We plan to adopt this guidance on January 1, 2021 and are currently evaluating the impact of adoption on our consolidated financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of market risks including risks related to potential adverse changes in interest rates and commodity prices. We actively monitor exposure to market risk and continue to develop and utilize appropriate risk management techniques. We do not use derivative financial instruments for trading or to speculate on changes in commodity prices.

Interest Rate Risk

Total long-term debt at March 31, 2020 included $141.0 million of floating-rate debt attributed to borrowings at an average interest rate of 9.84%. As a result, our annual interest cost in 2020 will fluctuate based on short-term interest rates. The impact on annual cash flow of a 10% change in the floating-rate (approximately 10.83%) would be approximately $1.3 million annually based on the floating-rate debt and other obligations outstanding at March 31, 2020; however, there are no assurances that possible rate changes would be limited to such amounts.

Commodity Price Risk

Oil and natural gas prices, and market expectations of potential changes in these prices, significantly impact the level of worldwide drilling and production services activities. Reduced demand for oil and natural gas generally results in lower prices for these commodities and may impact the economics of planned drilling projects and ongoing production projects, resulting in the curtailment, reduction, delay or postponement of such projects for an indeterminate period of time. When drilling and production activity and spending decline, both dayrates and utilization have also historically declined. Further declines in oil and natural gas prices and the general economy, could materially and adversely affect our business, results of operations, financial condition and growth strategy.

In addition, if oil and natural gas prices decline, companies that planned to finance exploration, development or production projects through the capital markets may be forced to curtail, reduce, postpone or delay drilling activities even further, and also may experience an inability to pay suppliers. Adverse conditions in the global economic environment could also impact our vendors’ and suppliers’ ability to meet obligations to provide materials and services in general. If any of the foregoing were to occur, or if current depressed market conditions continue for a prolonged period of time, it could have a material adverse effect on our business and financial results and our ability to timely and successfully implement our growth strategy.

The COVID-19 pandemic, responses taken and economic effects have caused significant declines in the global demand for crude oil. This demand declines in has occurred concurrent with the initiation of a crude oil price war between members of the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (collectively, the “OPEC+” group). These combined events have resulted significant declines in demand for oil and major disruptions to global energy prices. Even with recent production cuts announced by the OPEC+ group and others on April 9, 2020, and the cessation to the crude oil price war, crude oil inventories have continued to rise and to test storage capacity and logistics networks. These factors have led to a collapse in oil prices, with the WTI price for May delivery closing at negative $37.63 per barrel on April 20, 2020. Downward pressure on oil prices is expected to continue for the foreseeable future, and the long-term effects on production and demand are unknown at this time.

We cannot predict the length of time that the market disruptions resulting from the COVID-19 pandemic will continue or when, or if, oil and gas prices and demand for our contract drilling services will begin to improve or return to pre-COVID-19 levels. The extent to which our operating and financial results are affected by COVID-19 will depend on various factors and consequences beyond our control, such as the duration and scope of the pandemic; additional actions by businesses and governments in response to the pandemic; and the speed and effectiveness of responses to combat the virus. As a result, our business, operating results and financial conditions are subject to various risks outlined in this Current Report on Form 10-Q under Part II, Section 1a “Risk Factors”, as well as the risk factors outlined in our Annual Report on Form 10-K, many of which are aggravated as a result of the declining market conditions and significant uncertainty caused by the COVID-19 pandemic.

Credit and Capital Market Risk

Our customers may finance their drilling activities through cash flow from operations, the incurrence of debt or the issuance of equity. Any deterioration in the credit and capital markets, as currently being experienced, can make it difficult for our customers to obtain funding for their capital needs. A reduction of cash flow resulting from declines in commodity prices, or a reduction of available financing may result in a reduction in customer spending and the demand for our drilling services. This reduction in spending could have a material adverse effect on our business, financial condition, cash flows and results of operations.

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We expect all of our customers, lenders and suppliers are being adversely affected in some fashion by the COVID-19 pandemic. Although we are not currently experiencing any material disruption in payments by customers at this time, given the dramatic impact the COVID-19 pandemic has had on the oil and gas industry and our customers, there is no assurance that our customers’ financial position will not be adversely impacted which could result in payment delays and payment defaults. Availability under our revolving line of credit is based upon a borrowing base determined by the level of our accounts receivable, with uncollectable amounts or amounts greater than 90 days past excluded from consideration. As a result, delays in payment or payment defaults by any of our customers could have a material adverse impact on our financial liquidity. Similarly, our suppliers may not extend credit to us or require less favorable payment terms or face similar challenges with their own suppliers. We also are reliant upon our third-party lenders’ ability to meet their commitments under our existing credit facilities. Given the dramatic impact of the COVID-19 pandemic across industries and geographic regions, we cannot predict the magnitude it may have on our lenders’ ability to meet their commitments to us, and any failure to do so would have a material adverse effect on our liquidity and financial position.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our principal executive officer and principal financial officer have concluded that our current disclosure controls and procedures were effective as of March 31, 2020 at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM  1. LEGAL PROCEEDINGS

We are the subject of certain legal proceedings and claims arising in the ordinary course of business from time to time. Management cannot predict the ultimate outcome of such legal proceedings and claims. While the legal proceedings and claims may be asserted for amounts that may be material should an unfavorable outcome be the result, management does not currently expect that the resolution of these matters will have a material adverse effect on our financial position or results of operations. In addition, management monitors our legal proceedings and claims on a quarterly basis and establishes and adjusts any reserves as appropriate to reflect our assessment of the then-current status of such matters.

ITEM 1A. RISK FACTORS

In addition to the risks related to our business set forth under “Risk Factors” in our Form 10-K for the year ended December 31, 2019, our business is subject to the following risks:

The ongoing COVID-19 pandemic and related economic repercussions have had, and are expected to continue to have, a significant impact on our business, results of operations and financial condition, and depending on the duration of the pandemic and its effect on the oil and gas industry, could have a material adverse effect on our business, liquidity, results of operations and financial condition.

The recent worldwide outbreak of COVID-19, the uncertainty regarding the impact of COVID-19 and various governmental actions taken to mitigate the impact of COVID-19, have resulted in a decline in demand for oil and natural gas. To the extent that the outbreak of COVID-19 continues to negatively impact demand and OPEC members and other oil exporting nations fail to implement agreed to production cuts or other actions that are sufficient to support and stabilize commodity prices, we expect our business, operating results and financial condition to remain depressed with further declines in activity levels possible.

Given the nature and significance of the COVID-19 pandemic on demand for oil, and the uncertainty regarding the length of this impact, our business is subject to substantial risks outside of our control, which include, but are not limited to:

• disruption to our supply chain for equipment, supplies and materials essential to our business;

• notices from customers or suppliers arguing that their non-performance under our contracts with them is permitted as a result of force majeure or other reasons;

• reductions in our borrowing base under our revolving line of credit related to delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies;

• a need to preserve liquidity, which could result in reductions or delays to planned maintenance capital expenditures or failure to pursue other business opportunities;

• actions by the lenders under our revolving credit facility that additional borrowings will not be permitted as a result of the occurrence of a material adverse effect caused by the COVID-19 pandemic;

• actions by the lenders under our term loan that additional borrowings pursuant to our $15 million term loan accordion will not be permitted as a result of the occurrence of a material adverse effect caused by the COVID-19 pandemic;

• our ability to comply with minimum liquidity and springing fixed charge coverage ratio covenants contained in our credit facilities;

• cybersecurity issues, as digital technologies may become more vulnerable and experience a higher rate of cyberattacks in the current environment of remote connectivity;

• litigation risk and possible loss contingencies related to COVID-19 and its impact, including with respect to commercial contracts, employee matters and insurance arrangements;

• additional reductions to our workforce to adjust to market conditions, including severance payments, retention issues, and an inability to hire employees when market conditions improve;

• additional asset impairments, including an impairment of the carrying value of our assets as demand for our contract drilling services decreases;

• infections and quarantining of our employees and the personnel of our customers, suppliers and other third parties in areas in which we operate; and

• changes in the regulation of the production of hydrocarbons, such as the imposition of limitations on the production of oil and gas by states in our target markets or other jurisdictions, that may result in additional limits on demand for our contract drilling services.

36

If any of these risk factors were to come to fruition, they could have a material adverse effect on our business, liquidity, results of operations and financial condition.

Due to the adverse effects of the COVID-19 pandemic on the oil and gas industry, our operating rig count is dropping rapidly, and we cannot assure you when it will stabilize or begin to improve. Depending upon the duration of this decline and the length of time it takes for our operating rig count to improve, this could have a material adverse effect on our business, liquidity, results of operations and financial condition.

During the first quarter of 2020, our operating rig count reached a peak of 22 rigs. Since that time, market deterioration caused by COVID-19 has caused our customers to reduce drilling activity, which has resulted in our operating rig count to begin to rapidly decline. Currently, based upon customer actions to date, we would expect our operating rig count to fall to six rigs by the end of the second quarter of 2020, however, due to the lack of visibility and confidence towards customer intentions, we cannot assure you that our operating rig count will not fall below these levels. For example, our current backlog of contracts stands at 3.2 average rigs during the third quarter of 2020 and 1.8 average rigs during the fourth quarter of 2020, and none of our current drilling contracts have terms extending into 2021 or beyond. We also cannot assure you if or when market conditions will improve and if or when our operating rig count will begin to improve or reach pre-COVID-19 levels. A substantially lower operating rig count could have materially adverse effect on our business, liquidity, results of operations and financial condition.

Due to the adverse effects of the COVID-19 pandemic on the oil and gas industry, we expect our cash flows from operations to decrease dramatically, which could have a material adverse effect on our business, liquidity, results of operations and financial condition.

As a result of the ongoing decline in our operating rig count and associated dayrate pressure and margin contraction in the current oil and gas operating environment we expect that our cash flows from operations will decrease dramatically, and that we will need to draw on our existing sources of available liquidity until market conditions begin to improve in order to maintain operations and make required non-operating expenditures. Current sources of liquidity at March 31, 2020 include $9.8 million of cash, other net working capital of $0.9 million, $8.6 million of availability under our revolving credit facility and $15 million available under our term loan accordion. In addition, on April 27, 2020, we entered into the $10 million PPP Loan pursuant to the Paycheck Protection Program (the “PPP”). We will use the proceeds of the loan for payroll costs, rent, utilities, mortgage interests, and other permitted purposes. We currently believe that these sources of liquidity are sufficient to fund or operations for the next twelve months. However, due to the uncertainty regarding the duration of the COVID-19 pandemic and its effects on the oil and gas industry, we cannot predict the length of time that the market disruptions resulting from the COVID-19 pandemic will continue or when, or if, oil and gas prices and demand for our contract drilling services will begin to improve or return to pre-COVID-19 levels. As a result, we cannot assure that our current sources of financial liquidity will be sufficient to fund our operations, and any failure to do so could have a material adverse effect on our business, liquidity, results of operations and financial condition.

Our business and operations are dependent upon various third parties and counterparties who may be adversely affected by the COVID-19 pandemic which could have a material adverse effect on our business, liquidity, results of operations and financial condition.

We expect all of our customers, lenders and suppliers are being adversely affected in some fashion by the COVID-19 pandemic. Although we are not currently experiencing any material disruption in payments by customers at this time, given the dramatic impact the COVID-19 pandemic has had on the oil and gas industry and our customers, there is no assurance that our customers’ financial position will not be adversely impacted which could result in payment delays and payment defaults. Availability under our revolving line of credit is based upon a borrowing base determined by the level of our accounts receivable, with uncollectable amounts or amounts greater than 90 days past excluded from consideration. As a result, delays in payment or payment defaults by any of our customers could have a material adverse impact on our financial liquidity. Similarly, our suppliers may not extend credit to us or require less favorable payment terms or face similar challenges with their own suppliers. We also are reliant upon our third-party lenders’ ability to meet their commitments under our existing credit facilities. Given the dramatic impact of the COVID-19 pandemic across industries and geographic regions, we cannot predict the magnitude it may have had or may have in the future on our lenders’ ability to meet their commitments to us, and any failure to do so by them would have a material adverse effect on our business, liquidity, results of operations and financial condition.

As a result of the significant downturn in the oil and gas business and demand for our contract drilling services caused by the COVID-19 pandemic, we may lose our listing on the New York Stock Exchange, which could have a material adverse effect on the market value of our common stock.

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Under New York Stock Exchange listing requirements, in order to maintain our listing status we are required to maintain at all times a minimum 30-day trading average public market capitalization of $15 million.  Unlike certain other listing standards tied to minimum share price, there is no cure period or grace period associated with this listing standard.  In response to the substantial negative impact the COVID-19 pandemic has caused, the New York Stock Exchange granted a temporary waiver from compliance with this standard through June 30, 2020.  As of May 5, 2020, we estimated that our 30-day average public float was approximately $13.8 million.  Because we cannot predict the length of time that the market disruptions resulting from the COVID-19 pandemic will continue or when, or if, oil and gas prices and demand for our contract drilling services will begin to improve or return to pre-COVID-19 levels, we cannot assure you that our common stock will remain listed on the New York Stock Exchange , which could have a material adverse effect on the trading value of our common stock and our ability to raise additional funds through new issuances.

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ITEM  2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

In the second quarter of 2019, our Board of Directors authorized a stock repurchase program of up to $10.0 million.

The following table provides information relating to shares repurchased by the Company and affiliated purchasers during the three months ended March 31, 2020.

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares That May Yet be Purchased Under the Program
January 1 - January 31	—	$	—	—	$	9,191,336
February 1 - February 29	—	$	—	—	$	9,191,336
March 1 - March 31	14,443	$	4.61	14,443	$	9,124,711
Total	14,443	$	4.61	14,443	$	9,124,711

ITEM  3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM  4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM  5. OTHER INFORMATION

None.

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6. EXHIBITS

Exhibit Number	Description
3.1	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company, dated as of March 11, 2020. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8‑K, filed on March 11, 2020.)
10.1*	Paycheck Protection Program Note dated April 27, 2020
10.2	Time-Based Cash Settlement Award Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K, filed on February 13, 2020.)
10.3	TSR Cash Settlement Award Agreement (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8‑K, filed on February 13, 2020.)
10.4	ROIC Cash Settlement Award Agreement (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8‑K, filed on February 13, 2020.)
10.5	Director RSU Award Agreement - Partial Cash Settlement (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8‑K, filed on February 13, 2020.)
31.1*	Certification by Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
31.2*	Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.CAL*	XBRL Calculation Linkbase Document
101.DEF*	XBRL Definition Linkbase Document
101.INS*	XBRL Instance Document
101.LAB*	XBRL Labels Linkbase Document
101.PRE*	XBRL Presentation Linkbase Document
101.SCH*	XBRL Schema Document

* Filed with this report

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INDEPENDENCE CONTRACT DRILLING, INC.
By:	/s/ J. Anthony Gallegos, Jr.
	Name:	J. Anthony Gallegos, Jr.
	Title:	President and Chief Executive Officer (Principal Executive Officer)

By:	/s/ Philip A. Choyce
	Name:	Philip A. Choyce
	Title:	Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer)

By:	/s/ Michael J. Harwell
	Name:	Michael J. Harwell
	Title:	Vice President - Finance and Chief Accounting Officer (Principal Accounting Officer)

Date: May 7, 2020

41

EX-10.1

CITY BANK U.S. Small Business Administration 5219 City Bank Parkway PAYCHECK PROTECTION PROGRAM NOTE Lubbock, TX 79408 (EIN/SSN) Loan Date Loan Amount Interest Rate 1.00% Borrower s Name Borrower s Address Address: City / State / Zip Code: Words or phrases preceded by a checkbox ( ) will apply only if the checkbox is marked ( ). 1. PROMISE TO PAY: In return for the Loan, Borrower promises to pay to the order of Lender the amount of ______$10,000,000.00__ _, interest on the unpaid principal balance, and all other amounts required by this Note. 2. DEFINITIONS: Loan means the loan evidenced by this Note. Loan Documents means the documents related to the Loan signed by Borrower. SBA means the Small Business Administration, an Agency of the United States of America. CARES Act means the federal Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136). 3. PAYMENT TERMS: Borrower must make all payments at the place Lender designates. The payment terms for this Note are: A. The term of the Loan shall be two (2) years from the Loan Date. The Loan shall mature on ________4/27/2022_ __ ( B. The Loan shall be payable monthly. The first six monthly payments are deferred. C. Interest will accrue from the date of Loan (including during the deferral period) at the Interest Rate set forth above. D. Payments will be required beginning _________11/27/2020______. Your monthly payments will be an amount equal to the amount necessary to fully amortize the then- outstanding principal balance of the Loan (i.e., any portion of the Loan Amount that has not been forgiven as described in Section 10) at the Interest Rate specified above by the Maturity Date, with the entire outstanding principal balance and all accrued but unpaid interest due and payable on the Maturity Date. E. There are no prepayment penalties for the Loan. Borrower may repay all or a portion of the Loan at any time without penalty. F. The proceeds of the Loan shall be used for the following purposes only: (i) payroll costs (as defined in the CARES Act, and in Section 2.f of the SBA Interim Final Rule dated April 2, 2020); (ii) costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; (iii) mortgage interest payments (but not mortgage prepayments or principal payments); (iv) rent payments; (v) utility payments; (vi) interest payments on any other debt obligations that were incurred before February 15, 2020; and/or (vii) refinancing an SBA Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, under the conditions as specified in Section 2.r.vii of the SBA Interim Final Rule dated April 2, 2020. Page 1 of 3

PAYCHECK PROTECTION PROGRAM NOTE (continued) 4. DEFAULT: Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower: A. Fails to do anything required by this Note and other Loan Documents; B. Defaults on any other loan with Lender; C. Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or SBA; D. Makes, or anyone acting on their behalf makes, a materially false or misleading representation to Lender or SBA; E. Fails to pay any taxes when due; F. Becomes the subject of a proceeding under any bankruptcy or insolvency law; G. Has a receiver or liquidator appointed for any part of their business or property; H. Makes an assignment for the benefit of creditors; I. Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower s ability to pay this Note; J. Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender s prior written consent; or K. Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower s ability to pay this Note. 5. Without notice or demand and without giving up any of its rights, Lender may: A. Require immediate payment of all amounts owing under this Note: B. Collect all amounts owing from any Borrower; or C. File suit and obtain judgment. 6. LENDER S GENERAL POWERS: Without notice and without Borrower s consent, Lender may: A. Incur expenses to collect amounts due under this Note or enforce the terms of this Note or any other Loan Document, including reasonable attorneys fees and costs. If Lender incurs such expenses, it may demand immediate payment from Borrower or add the expenses to the principal balance; and B. Release anyone obligated to pay this Note. 7. WHEN FEDERAL LAW APPLIES: When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law or deny any obligation, defeat any claim of SBA, or preempt federal law. 8. SUCCESSORS AND ASSIGNS: Under this Note, Borrower includes its successors, and Lender includes its successors and assigns. 9. GENERAL PROVISIONS: A. All individuals and entities signing this Note are jointly and severally liable. B. Borrower waives all suretyship defenses. C. Borrower must sign all documents necessary at any time to comply with the Loan Documents. D. Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them. E. Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note. F. If any part of this Note is unenforceable, all other parts remain in effect. G. To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. 10. LOAN FORGIVENESS: Pursuant to Section 1106 of the CARES Act, the following provisions shall apply to the Loan: A. The Loan is subject to the limited loan forgiveness provisions of Section 1106 of the CARES Act, and the SBA Interim Final Rule dated April 2, 2020. B. The amount of loan forgiveness is determined by and is subject to the sole approval of the SBA. C. Limited loan forgiveness is provided for amounts spent on payroll costs, rent and utilities payments, and interest payments on mortgages for Borrowers that apply. No more than 25.0% of the amount forgiven may be for costs other than payroll costs. Page 2 of 3

PAYCHECK PROTECTION PROGRAM NOTE (continued) D. The amount of loan forgiveness will be reduced if Borrower reduces the number of their employees (layoffs). E. Borrower is eligible for loan forgiveness on a covered loan in an amount equal to the following payments made during the 8-week period beginning on the Loan Date ( covered period ): (i) payroll costs; (ii) interest payments on mortgage obligations (excluding principal and prepaid principal); (iii) rent; and (iv) utility payments. F. The amount of loan forgiveness cannot exceed the principal balance of the Loan. G. Cancelled indebtedness will not be included in the Borrower s taxable income. H. To receive loan forgiveness, Borrower must apply for loan forgiveness through Lender. The Borrower must submit to the Lender servicing the Loan application, which must include documents verifying the number of full- time employees and the pay rates for the period described, including payroll tax filings to the IRS and State, income, payroll, and unemployment insurance filings, cancelled checks, payment receipts, transcript of accounts, or other documents verifying payments on covered mortgage loan obligations, lease obligations and utility payments, plus any other documentation the SBA deems necessary. I. to Lender. 11. STATE LAW PROVISIONS: THIS PROMISSORY NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 12. AGREEMENT TO MAKE CHANGES TO THIS NOTE: Borrower acknowledges that in order to disburse the Loan proceeds to Borrower at the earliest possible time, Lender administered by the SBA and the terms thereof. Borrower agrees that, if Lender deems it necessary or appropriate to amend this Note in any respect in order for this Note to comply with the requirements of the Program or for the SBA to guarantee all or any portion of the amounts outstanding under this Note, Borrower will sign and deliver to Lender any amendment to this Note or a new note in replacement of this Note, with the terms of any amendment or new note retroactive to the date of this Note. Borrower will also execute any additional documentation the Lender requests that Lender believes is consistent with the purposes of the Program. 13. NON-RECOURSE: Lender and SBA shall have no recourse against any individual shareholder, member or partner of Borrower for non- payment of the Loan, except to the extent that such shareholder, member or partner uses the Loan proceeds for an unauthorized purpose. 14. BORROWER S NAME(S) AND SIGNATURE(S): By signing below, each individual or entity becomes obligated under this Note as Borrower. Borrower: INDEPENDENCE CONTRACT DRILLING INC By:______________________________________ By:______________________________________ By:______________________________________ By:______________________________________ Page 3 of 3

EX-31.1

Exhibit 31.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO

RULE 13a-14(a) AND 15d-14(a) UNDER THE EXCHANGE ACT

I, J. Anthony Gallegos, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2020 of Independence Contract Drilling, Inc. (the "registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2020

/s/ J. Anthony Gallegos, Jr.

J. Anthony Gallegos, Jr.

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13a-14(a) AND 15d-14(a) UNDER THE EXCHANGE ACT

I, Philip A. Choyce, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2020 of Independence Contract Drilling, Inc. (the "registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2020

/s/ Philip A. Choyce

Philip A. Choyce

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Independence Contract Drilling, Inc. (the “Company”) on Form 10-Q for the quarter ending March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Anthony Gallegos, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 7, 2020

/s/ J. Anthony Gallegos, Jr.

J. Anthony Gallegos, Jr.

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Independence Contract Drilling, Inc. (the “Company”) on Form 10-Q for the quarter ending March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip A. Choyce, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 7, 2020

/s/ Philip A. Choyce

Philip A. Choyce

Chief Financial Officer

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Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following:

(in thousands)	March 31, 2020		December 31, 2019
Accrued salaries and other compensation	$	2,177	$	3,500
Insurance	2,007		2,861
Deferred revenues	505		701
Property and other taxes	2,569		4,716
Interest	3,104		3,244
Operating lease liability - current	545		475
Other (1)	2,051		871
	$	12,958	$	16,368

(1) Accrued Liabilities - Other includes $1.1 million in accrued severance, as of March 31, 2020, in connection with our cost reduction measures instituted in response to the COVID-19 pandemic and current deteriorating market conditions.

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Interim Financial Information (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of Accounting

These unaudited consolidated financial statements include the accounts of ICD and its subsidiary, and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These consolidated financial statements should be read along with our audited consolidated financial statements for the year ended December 31, 2019, included in our Annual Report on Form 10-K for the year ended December 31, 2019. In management’s opinion, these financial statements contain all adjustments necessary to fairly present our financial position, results of operations, cash flows and changes in stockholders’ equity for all periods presented.

As we had no items of other comprehensive income in any period presented, no other components of comprehensive income is presented.

Interim results for the three months ended March 31, 2020 may not be indicative of results that will be realized for the full year ending December 31, 2020.

Segment and Geographical Information

Segment and Geographical Information

Our operations consist of one reportable segment because all of our drilling operations are located in the United States and have similar economic characteristics. Corporate management administers all properties as a whole rather than as discrete operating segments. Operational data is tracked by rig; however, financial performance is measured as a single enterprise and not on a rig-by-rig basis. Further, the allocation of capital resources is employed on a project-by-project basis across our entire asset base to maximize profitability without regard to individual geographic areas.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, as additional guidance on the measurement of credit losses on financial instruments. The new guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. In addition, the guidance amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The new guidance is effective for public companies for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. In October 2019, the FASB approved a proposal which grants smaller reporting companies additional time to implement FASB standards on current expected credit losses (CECL) to January 2023. As a smaller reporting company, we will defer adoption of ASU 2016-13 until January 2023. We are currently evaluating the impact this guidance will have on our accounts receivable.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes. The amendments in the update are effective for public companies for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We plan to adopt this guidance on January 1, 2021 and are currently evaluating the impact of adoption on our consolidated financial statements.

Fair Value Measurement

Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 Unadjusted quoted market prices for identical assets or liabilities in an active market;

Level 2 Quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets or liabilities; and

Level 3 Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.

This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The carrying value of certain of our assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities approximates their fair value due to the short-term nature of such instruments.

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Nature of Operations and Recent Events - Operations & Oil and Natural Gas Prices and Drilling Activity (Details)	Apr. 20, 2020 $ / bbl	Mar. 11, 2020	Dec. 31, 2020 drilling_rig	Sep. 30, 2020 drilling_rig	Jun. 30, 2020 drilling_rig	Apr. 27, 2020 USD ($)	Mar. 31, 2020 drilling_rig
Property, Plant and Equipment [Line Items]
Number of oil and natural gas rigs							22
Stock split, conversion ratio		0.20
AC Powered Rigs
Property, Plant and Equipment [Line Items]
Number of rigs							29
Forecast
Property, Plant and Equipment [Line Items]
Number of oil and natural gas rigs					6
Average Number Of Oil And Natural Gas Rigs			1.8	3.2
Subsequent Event
Property, Plant and Equipment [Line Items]
Market price of oil (in dollars per barrel) | $ / bbl	37.63
Subsequent Event | Line of credit | PPA Loan
Property, Plant and Equipment [Line Items]
Face amount | $						$ 10,000,000.0

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Stock-Based Compensation - Restricted Stock Activity (Details)	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Restricted stock
Shares
Number, beginning balance (in shares) | shares	62,817
Number, granted (in shares) | shares	0
Number, vested and converted (in shares) | shares	0
Number, forfeited (in shares) | shares	0
Number, ending balance (in shares) | shares	62,817
Weighted Average Grant-Date Fair Value Per Share
Weighted average grant date fair value per share, beginning balance (in dollars per share) | $ / shares	$ 64.40
Weighted average grant date fair value per share, granted (in dollars per share) | $ / shares	0.00
Weighted average grant date fair value per share, vested and converted (in dollars per share) | $ / shares	0.00
Weighted average grant date fair value per share, forfeited (in dollars per share) | $ / shares	0.00
Weighted average grant date fair value per share, ending balance (in dollars per share) | $ / shares	$ 64.40
RSUs
Shares
Number, beginning balance (in shares) | shares	44,439
Number, granted (in shares) | shares	62,534
Number, vested and converted (in shares) | shares	(9,561)
Number, forfeited (in shares) | shares	(3,031)
Number, ending balance (in shares) | shares	94,381
Weighted Average Grant-Date Fair Value Per Share
Weighted average grant date fair value per share, beginning balance (in dollars per share) | $ / shares	$ 59.71
Weighted average grant date fair value per share, granted (in dollars per share) | $ / shares	11.98
Weighted average grant date fair value per share, vested and converted (in dollars per share) | $ / shares	38.80
Weighted average grant date fair value per share, forfeited (in dollars per share) | $ / shares	38.80
Weighted average grant date fair value per share, ending balance (in dollars per share) | $ / shares	$ 30.88
Performance-based RSUs
Shares
Number, beginning balance (in shares) | shares	23,480
Number, granted (in shares) | shares	24,854
Number, vested and converted (in shares) | shares	0
Number, forfeited (in shares) | shares	0
Number, ending balance (in shares) | shares	48,334
Weighted Average Grant-Date Fair Value Per Share
Weighted average grant date fair value per share, beginning balance (in dollars per share) | $ / shares	$ 33.90
Weighted average grant date fair value per share, granted (in dollars per share) | $ / shares	12.50
Weighted average grant date fair value per share, vested and converted (in dollars per share) | $ / shares	0.00
Weighted average grant date fair value per share, forfeited (in dollars per share) | $ / shares	0.00
Weighted average grant date fair value per share, ending balance (in dollars per share) | $ / shares	$ 22.90

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Revenue from Contracts with Customers Revenue from Contracts with Customers (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Capitalized contract cost, current	$ 0.5		$ 0.1
Capitalized contract cost, increase	1.2	$ 0.5
Amortization of contract costs	$ 0.8	$ 0.7

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Long-term Debt - Narrative (Details)	Oct. 01, 2018 USD ($)	Mar. 31, 2020 USD ($)
Line of credit
Debt Instrument [Line Items]
Weighted average interest rate		9.84%
Term Loan Facility
Debt Instrument [Line Items]
Face amount	$ 130,000,000.0
Term Loan Facility | Line of credit
Debt Instrument [Line Items]
Face amount	130,000,000.0
Liquidity covenant	$ 10,000,000.0
Fixed charge coverage ratio	1.00
Term Loan Facility | Line of credit | LIBOR
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	7.50%
Term Loan Facility | Line of credit | Prime Rate
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	6.50%
Delayed Draw Term Loan
Debt Instrument [Line Items]
Face amount	$ 15,000,000.0
Delayed Draw Term Loan | Line of credit
Debt Instrument [Line Items]
Face amount	15,000,000.0
ABL Credit Facility And Delayed Draw Facility | Line of credit
Debt Instrument [Line Items]
Minimum availability	$ 5,000,000.0
Revolving Credit Facility | Line of credit
Debt Instrument [Line Items]
Fixed charge coverage ratio	1.00
Line of credit facility, borrowing base threshold, percentage	85.00%
Commitment fee on unused capacity (as a percent)	0.375%
Line of credit facility, unused commitment fee percentage, revolver contingency	0.25%
Unused commitment fee percentage, maximum credit threshold	50.00%
Fixed charge coverage ratio, maximum credit threshold	10.00%
Borrowing base		$ 20,100,000
Revolving Credit Facility | Line of credit | Federal funds, effective rate
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	0.05%
Revolving Credit Facility | Line of credit | LIBOR
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	1.00%
Revolving Credit Facility | Revolving credit facility | Line of credit
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity	$ 40,000,000.0	40,000,000.0
Remaining availability		$ 8,600,000
Revolving Credit Facility | Letter of Credit | Line of credit
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity	$ 7,500,000.0
Minimum | Revolving Credit Facility | Line of credit | LIBOR
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	2.00%
Minimum | Revolving Credit Facility | Line of credit | Wells Fargo Prime Rate
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	1.00%
Maximum | Line of credit | Wells Fargo Prime Rate
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	1.50%
Maximum | Term Loan Facility | Line of credit | Federal funds, effective rate
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	0.05%
Maximum | Term Loan Facility | Line of credit | LIBOR
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	1.00%
Maximum | Revolving Credit Facility | Line of credit | LIBOR
Debt Instrument [Line Items]
Interest rate, basis spread (as a percent)	2.50%
Independence Contract Drilling, Inc. | MSD Partners
Debt Instrument [Line Items]
Ownership percentage		30.00%

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities
Net loss	$ (28,223)	$ (2,373)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization	11,516	11,313
Asset impairment (insurance recoveries), net	16,619	2,018
Stock-based compensation	570	387
(Gain) loss on disposition of assets, net	(46)	3,220
Deferred income taxes	(42)	(2,540)
Amortization of deferred financing costs	204	203
Bad debt expense (recovery)	16
Bad debt expense (recovery)		(45)
Changes in operating assets and liabilities
Accounts receivable	8,925	(105)
Inventories	(27)	(45)
Prepaid expenses and other assets	(462)	843
Accounts payable and accrued liabilities	(5,959)	(5,271)
Net cash provided by operating activities	3,091	7,605
Cash flows from investing activities
Purchases of property, plant and equipment	(9,139)	(10,832)
Proceeds from the sale of assets	628	536
Proceeds from insurance claims	0	1,000
Collection of principal on note receivable	145	0
Net cash used in investing activities	(8,366)	(9,296)
Cash flows from financing activities
Common stock issuance costs	0	(177)
Purchase of treasury stock	(66)	0
RSUs withheld for taxes	(26)	0
Payments for finance lease obligations	(1,086)	(216)
Net cash provided by financing activities	9,822	1,993
Net increase in cash and cash equivalents	4,547	302
Cash and cash equivalents
Beginning of period	5,206	12,247
End of period	9,753	12,549
Supplemental disclosure of cash flow information
Cash paid during the period for interest	3,541	3,514
Supplemental disclosure of non-cash investing and financing activities
Change in property, plant and equipment purchases in accounts payable	(5,285)	(1,753)
Additions to property, plant and equipment through finance leases	55	520
Extinguishment of finance lease obligations from sale of assets classified as finance leases	(204)	0
Transfer of assets from held and used to held for sale	0	(2,285)
Revolving Credit Facility
Cash flows from financing activities
Borrowings under Revolving Credit Facility	11,038	2,403
Repayments under Revolving Credit Facility	(38)	0
Financing costs paid	0	(12)
Term Loan Facility
Cash flows from financing activities
Financing costs paid	$ 0	$ (5)

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Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Assets
Cash and cash equivalents	$ 9,753	$ 5,206
Accounts receivable, net	26,893	35,834
Inventories	1,181	2,325
Assets held for sale	5,014	8,740
Prepaid expenses and other current assets	4,803	4,640
Total current assets	47,644	56,745
Property, plant and equipment, net	437,505	457,530
Other long-term assets, net	2,754	2,726
Total assets	487,903	517,001
Liabilities
Current portion of long-term debt	3,268	3,685
Accounts payable	14,981	22,674
Accrued liabilities	12,958	16,368
Merger consideration payable to an affiliate	2,932	3,022
Current portion of contingent consideration	2,814	2,814
Total current liabilities	36,953	48,563
Long-term debt	145,291	134,941
Deferred income taxes, net	610	652
Other long-term liabilities	1,198	1,249
Total liabilities	184,052	185,405
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock, $0.01 par value, 50,000,000 shares authorized; 3,888,137 and 3,876,196 shares issued, respectively, and 3,809,548 and 3,812,050 shares outstanding, respectively	38	38
Additional paid-in capital	506,375	505,831
Accumulated deficit	(198,649)	(170,426)
Treasury stock, at cost, 78,589 shares and 64,146 shares, respectively	(3,913)	(3,847)
Total stockholders’ equity	303,851	331,596
Total liabilities and stockholders’ equity	$ 487,903	$ 517,001

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Income Taxes (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Effective income tax rate (as a percent)	0.10%	51.70%	0.20%

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Stockholders’ Equity and Earnings (Loss) per Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Stockholders' Equity and Earnings (Loss) per Share

Stockholders’ Equity and Earnings (Loss) per Share

As of March 31, 2020, we had a total of 3,809,548 shares of common stock, $0.01 par value, outstanding. We also had 78,589 shares held as treasury stock. Total authorized common stock is 50,000,000 shares.

Basic earnings (loss) per common share (“EPS”) are computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation of the numerators and denominators of the basic and diluted losses per share computations is as follows:

	Three Months Ended March 31,
(in thousands, except per share data)	2020			2019
Net loss (numerator):	$	(28,223	)	$	(2,373	)
Loss per share:
Basic and diluted	$	(7.53	)	$	(0.63	)
Shares (denominator):
Weighted average common shares outstanding - basic	3,750			3,785
Weighted average common shares outstanding - diluted	3,750			3,785

For all periods presented, the computation of diluted loss per share excludes the effect of certain outstanding stock options and RSUs because their inclusion would be anti-dilutive. The number of options that were excluded from diluted loss per share were 33,458 during the three months ended March 31, 2020 and 33,458 during the three months ended March 31, 2019. The number of RSUs, which are not participating securities, that were excluded from our basic and diluted loss per share because they are anti-dilutive, were 142,715 for the three months ended March 31, 2020 and 20,480 for the three months ended March 31, 2019.

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Inventories

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Inventories

Inventories

All of our inventory as of March 31, 2020 and December 31, 2019 consisted of supplies held for use in our drilling operations.

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Revenue from Contracts with Customers - Assets and Liabilities Rollforward (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue from Contract with Customer [Abstract]
Revenue recognized that was included in contract liabilities at beginning of period	$ 311	$ 732
Increase in contract liabilities due to cash received, excluding amounts recognized as revenue	$ (505)	$ (479)

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Interim Financial Information - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($) segment	Mar. 31, 2019 USD ($)
Property, Plant and Equipment [Line Items]
Reportable segments | segment	1
Impairment of assets held for sale	$ 3.3
Machinery and Equipment
Property, Plant and Equipment [Line Items]
Asset impairment	$ 13.3	$ 2.0

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Leases - Lease Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Operating Leases
2020	$ 505
2021	616
2022	444
2023	370
2024	47
Thereafter	0
Total cash lease payment	1,982
Less: imputed interest	(239)
Total lease liabilities	1,743	$ 1,725
Finance Leases
2020	2,861
2021	3,661
2022	3,517
2023	164
2024	0
Thereafter	0
Total cash lease payment	10,203
Add: expected residual value	832
Less: imputed interest	(1,113)
Total lease liabilities	$ 9,922	$ 11,157

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Stockholders’ Equity and Earnings (Loss) per Share - Basic and Diluted Computation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net loss (numerator):
Net loss	$ (28,223)	$ (2,373)
Loss per share:
Basic and diluted (in dollars per share)	$ (7.53)	$ (0.63)
Shares (denominator):
Weighted average common shares outstanding - basic (in shares)	3,750	3,785
Weighted average common shares outstanding - diluted (in shares)	3,750	3,785

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Prior to June 2019, we issued common stock-based awards to employees and non-employee directors under our 2012 Long-Term Incentive Plan adopted in March 2012 (the “2012 Plan”). In June 2019, we adopted the 2019 Omnibus Incentive Plan (the “2019 Plan”) providing for common stock-based awards to employees and non-employee directors. The 2019 Plan permits the granting of various types of awards, including stock options, restricted stock and restricted stock unit awards, and up to 275,000 shares were authorized for issuance. Restricted stock and restricted stock units may be granted for no consideration other than prior and future services. The purchase price per share for stock options may not be less than the market price of the underlying stock on the date of grant.As of March 31, 2020, approximately 87,532 shares were available for future awards under the 2019 Plan. In connection with the adoption of the 2019 Plan, no further awards will be made under the 2012 Plan. Our policy is to account for forfeitures of share-based compensation awards as they occur.

A summary of compensation cost recognized for stock-based payment arrangements is as follows:

	Three Months Ended March 31,
(in thousands)	2020		2019
Compensation cost recognized:
Restricted stock and restricted stock units	570		387
Total stock-based compensation	$	570	$	387

No stock-based compensation was capitalized in connection with rig construction activity during the three months ended March 31, 2020 or 2019.

Stock Options

We use the Black-Scholes option pricing model to estimate the fair value of stock options granted to employees and non-employee directors. The fair value of the options is amortized to compensation expense on a straight-line basis over the requisite service periods of the stock awards, which are generally the vesting periods.

There were no stock options granted during the three months ended March 31, 2020 or 2019.

A summary of stock option activity and related information for the three months ended March 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	Options	Weighted Average Exercise Price
Outstanding at January 1, 2020	33,458	$	254.80
Granted	—	—
Exercised	—	—
Forfeited/expired	—	—
Outstanding at March 31, 2020	33,458	$	254.80
Exercisable at March 31, 2020	33,458	$	254.80

The number of options vested at March 31, 2020 was 33,458 with a weighted average remaining contractual life of 2.0 years and a weighted average exercise price of $254.80 per share. There were no unvested options or unrecognized compensation cost related to outstanding stock options at March 31, 2020.

Time-based Restricted Stock and Restricted Stock Units

We have granted time-based restricted stock and restricted stock units to key employees under the 2012 Plan and 2019 Plan.

Time-based Restricted Stock

Time-based restricted stock awards consist of grants of our common stock that vest over five years. We recognize compensation expense on a straight-line basis over the vesting period. The fair value of restricted stock awards is determined based on the estimated fair market value of our shares on the grant date. As of March 31, 2020, there was $3.0 million in unrecognized compensation cost related to unvested restricted stock awards. This cost is expected to recognized over a weighted-average period of 1.9 years.

A summary of the status of our time-based restricted stock awards and of changes in our time-based restricted stock awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	Shares	Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	62,817	$	64.40
Granted	—	—
Vested	—	—
Forfeited	—	—
Outstanding at March 31, 2020	62,817	$	64.40

Time-based Restricted Stock Units

We have granted three-year time vested restricted stock unit awards where each unit represents the right to receive, at the end of a vesting period, one share of ICD common stock with no exercise price. The fair value of time-based restricted stock unit awards is determined based on the estimated fair market value of our shares on the grant date. As of March 31, 2020, there was $2.3 million of total unrecognized compensation cost related to unvested time-based restricted stock unit awards. This cost is expected to be recognized over a weighted-average period of 1.1 years.

A summary of the status of our time-based restricted stock unit awards and of changes in our time-based restricted stock unit awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	RSUs		Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	44,439		$	59.71
Granted	62,534		11.98
Vested and converted	(9,561	)	38.80
Forfeited	(3,031	)	38.80
Outstanding at March 31, 2020	94,381		$	30.88

Performance-Based and Market-Based Restricted Stock Units

We have granted three-year performance-based and market-based restricted stock unit awards, where each unit represents the right to receive, at the end of a vesting period, up to two shares of ICD common stock with no exercise price. Exercisability of the market-based restricted stock unit awards is based on our total shareholder return ("TSR") as measured against the TSR of a defined peer group and vesting of the performance-based restricted stock unit awards is based on our cumulative return on invested capital ("ROIC") as measured against ROIC performance goals determined by the compensation committee of our Board of Directors. We used a Monte Carlo simulation model to value the TSR market-based restricted stock unit awards. The fair value of the performance-based restricted stock unit awards is based on the market price of our common stock on the date of grant. During the restriction period, the performance-based and market-based restricted stock unit awards may not be transferred or encumbered, and the recipient does not receive dividend equivalents or have voting rights until the units vest. As of March 31, 2020, there was unrecognized compensation cost related to unvested performance-based or market-based restricted stock unit awards totaling $0.5 million. This cost is expected to be recognized over a weighted-average period of 1.3 years.

A summary of the status of our performance-based and market-based restricted stock unit awards and of changes in our restricted stock unit awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	RSUs	Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	23,480	$	33.90
Granted	24,854	12.50
Vested and converted	—	—
Forfeited	—	—
Outstanding at March 31, 2020	48,334	$	22.90

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Financial Instruments and Fair Value

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Financial Instruments and Fair Value

Financial Instruments and Fair Value

Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 Unadjusted quoted market prices for identical assets or liabilities in an active market;

Level 2 Quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets or liabilities; and

Level 3 Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.

This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The carrying value of certain of our assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities approximates their fair value due to the short-term nature of such instruments.

The fair value of our long-term debt is determined by Level 3 measurements based on quoted market prices and terms for similar instruments, where available, and on the amount of future cash flows associated with the debt, discounted using our current borrowing rate for comparable debt instruments (the Income Method). Based on our evaluation of the risk free rate, the market yield and credit spreads on comparable company publicly traded debt issues, we used an annualized discount rate, including a credit valuation allowance, of 38.8%. The following table summarizes the carrying value and fair value of our long-term debt as of March 31, 2020 and December 31, 2019.

	March 31, 2020				December 31, 2019
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Term Loan Facility	$	130,000	$	62,559	$	130,000	$	138,567
Revolving Credit Facility	$	11,000	$	4,464	$	—	$	—

The fair value of our assets held for sale is determined using Level 3 measurements. In the first quarter of 2020, we obtained a third-party appraisal to determine the fair value of our assets held for sale. Fair value measurements are applied with respect to our non-financial assets and liabilities measured on a non-recurring basis, which would consist of measurements primarily of long-lived assets.

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Leases - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Leases [Abstract]
Finance lease liabilities	$ 9,922		$ 11,157
Finance lease, right-of-use asset	12,422		12,950
Operating lease liabilities	1,743		1,725
Operating lease right-of-use assets	1,095		$ 1,033
Right-of-use asset obtained in exchange for finance lease liability	$ 54	$ 520

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Sidewinder Merger (Details)	3 Months Ended		6 Months Ended
	Mar. 31, 2020 USD ($)	Mar. 31, 2019 USD ($)	Jun. 30, 2019 USD ($)	Oct. 01, 2018 drilling_rig
Business Acquisition [Line Items]
Severance and merger-related expenses	$ 1,076,000	$ 1,081,000
Revenues	38,494,000	60,358,000
Intangible
Business Acquisition [Line Items]
Revenues	0	1,033,000	$ 1,000,000
Rigs, Mechanical | Sidewinder Drilling, Inc.
Business Acquisition [Line Items]
Number of rigs | drilling_rig				11
Sidewinder Drilling, Inc.
Business Acquisition [Line Items]
Severance and merger-related expenses	$ 0	$ 1,100,000

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Revenue from Contracts with Customers - Remaining Performance Obligation (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Revenue from Contract with Customer [Abstract]
Performance obligations, expected to be satisfied	$ 0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01
Revenue from Contract with Customer [Abstract]
Performance obligations, expected to be satisfied	$ 505
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue from Contract with Customer [Abstract]
Performance obligations, expected to be satisfied	$ 0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue from Contract with Customer [Abstract]
Performance obligations, expected to be satisfied	$ 0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year

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Stockholders’ Equity and Earnings (Loss) per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Reconciliation of Numerators and Denominators of Basic and Diluted (Loss) Earnings Per Share

A reconciliation of the numerators and denominators of the basic and diluted losses per share computations is as follows:

	Three Months Ended March 31,
(in thousands, except per share data)	2020			2019
Net loss (numerator):	$	(28,223	)	$	(2,373	)
Loss per share:
Basic and diluted	$	(7.53	)	$	(0.63	)
Shares (denominator):
Weighted average common shares outstanding - basic	3,750			3,785
Weighted average common shares outstanding - diluted	3,750			3,785

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Financial Instruments and Fair Value (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Schedule of fair value of liabilities

The following table summarizes the carrying value and fair value of our long-term debt as of March 31, 2020 and December 31, 2019.

	March 31, 2020				December 31, 2019
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Term Loan Facility	$	130,000	$	62,559	$	130,000	$	138,567
Revolving Credit Facility	$	11,000	$	4,464	$	—	$	—

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Related Parties

3 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

Related Parties

Related Parties

In conjunction with the closing of the Sidewinder Merger on October 1, 2018, we entered into the Term Loan Credit Agreement for an initial term loan in an aggregate principal amount of $130.0 million and a delayed draw term loan facility in an aggregate principal amount of up to $15.0 million. MSD PCOF Partners IV, LLC (an affiliate of MSD Partners) is the lender of our $130.0 million Term Loan Facility.  MSD Partners, together with MSD Capital, own approximately 30% of the outstanding shares of the Company’s common stock as of March 31, 2020.

We made interest payments on the Term Loan Facility totaling $3.2 million and $3.3 million for the three months ended March 31, 2020 and 2019, respectively.

Additionally, we have recorded merger consideration payable to an affiliate of $2.9 million related to proceeds received from the sale of specific assets earmarked in the Sidewinder Merger agreement as assets held for sale with the Sidewinder unitholders receiving the net proceeds. We are required to make this payment to MSD, the shareholders’ representative, in the second quarter of 2020.

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Financial Instruments and Fair Value (Details) $ in Thousands	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Term Loan Facility | Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	$ 130,000	$ 130,000
Term Loan Facility | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	62,559	138,567
Revolving Credit Facility | Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	11,000	0
Revolving Credit Facility | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	$ 4,464	$ 0
Discount rate
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument, measurement input	0.388

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Stock-Based Compensation - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation capitalized due to rig construction activity	$ 0	$ 0
Options, granted (in shares)	0	0
Options, exercisable (in shares)	33,458
Remaining contractual life (years)	2 years
Weighted-average exercise price (in dollars per share)	$ 254.80
Restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (years)	5 years
Unrecognized compensation costs	$ 3,000,000
Period for recognition	1 year 11 months
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (years)	3 years
Unrecognized compensation costs	$ 2,300,000
Period for recognition	1 year 1 month 18 days
Exercise price (in dollars per share)	$ 0
Performance-based RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation costs	$ 500,000
Period for recognition	1 year 3 months 24 days
2019 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)	275,000
Number of shares available for future awards (in shares)	87,532

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Stockholders’ Equity and Earnings (Loss) per Share - Narrative (Details) - $ / shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares outstanding (in shares)	3,809,548
Common stock, par value (usd per share)	$ 0.01		$ 0.01
Treasury stock, number of shares held (in shares)	78,589		64,146
Shares authorized (in shares)	50,000,000		50,000,000
Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	33,458	33,458
RSU's
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	142,715	20,480
Common Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares outstanding (in shares)	3,809,548	3,853,909	3,812,050	3,853,909

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Nature of Operations and Recent Events

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations and Recent Events

Nature of Operations and Recent Events

Except as expressly stated or the context otherwise requires, the terms “we,” “us,” “our,” “ICD,” and the “Company” refer to Independence Contract Drilling, Inc. and its subsidiary.

We provide land-based contract drilling services for oil and natural gas producers targeting unconventional resource plays in the United States. We own and operate a premium fleet comprised of modern, technologically advanced drilling rigs.

Our rig fleet includes 29 marketed AC powered (“AC”) rigs and a number of additional rigs requiring conversions or upgrades in order to meet our AC pad-optimal specifications.

We currently focus our operations on unconventional resource plays located in geographic regions that we can efficiently support from our Houston, Texas and Midland, Texas facilities in order to maximize economies of scale. Currently, our rigs are operating in the Permian Basin, the Haynesville Shale and the Eagle Ford Shale; however, our rigs have previously operated in the Mid-Continent and Eaglebine regions as well.

Our business depends on the level of exploration and production activity by oil and natural gas companies operating in the United States, and in particular, the regions where we actively market our contract drilling services. The oil and natural gas exploration and production industry is historically cyclical and characterized by significant changes in the levels of exploration and development activities. Oil and natural gas prices and market expectations of potential changes in those prices significantly affect the levels of those activities. Worldwide political, regulatory, economic and military events, as well as natural disasters have contributed to oil and natural gas price volatility historically, and are likely to continue to do so in the future. Any prolonged reduction in the overall level of exploration and development activities in the United States and the regions where we market our contract drilling services, whether resulting from changes in oil and natural gas prices or otherwise, could materially and adversely affect our business.

COVID-19 Pandemic and Market Conditions Update

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (“COVID-19”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The continued spread of the COVID-19 virus and the responses taken to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, has caused significant declines in global demand for crude oil. This reduction in demand has occurred concurrent with the initiation of a crude oil price war between members of the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (collectively, the “OPEC+” group). Even with recent production cuts announced by the OPEC+ group and others on April 9, 2020, and the cessation to the crude oil price war, crude oil inventories have continued to rise and to test storage capacity and logistics networks. These factors have led to a collapse in oil prices, with the WTI price for May delivery closing at negative $37.63 per barrel on April 20, 2020. Downward pressure on oil prices is expected to continue for the foreseeable future, and the long-term effects on production and demand are unknown at this time. Currently, there is considerable uncertainty regarding measures to contain the virus and what potential future measures may be put in place, therefore we cannot predict when worldwide demand for oil will stabilize and if or when it will begin to improve or reach pre-COVID-19 levels.

In response to these adverse market conditions, North American exploration companies, including all of our customers, have rapidly reduced planned capital expenditures and drilling activity. As a result, demand for our products and services began to rapidly decline late in the first quarter of 2020, and we expect demand for our products and services to continue to decline and remain low as our customers continue adjusting their operations in response to market conditions. During the first quarter of 2020, our operating rig count reached a peak of 22 rigs. Based upon customer actions to date, we expect our operating rig count to fall to six rigs by the end of the second quarter of 2020. However, due to the lack of visibility and confidence towards customer intentions, we cannot assure you that our operating rig count will not fall below these levels by that period of time or thereafter. Our current backlog of contracts stands at 3.2 average rigs during the third quarter of 2020 and 1.8 average rigs during the fourth quarter of 2020, and none of our current drilling contracts have terms extending into 2021 or beyond. As a result of this rapidly declining operating level coupled with downward pressure on dayrates we charge for our contract drilling services, we will experience corresponding reductions in revenue, operating margins and cash flows.

Due to these rapidly declining market conditions, we took the following actions at the end of the first quarter of 2020 in order to reduce our cost structure:

• Salary or compensation reductions for substantially all our employees, including members of executive management;

• Suspension of all cash-based incentive compensation, including all members of executive management;

• Reducing the number of executive management positions by two;

• Reducing the number of directors from seven to five, which would become effective following director elections at our 2020 Annual Meeting of Stockholders currently scheduled to occur on June 12, 2020;

• Annual compensation reductions for our directors; and

• Reducing headcount for non-field-based personnel by approximately 40%.

Depending upon the nature and duration of the COVID-19 pandemic, the nature of containment measures taken in the future, it could have a material adverse effect on our business, results of operations and financial condition.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.    

On April 27, 2020, we entered into an unsecured loan in the aggregate principal amountof $10.0 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”), sponsored by the Small Business Administration (the “SBA”) as guarantor of loans under the PPP. The PPP is part of the CARES Act, and itprovides for loans to qualifying businesses in a maximum amount equal to the lesser of $10.0 million and 2.5 times the average monthly payroll expenses of the qualifying business. The proceeds of the loan may only be used for payroll costs, rent, utilities, mortgage interests, and interest on other pre-existing indebtedness (the “permissible purposes”).

The application for these funds required us to, in good faith, certify that current economic uncertainty made the loan request necessary to support our ongoing operations. This certification further required us to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. In making our certification, we considered numerous factors, including (i) current market and economic conditions, including the significant declines in worldwide demand and oil prices as a result of the COVID-19 pandemic and the uncertainty and inability to predict when market conditions will stabilize and begin to improve, (ii) the actions and communications from our customers that have caused and will cause our operating rig count to fall (from a high of 22 rigs during the first quarter of 2020, to an estimated six rigs by the end of the second quarter of 2020 and potential further reductions depending on when oil supply and demand fundamentals rebalance and U.S. land rig counts stabilize and begin to improve), (iii) whether our current sources of liquidity, comprised of cash and cash equivalents, availability under our revolving credit facility and accordion under our term loan facility, would be sufficient to finance our operations and required expenditures while industry and market conditions remain distressed, (iv) our status as a micro-cap public company, and (v) our belief, after inquiry, that capital markets were not reasonably available or open to us at such time for new issuances of debt or equity.

We cannot predict the length of time that the market disruptions resulting from the COVID-19 pandemic will continue; or when, or if, oil and gas prices and demand for our contract drilling services will begin to improve or return to pre-COVID-19 levels. The extent to which our operating and financial results are affected by the COVID-19 pandemic will depend on various factors and consequences beyond our control, such as the duration and scope of the pandemic; additional actions by businesses and governments in response to the pandemic; and the speed and effectiveness of responses to combat the virus. As a result, our business, operating results and financial conditions are subject to various risks, many of which are aggravated as a result of the declining market conditions and significant uncertainty caused by the COVID-19 pandemic.

The CARES Act did not have a material impact on our income taxes.  Management will continue to monitor future developments and interpretations for any further impacts on our financial condition, results of operations, or liquidity.

Reverse Stock Split

Following approval by our stockholders on February 6, 2020, our Board of Directors approved a 1-for-20 reverse stock split of our common stock. The reverse split was effective March 11, 2020, and all share and earnings per share information have been retroactively adjusted to reflect the reverse stock split and the associated decrease in par value was recorded with the offset to additional paid-in capital.

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Shares authorized (in shares)	50,000,000	50,000,000
Shares issued (in shares)	3,888,137	3,876,196
Shares outstanding (in shares)	3,809,548	3,812,050
Treasury stock (in shares)	78,589	64,146

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Commitments and Contingencies (Details) $ in Millions	Mar. 31, 2020 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Outstanding purchase commitments	$ 2.9

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Leases - Lease Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Operating leases:
Operating lease right-of-use assets	$ 1,095	$ 1,033
Accrued liabilities	545	475
Other long-term liabilities	1,198	1,250
Total operating lease liabilities	1,743	1,725
Finance leases:
Property and equipment	13,774	14,375
Accumulated depreciation	(1,352)	(1,425)
Property and equipment, net	12,422	12,950
Current portion of long-term debt	3,268	3,685
Long-term debt	6,654	7,472
Total finance lease liabilities	$ 9,922	$ 11,157
Weighted-average remaining lease term
Operating leases	3 years 3 months 8 days	3 years 7 months 5 days
Finance leases	2 years 6 months 17 days	2 years 8 months 17 days
Weighted-average discount rate
Operating leases	8.00%	8.07%
Finance leases	7.66%	7.64%

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Revenue from Contracts with Customers - Receivables and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Receivables, which are included in “Accounts receivable, net”	$ 26,752	$ 35,378
Contract liabilities, which are included in “Accrued liabilities - deferred revenue”	$ (505)	$ (311)

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Accrued Liabilities

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Accrued Liabilities

Accrued Liabilities

Accrued liabilities consisted of the following:

(in thousands)	March 31, 2020		December 31, 2019
Accrued salaries and other compensation	$	2,177	$	3,500
Insurance	2,007		2,861
Deferred revenues	505		701
Property and other taxes	2,569		4,716
Interest	3,104		3,244
Operating lease liability - current	545		475
Other (1)	2,051		871
	$	12,958	$	16,368

(1) Accrued Liabilities - Other includes $1.1 million in accrued severance, as of March 31, 2020, in connection with our cost reduction measures instituted in response to the COVID-19 pandemic and current deteriorating market conditions.

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Sidewinder Merger

3 Months Ended

Mar. 31, 2020

Business Combinations [Abstract]

Sidewinder Merger

Sidewinder Merger

We completed the merger with Sidewinder Drilling LLC on October 1, 2018.

During the three months ended March 31, 2019 we recorded $1.1 million of merger-related expenses comprised primarily of severance, professional feesand various other integration related expenses. There were no merger expenses recorded during the three months ended March 31, 2020.

Certain intangible liabilities were recorded in connection with the Sidewinder merger for drilling contracts in place at the closing date of the transaction that had unfavorable contract terms as compared to then current market terms for comparable drilling rigs. The intangible liabilities are amortized to operating revenues over the remaining underlying contract terms. During the three month period ended March 31, 2019, $1.0 million of intangible revenue was recognized as a result of this amortization. The intangible liabilities were fully amortized in the second quarter of 2019.    

In addition, at the time of consummation of the Sidewinder Merger,  Sidewinder owned 11 mechanical rigs and related equipment (the "Mechanical Rigs") located principally in the Utica and Marcellus plays. As these rigs are not consistent with ICD’s core strategy or geographic focus, ICD agreed that these rigs can be disposed of, with the Sidewinder unitholders receiving the net proceeds. As a result of this arrangement, on the merger date, we recorded the fair value of the Mechanical Rigs less costs to sell, as assets held for sale, with an offsetting liability in contingent consideration. Subsequently, a majority of these assets were sold at auction for substantially less than the appraised fair values on the merger date. As a result, the contingent consideration liability was reduced by the appraised fair values on the merger date and the proceeds were recorded as merger consideration payable to an affiliate on our consolidated balance sheets. We are required to pay out the related net proceeds in the second quarter of 2020.

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Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our effective tax rate was 0.1% and 51.7% for the three months ended March 31, 2020 and 2019, respectively. Taxes in both periods relate to Louisiana state income tax and Texas margin tax. In the first quarter of 2020, the rate is largely driven by the recording of a valuation allowance against the Louisiana deferred tax assets, caused by the asset impairment recorded. In the first quarter of 2019, our effective tax rate was significantly higher based on our then full year forecast of net income before taxes and the application of our estimated annual rate to our year-to-date results.  We finished 2019 with an annual effective rate of 0.2%.

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Long-term Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Schedule of Long-term Debt

Our long-term debt consisted of the following:    

(in thousands)	March 31, 2020			December 31, 2019
Term Loan Facility due October 1, 2023	$	130,000		$	130,000
Revolving Credit Facility due October 1, 2023	11,000			—
Finance lease obligations	9,922			11,157
	150,922			141,157
Less: current portion	(3,268		)	(3,685		)
Less: Term Loan Facility deferred financing costs	(2,363		)	(2,531		)
Long-term debt	$	145,291		$	134,941

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Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Lease, cost

The components of lease expense were as follows:

(in thousands)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating lease expense	$	149	$	125
Short-term lease expense	1,281		1,193
Variable lease expense	134		86
Finance lease expense:
Amortization of right-of-use assets	$	392	$	265
Interest expense on lease liabilities	195		32
Total finance lease expense	587		297
Total lease expense	$	2,151	$	1,701

Supplemental cash flow information related to leases is as follows:

(in thousands)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	160	$	103
Operating cash flows from finance leases	$	194	$	32
Financing cash flows from finance leases	$	1,086	$	216
Right-of-use assets obtained or recorded in exchange for lease obligations:
Operating leases	$	178	$	955
Finance leases	$	54	$	520

Assets and liabilities, lessee

Supplemental balance sheet information related to leases is as follows:

(in thousands)	March 31, 2020			December 31, 2019
Operating leases:
Other long-term assets, net	$	1,095		$	1,033
Accrued liabilities	$	545		$	475
Other long-term liabilities	1,198			1,250
Total operating lease liabilities	$	1,743		$	1,725
Finance leases:
Property, plant and equipment	$	13,774		$	14,375
Accumulated depreciation	(1,352		)	(1,425		)
Property, plant and equipment, net	$	12,422		$	12,950
Current portion of long-term debt	$	3,268		$	3,685
Long-term debt	6,654			7,472
Total finance lease liabilities	$	9,922		$	11,157
Weighted-average remaining lease term
Operating leases	3.3 years			3.6 years
Finance leases	2.5 years			2.7 years
Weighted-average discount rate
Operating leases	8.00		%	8.07		%
Finance leases	7.66		%	7.64		%

Maturity of operating lease liability

Maturities of lease liabilities at March 31, 2020 were as follows:

(in thousands)	Operating Leases			Finance Leases
2020	$	505		$	2,861
2021	616			3,661
2022	444			3,517
2023	370			164
2024	47			—
Thereafter	—			—
Total cash lease payment	1,982			10,203
Add: expected residual value	—			832
Less: imputed interest	(239		)	(1,113		)
Total lease liabilities	$	1,743		$	9,922

Maturity of finance lease liability

Maturities of lease liabilities at March 31, 2020 were as follows:

(in thousands)	Operating Leases			Finance Leases
2020	$	505		$	2,861
2021	616			3,661
2022	444			3,517
2023	370			164
2024	47			—
Thereafter	—			—
Total cash lease payment	1,982			10,203
Add: expected residual value	—			832
Less: imputed interest	(239		)	(1,113		)
Total lease liabilities	$	1,743		$	9,922

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Consolidated Statements of Stockholders’ Equity (Unaudited) - USD ($)	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock
Beginning balance (shares) at Dec. 31, 2018		3,853,909
Beginning balance at Dec. 31, 2018	$ 391,533,000	$ 39,000	$ 504,178,000	$ (109,638,000)	$ (3,046,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issuance costs	(177,000)	$ 0	(177,000)
Stock-based compensation	387,000		387,000
Net loss	(2,373,000)			(2,373,000)
RSUs vested, net of shares withheld for taxes (shares)		0
Ending balance (shares) at Mar. 31, 2019		3,853,909
Ending balance at Mar. 31, 2019	389,370,000	$ 39,000	504,388,000	(112,011,000)	(3,046,000)
Beginning balance (shares) at Dec. 31, 2019		3,812,050
Beginning balance at Dec. 31, 2019	331,596,000	$ 38,000	505,831,000	(170,426,000)	(3,847,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
RSUs vested, net of shares withheld for taxes	$ (26,000)	$ 11,941
Purchase of treasury stock (shares)	(14,443)
Purchase of treasury stock	$ (66,000)				(66,000)
Stock-based compensation	570,000		570,000
Net loss	$ (28,223,000)			(28,223,000)
Ending balance (shares) at Mar. 31, 2020	3,809,548	3,809,548
Ending balance at Mar. 31, 2020	$ 303,851,000	$ 38,000	$ 506,375,000	$ (198,649,000)	$ (3,913,000)

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 06, 2020
Document and Entity Information [Abstract]
Entity Registrant Name	Independence Contract Drilling, Inc.
Entity Central Index Key	0001537028
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		3,816,258
Entity Small Business	true
Entity Emerging Growth	false
Entity Interactive Data Current	Yes
Entity Current Reporting Status	Yes
Entity Shell Company	false

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Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

Leases

We have multi-year operating and financing leases for corporate office space, field location facilities, land, vehicles and various other equipment used in our operations. We also have a significant number of rentals related to our drilling operations that are day-to-day or month-to-month arrangements. Our multi-year leases have remaining lease terms of greater than one year to five years.

The components of lease expense were as follows:

(in thousands)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating lease expense	$	149	$	125
Short-term lease expense	1,281		1,193
Variable lease expense	134		86
Finance lease expense:
Amortization of right-of-use assets	$	392	$	265
Interest expense on lease liabilities	195		32
Total finance lease expense	587		297
Total lease expense	$	2,151	$	1,701

Supplemental cash flow information related to leases is as follows:

(in thousands)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	160	$	103
Operating cash flows from finance leases	$	194	$	32
Financing cash flows from finance leases	$	1,086	$	216
Right-of-use assets obtained or recorded in exchange for lease obligations:
Operating leases	$	178	$	955
Finance leases	$	54	$	520

Supplemental balance sheet information related to leases is as follows:

(in thousands)	March 31, 2020			December 31, 2019
Operating leases:
Other long-term assets, net	$	1,095		$	1,033
Accrued liabilities	$	545		$	475
Other long-term liabilities	1,198			1,250
Total operating lease liabilities	$	1,743		$	1,725
Finance leases:
Property, plant and equipment	$	13,774		$	14,375
Accumulated depreciation	(1,352		)	(1,425		)
Property, plant and equipment, net	$	12,422		$	12,950
Current portion of long-term debt	$	3,268		$	3,685
Long-term debt	6,654			7,472
Total finance lease liabilities	$	9,922		$	11,157
Weighted-average remaining lease term
Operating leases	3.3 years			3.6 years
Finance leases	2.5 years			2.7 years
Weighted-average discount rate
Operating leases	8.00		%	8.07		%
Finance leases	7.66		%	7.64		%

Maturities of lease liabilities at March 31, 2020 were as follows:

(in thousands)	Operating Leases			Finance Leases
2020	$	505		$	2,861
2021	616			3,661
2022	444			3,517
2023	370			164
2024	47			—
Thereafter	—			—
Total cash lease payment	1,982			10,203
Add: expected residual value	—			832
Less: imputed interest	(239		)	(1,113		)
Total lease liabilities	$	1,743		$	9,922

Leases

Leases

We have multi-year operating and financing leases for corporate office space, field location facilities, land, vehicles and various other equipment used in our operations. We also have a significant number of rentals related to our drilling operations that are day-to-day or month-to-month arrangements. Our multi-year leases have remaining lease terms of greater than one year to five years.

The components of lease expense were as follows:

(in thousands)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating lease expense	$	149	$	125
Short-term lease expense	1,281		1,193
Variable lease expense	134		86
Finance lease expense:
Amortization of right-of-use assets	$	392	$	265
Interest expense on lease liabilities	195		32
Total finance lease expense	587		297
Total lease expense	$	2,151	$	1,701

Supplemental cash flow information related to leases is as follows:

(in thousands)	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	160	$	103
Operating cash flows from finance leases	$	194	$	32
Financing cash flows from finance leases	$	1,086	$	216
Right-of-use assets obtained or recorded in exchange for lease obligations:
Operating leases	$	178	$	955
Finance leases	$	54	$	520

Supplemental balance sheet information related to leases is as follows:

(in thousands)	March 31, 2020			December 31, 2019
Operating leases:
Other long-term assets, net	$	1,095		$	1,033
Accrued liabilities	$	545		$	475
Other long-term liabilities	1,198			1,250
Total operating lease liabilities	$	1,743		$	1,725
Finance leases:
Property, plant and equipment	$	13,774		$	14,375
Accumulated depreciation	(1,352		)	(1,425		)
Property, plant and equipment, net	$	12,422		$	12,950
Current portion of long-term debt	$	3,268		$	3,685
Long-term debt	6,654			7,472
Total finance lease liabilities	$	9,922		$	11,157
Weighted-average remaining lease term
Operating leases	3.3 years			3.6 years
Finance leases	2.5 years			2.7 years
Weighted-average discount rate
Operating leases	8.00		%	8.07		%
Finance leases	7.66		%	7.64		%

Maturities of lease liabilities at March 31, 2020 were as follows:

(in thousands)	Operating Leases			Finance Leases
2020	$	505		$	2,861
2021	616			3,661
2022	444			3,517
2023	370			164
2024	47			—
Thereafter	—			—
Total cash lease payment	1,982			10,203
Add: expected residual value	—			832
Less: imputed interest	(239		)	(1,113		)
Total lease liabilities	$	1,743		$	9,922

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Long-term Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Long-term debt, including current portion	$ 150,922	$ 141,157
Less: current portion	(3,268)	(3,685)
Less: Term Loan Facility deferred financing costs	(2,363)	(2,531)
Long-term debt	145,291	134,941
Finance lease obligations
Debt Instrument [Line Items]
Long-term debt, including current portion	9,922	11,157
Term Loan Facility
Debt Instrument [Line Items]
Long-term debt, including current portion	130,000	130,000
Revolving Credit Facility
Debt Instrument [Line Items]
Long-term debt, including current portion	$ 11,000	$ 0

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Stock-Based Compensation - Stock Option Activity (Details) - $ / shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Options
Options, beginning balance (in shares)	33,458
Options, granted (in shares)	0	0
Options, exercised (in shares)	0
Options, forfeited/expired (in shares)	0
Options, ending balance (in shares)	33,458.000
Options, exercisable (in shares)	33,458
Weighted Average Exercise Price
Weighted average exercise price, beginning balance (in dollars per share)	$ 254.80
Weighted average exercise price, granted (in dollars per share)	0.00
Weighted average exercise price, exercised (in dollars per share)	0.00
Weighted average exercise price, forfeited/expired (in dollars per share)	0.00
Weighted average exercise price, ending balance (in dollars per share)	254.80
Weighted-average exercise price, exercisable (in dollars per share)	$ 254.80

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Summary of Compensation Cost

A summary of compensation cost recognized for stock-based payment arrangements is as follows:

	Three Months Ended March 31,
(in thousands)	2020		2019
Compensation cost recognized:
Restricted stock and restricted stock units	570		387
Total stock-based compensation	$	570	$	387

Summary of Stock Option Activity and Related Information

A summary of stock option activity and related information for the three months ended March 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	Options	Weighted Average Exercise Price
Outstanding at January 1, 2020	33,458	$	254.80
Granted	—	—
Exercised	—	—
Forfeited/expired	—	—
Outstanding at March 31, 2020	33,458	$	254.80
Exercisable at March 31, 2020	33,458	$	254.80

Schedule of Restricted Stock Activity

A summary of the status of our time-based restricted stock unit awards and of changes in our time-based restricted stock unit awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	RSUs		Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	44,439		$	59.71
Granted	62,534		11.98
Vested and converted	(9,561	)	38.80
Forfeited	(3,031	)	38.80
Outstanding at March 31, 2020	94,381		$	30.88

A summary of the status of our time-based restricted stock awards and of changes in our time-based restricted stock awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	Shares	Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	62,817	$	64.40
Granted	—	—
Vested	—	—
Forfeited	—	—
Outstanding at March 31, 2020	62,817	$	64.40

A summary of the status of our performance-based and market-based restricted stock unit awards and of changes in our restricted stock unit awards outstanding for the three months endedMarch 31, 2020 is as follows:

	Three Months Ended March 31, 2020
	RSUs	Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2020	23,480	$	33.90
Granted	24,854	12.50
Vested and converted	—	—
Forfeited	—	—
Outstanding at March 31, 2020	48,334	$	22.90

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Revenue from Contracts with Customers (Tables)

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table summarizes revenues from our contracts disaggregated by revenue generating activity contained therein for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
(in thousands)	2020		2019
Dayrate drilling	$	34,478	$	56,451
Mobilization	1,541		1,260
Reimbursables	2,448		1,604
Early termination	27		—
Capital modification	—		10
Intangible	—		1,033
Total revenue	$	38,494	$	60,358

Summary of Contract with Customer, Asset and Liability

The following table provides information about receivables and contract liabilities related to contracts with customers. We had no contract assets as of March 31, 2020 or December 31, 2019.

(in thousands)	March 31, 2020			December 31, 2019
Receivables, which are included in “Accounts receivable, net”	$	26,752		$	35,378
Contract liabilities, which are included in “Accrued liabilities - deferred revenue”	$	(505	)	$	(311	)

Significant changes in the contract liabilities balance during the period are as follows:

	Three Months Ended March 31,
(in thousands)	2020			2019
Revenue recognized that was included in contract liabilities at beginning of period	$	311		$	732
Increase in contract liabilities due to cash received, excluding amounts recognized as revenue	$	(505	)	$	(479	)

Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2020. The estimated revenue does not include amounts of variable consideration that are constrained.

	Year Ending December 31,
(in thousands)	2020		2021		2022		2023
Revenue	$	505	$	—	$	—	$	—

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Interim Financial Information

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Interim Financial Information

Interim Financial Information

These unaudited consolidated financial statements include the accounts of ICD and its subsidiary, and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These consolidated financial statements should be read along with our audited consolidated financial statements for the year ended December 31, 2019, included in our Annual Report on Form 10-K for the year ended December 31, 2019. In management’s opinion, these financial statements contain all adjustments necessary to fairly present our financial position, results of operations, cash flows and changes in stockholders’ equity for all periods presented.

As we had no items of other comprehensive income in any period presented, no other components of comprehensive income is presented.

Interim results for the three months ended March 31, 2020 may not be indicative of results that will be realized for the full year ending December 31, 2020.

Segment and Geographical Information

Our operations consist of one reportable segment because all of our drilling operations are located in the United States and have similar economic characteristics. Corporate management administers all properties as a whole rather than as discrete operating segments. Operational data is tracked by rig; however, financial performance is measured as a single enterprise and not on a rig-by-rig basis. Further, the allocation of capital resources is employed on a project-by-project basis across our entire asset base to maximize profitability without regard to individual geographic areas.

Asset Impairments, net

As a result of the rapidly deteriorating market conditions described in "COVID-19 Pandemic and Market Conditions Update", we concluded that a triggering event occurred and, accordingly, an interim asset impairment test was performed as of March 31, 2020. As a result, we recognized further impairment of $3.3 million associated with the decline in the market value of our assets held for sale and $13.3 million related to the remaining assets on rigs removed from our marketed fleet, as well as certain other component equipment and inventory. Due to the uncertainty around COVID-19 and current market conditions, we may have to make further impairment charges in future periods relating to, among other things, fixed assets and inventory.

Additionally, in the first quarter of 2019, we recorded $2.0 million of asset impairment expense in conjunction with the sale of miscellaneous drilling equipment at auctions in April of 2019.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, as additional guidance on the measurement of credit losses on financial instruments. The new guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. In addition, the guidance amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The new guidance is effective for public companies for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. In October 2019, the FASB approved a proposal which grants smaller reporting companies additional time to implement FASB standards on current expected credit losses (CECL) to January 2023. As a smaller reporting company, we will defer adoption of ASU 2016-13 until January 2023. We are currently evaluating the impact this guidance will have on our accounts receivable.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes. The amendments in the update are effective for public companies for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We plan to adopt this guidance on January 1, 2021 and are currently evaluating the impact of adoption on our consolidated financial statements.

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Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Revenues	$ 38,494	$ 60,358
Costs and expenses
Operating costs	30,229	39,333
Selling, general and administrative	3,761	4,545
Severance and merger-related expenses	1,076	1,081
Depreciation and amortization	11,516	11,313
Asset impairment (insurance recoveries), net	16,619	2,018
(Gain) loss on disposition of assets, net	(46)	3,220
Total costs and expenses	63,155	61,510
Operating loss	(24,661)	(1,152)
Interest expense	(3,604)	(3,761)
Loss before income taxes	(28,265)	(4,913)
Income tax benefit	(42)	(2,540)
Net loss	$ (28,223)	$ (2,373)
Loss per share:
Basic and diluted (in dollars per share)	$ (7.53)	$ (0.63)
Weighted average number of common shares outstanding:
Basic and diluted (in shares)	3,750	3,785

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Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued salaries and other compensation	$ 2,177	$ 3,500
Insurance	2,007	2,861
Deferred revenues	505	701
Property and other taxes	2,569	4,716
Interest	3,104	3,244
Operating lease liability - current	545	475
Other	2,051	871
Accrued liabilities	12,958	$ 16,368
Accrued severance	$ 1,100

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Stock-Based Compensation - Compensation Cost (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	$ 570	$ 387
Restricted stock and restricted stock units
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	$ 570	$ 387

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Related Parties (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Oct. 01, 2018
Merger consideration payable to an affiliate	$ 2,932,000		$ 3,022,000
Term Loan Facility
Face amount				$ 130,000,000.0
Interest payments	$ 3,200,000	$ 3,300,000
Delayed Draw Term Loan
Face amount				$ 15,000,000.0
MSD Partners
Ownership percentage	30.00%

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Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Operating lease expense	$ 149	$ 125
Short-term lease expense	1,281	1,193
Variable lease expense	134	86
Finance lease cost:
Amortization of right-of-use assets	392	265
Interest expense on lease liabilities	195	32
Total finance lease expense	587	297
Total lease expenses	2,151	1,701
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	160	103
Operating cash flows from finance leases	194	32
Financing cash flows from finance leases	1,086	216
Right-of-use assets obtained or recorded in exchange for lease obligations:
Operating leases	178	955
Finance leases	$ 54	$ 520

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Revenue From Contracts with Customers - Disaggregation of Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Jun. 30, 2019
Disaggregation of Revenue [Line Items]
Revenues	$ 38,494	$ 60,358
Dayrate drilling
Disaggregation of Revenue [Line Items]
Revenues	34,478	56,451
Mobilization
Disaggregation of Revenue [Line Items]
Revenues	1,541	1,260
Reimbursables
Disaggregation of Revenue [Line Items]
Revenues	2,448	1,604
Early termination
Disaggregation of Revenue [Line Items]
Revenues	27	0
Capital modification
Disaggregation of Revenue [Line Items]
Revenues	0	10
Intangible
Disaggregation of Revenue [Line Items]
Revenues	$ 0	$ 1,033	$ 1,000

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Purchase Commitments

As of March 31, 2020, we had outstanding purchase commitments to a number of suppliers totaling $2.9 million related primarily to the operation of drilling rigs. All of these commitments relate to equipment and services currently scheduled for delivery in 2020.

Contingencies

We may be the subject of lawsuits and claims arising in the ordinary course of business from time to time. Management cannot predict the ultimate outcome of such lawsuits and claims. While lawsuits and claims are asserted for amounts that may be material should an unfavorable outcome be the result, management does not currently expect that the outcome of any of these known legal proceedings or claims will have a material adverse effect on our financial position or results of operations.

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Long-term Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Long-term Debt

Long-term Debt

Our long-term debt consisted of the following:    

(in thousands)	March 31, 2020			December 31, 2019
Term Loan Facility due October 1, 2023	$	130,000		$	130,000
Revolving Credit Facility due October 1, 2023	11,000			—
Finance lease obligations	9,922			11,157
	150,922			141,157
Less: current portion	(3,268		)	(3,685		)
Less: Term Loan Facility deferred financing costs	(2,363		)	(2,531		)
Long-term debt	$	145,291		$	134,941

Credit Facilities

On October 1, 2018, we entered into a term loan Credit Agreement (the “Term Loan Credit Agreement”) for an initial term loan in an aggregate principal amount of $130.0 million, (the “Term Loan Facility”) and (b) a delayed draw term loan facility in an aggregate principal amount of up to $15.0 million (the “DDTL Facility”, and together with the Term Loan Facility, the “Term Facilities”). The Term Facilities have a maturity date of October 1, 2023, at which time all outstanding principal under the Term Facilities and other obligations become due and payable in full.

At our election, interest under the Term Loan Facility is determined by reference at our option to either (i) a “base rate” equal to the higher of (a) the federal funds effective rate plus 0.05%, (b) the London Interbank Offered Rate with an interest period of one month (“LIBOR”), plus 1.0%, and (c) the rate of interest as publicly quoted from time to time by the Wall Street Journal as the “prime rate” in the United States; plus an applicable margin of 6.5%, or (ii) a “LIBOR rate” equal to LIBOR with an interest period of one month, plus an applicable margin of 7.5%.

The Term Loan Credit Agreement contains financial covenants, including a liquidity covenant of $10.0 million and a springing fixed charge coverage ratio covenant of 1.00 to 1.00 that is tested when availability under the ABL Credit Facility (defined below) and the DDTL Facility is below $5.0 million at any time that a DDTL Facility loan is outstanding. The Term Loan Credit Agreement also contains other customary affirmative and negative covenants, including limitations on indebtedness, liens, fundamental changes, asset dispositions, restricted payments, investments and transactions with affiliates. The Term Loan Credit Agreement also provides for customary events of default, including breaches of material covenants, defaults under the ABL Credit Facility or other material agreements for indebtedness, and a change of control.

The obligations under the Term Loan Credit Agreement are secured by a first priority lien on collateral (the “Term Priority Collateral”) other than accounts receivable, deposit accounts and other related collateral pledged as first priority collateral (“Priority Collateral”) under the ABL Credit Facility (defined below) and a second priority lien on such Priority Collateral, and are unconditionally guaranteed by all of our current and future direct and indirect subsidiaries. MSD PCOF Partners IV, LLC (an affiliate of MSD Partners, L.P. "MSD Partners") is the lender of our $130.0 million Term Loan Facility.  MSD Partners, together with its affiliate, MSD Capital, L.P. (“MSD Capital”) own approximately 30% of the outstanding shares of the Company’s common stock.

In July 2019, we revised our credit agreement to explicitly permit the repurchase of equity interests by the company pursuant to the stock purchase program that was approved by our Board of Directors.

Additionally on October 1, 2018, we entered into a $40.0 million revolving Credit Agreement (the “ABL Credit Facility”), including availability for letters of credit in an aggregate amount at any time outstanding not to exceed $7.5 million. Availability under the ABL Credit Facility is subject to a borrowing base calculated based on 85% of the net amount of our eligible accounts receivable, minus reserves. The ABL Credit Facility has a maturity date of the earlier of October 1, 2023 or the maturity date of the Term Loan Credit Agreement.

At our election, interest under the ABL Credit Facility is determined by reference at our option to either (i) a “base rate” equal to the higher of (a) the federal funds effective rate plus 0.05%, (b) LIBOR with an interest period of one month, plus 1.0%, and (c) the prime rate of Wells Fargo, plus in each case, an applicable base rate margin ranging from 1.0% to 1.5% based on quarterly availability, or (ii) a revolving loan rate equal to LIBOR for the applicable interest period plus an applicable LIBOR margin ranging from 2.0% to 2.5% based on quarterly availability. We also pay, on a quarterly basis, a commitment fee of 0.375% (or 0.25% at any time when revolver usage is greater than 50% of the maximum credit) per annum on the unused portion of the ABL Credit Facility commitment.

The ABL Credit Facility contains a springing fixed charge coverage ratio covenant of 1.00 to 1.00 that is tested when availability is less than 10% of the maximum credit. The ABL Credit Facility also contains other customary affirmative and negative covenants, including limitations on indebtedness, liens, fundamental changes, asset dispositions, restricted payments, investments and transactions with affiliates. The ABL Credit Facility also provides for customary events of default, including breaches of material covenants, defaults under the Term Loan Agreement or other material agreements for indebtedness, and a change of control. We are in compliance with our covenants as of March 31, 2020.

The obligations under the ABL Credit Facility are secured by a first priority lien on Priority Collateral, which includes all accounts receivable and deposit accounts, and a second priority lien on the Term Priority Collateral, and are unconditionally guaranteed by all of our current and future direct and indirect subsidiaries.  As of March 31, 2020, the weighted-average interest rate on our borrowings was 9.84%.  At March 31, 2020, the borrowing base under our ABL Credit Facility was $20.1 million, and we had $8.6 million of availability remaining of our $40.0 million commitment on that date.

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Revenue from Contracts with Customers

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customer

Revenue from Contracts with Customers

The following table summarizes revenues from our contracts disaggregated by revenue generating activity contained therein for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
(in thousands)	2020		2019
Dayrate drilling	$	34,478	$	56,451
Mobilization	1,541		1,260
Reimbursables	2,448		1,604
Early termination	27		—
Capital modification	—		10
Intangible	—		1,033
Total revenue	$	38,494	$	60,358

The following table provides information about receivables and contract liabilities related to contracts with customers. We had no contract assets as of March 31, 2020 or December 31, 2019.

(in thousands)	March 31, 2020			December 31, 2019
Receivables, which are included in “Accounts receivable, net”	$	26,752		$	35,378
Contract liabilities, which are included in “Accrued liabilities - deferred revenue”	$	(505	)	$	(311	)

Significant changes in the contract liabilities balance during the period are as follows:

	Three Months Ended March 31,
(in thousands)	2020			2019
Revenue recognized that was included in contract liabilities at beginning of period	$	311		$	732
Increase in contract liabilities due to cash received, excluding amounts recognized as revenue	$	(505	)	$	(479	)

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2020. The estimated revenue does not include amounts of variable consideration that are constrained.

	Year Ending December 31,
(in thousands)	2020		2021		2022		2023
Revenue	$	505	$	—	$	—	$	—

The amounts presented in the table above consist only of fixed consideration related to fees for rig mobilizations and demobilizations, if applicable, which are allocated to the drilling services performance obligation as such performance obligation is satisfied. We have elected the exemption from disclosure of remaining performance obligations for variable consideration. Therefore, dayrate revenue to be earned on a rate scale associated with drilling conditions and level of service provided for each fractional-hour time increment over the contract term and other variable consideration such as penalties and reimbursable revenues, have been excluded from the disclosure.

Contract Costs

We capitalize costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligations under the contract and (iii) are expected to be recovered through revenue generated under the contract. These costs, which principally relate to rig mobilization costs at the commencement of a new contract, are deferred as a current or noncurrent asset (depending on the length of the contract term), and amortized ratably to contract drilling expense as services are rendered over the initial term of the related drilling contract. Such contract costs, recorded as “Prepaid expenses and other current assets”, amounted to $0.5 million and $0.1 million on our consolidated balance sheets at March 31, 2020 and December 31, 2019, respectively. During the three months ended March 31, 2020 and 2019 contract costs increased by $1.2 million and $0.5 million, respectively, and we amortized $0.8 million and $0.7 million of contract costs.