Independence Contract Drilling, Inc. (NYSE:ICD) Q4 2022 Earnings Call Transcript

I think everybody knows that. The Permian and Haynesville are home markets for us. Yes, we have worked in Eagle Ford. Yes, we’ve worked in other in the Chalk. But these two basins are home for us where we have a very strong reputation. And as you know, Steve, none of that would be possible if it wasn’t for the hard work and dedication of our people, so yes, I am very optimistic that we are going to be successful in doing that without having to significantly drop day rates. In the process, we are only talking about 5 rigs, right, in a 300-rig market. And like I said, we posted a PowerPoint this morning. And Phillip did some really good analysis out there. There is a slide there. I referred to it as the Pac Man slide, where we have put some analysis to this question.

And the way we look at it in the Permian, there is roughly 40 of what we would call lower spec AC rigs. And then there is about two dozen SCR rigs that are running. I am ignoring the mechanicals because we are probably not the right tool for the work that the mechanical rigs are employing. But if you saw on both of those up, that’s 60ish rigs. That should be high grade opportunities for the super-spec pad-optimal fleet that we have. And like I said, we are only moving 5. I don’t think you are going to see a mass exodus of rigs out of the Haynesville. Certainly, we are going to move a handful. I suspect some others might move a few. But yes, I am very confident we are going to be able to do this. Are we going to be able to move all 5 without a single day of whitespace?

Hopefully, we can. But I would assume there is a small break in one or two of those. But we think that we kind of hit the bottom in terms of that transition here in the second quarter. But certainly, by the end of the year and I would hope within the fourth quarter, we are back to 20 rigs run €“ 21 rigs running and position for what should be a really good 2024 when you think about the macro.

Steve Ferazani: Excellent, excellent. Appreciate the explanation. And if you can just walk through a little bit in terms of the mobilization time how you are paid, I know Phillip gave some detail on pricing the average rig count in 2Q and then some of the costs, but in terms of the downtime as you move the time it takes to move from Haynesville to Permian now, how you get paid during that interim, just a little bit of detail there to explain it to everyone?

Anthony Gallegos: Yes. Steve, it’s really a long rig move is what it is. And look, we €“ a 1 year, 1.5 year ago, we were moving rigs from Permian to Haynesville and now we are going back. So the entire time to affect that mobilization is 7 days, 10 days. Our contracts in the Haynesville have demobilization provisions. There is typically a demobilization fee. Sometimes that that’s back to Houston, sometimes there is a lump-sum. And what we are doing to mitigate the financial impact is taking the demote fee that we would receive to bring the rig back to Houston. To the extent, we have to top it off to pay all of the trucking, we are doing that. And it’s really not as big of a financial hit as you might think. I think where the exposure is, is if we are not successful moving them straight from one location to another, in other words, contract to contract and there is idle time, because we see this as a relatively short-term phenomenon, our plan is to keep the crews.