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 June 30, 2014

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.)
11601 North Galayda Street Houston, Texas 77086	77086
(Address of principal executive offices)	(Zip code)

(281) 598-1230

(Registrant’s telephone number, including area code)

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   ¨    No  x

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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

24,355,155 shares of the registrant’s Common Stock were outstanding as of September 15, 2014.

INDEPENDENCE CONTRACT DRILLING, INC.

Index to Form 10-Q

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013	4
Statements of Operations for the three and six months ended June 30, 2014 and 2013 (Unaudited)	5
Statements of Stockholders’ Equity for the six months ended June 30, 2014 (Unaudited)	6
Statements of Cash Flows for the six months ended June 30, 2014 and 2013 (Unaudited)	7
Notes to the Unaudited Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4. Controls and Procedures	26
Part II. OTHER INFORMATION
Item 1. Legal Proceedings	27
Item 1A. Risk Factors	27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6. Exhibits	28
Signatures	30

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in this report, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. 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. The forward-looking statements in this report speak only as of the date of this report; we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. 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:

• our inability to implement our business and growth strategy;

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

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

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

• inability to maintain or increase pricing on our contract drilling services;

• delays in construction or deliveries of our new land drilling rigs;

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

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

• our inability to raise sufficient funds through debt financing and equity issuances needed to fund our planned rig construction projects;

• 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;

• overcapacity and competition in our industry;

• 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;

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

• differences in our future results of operations compared to GES, which is currently deemed to be our accounting predecessor;

• lack of operating history as a contract drilling company; and

• uncertainties associated with any registration statement, including financial statements, we may be required to file with the SEC.

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 quarterly report and in our prospectus filed pursuant to rule 424(b), under the Securities Act of 1933, as amended, with the Securities and Exchange Commission on August 11, 2014. 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.

3

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Independence Contract Drilling, Inc.

Balance Sheets

(in thousands, except share data)

	June 30, 2014			December 31, 2013
Assets	(Unaudited)
Cash and cash equivalents	$	2,873		$	2,730
Accounts receivable, net	10,134			9,089
Inventory	1,826			1,128
Vendor advances	7,736			6,168
Prepaid expenses and other current assets	3,983			2,042
Total current assets	26,552			21,157
Property, plant and equipment, net	173,808			129,488
Intangible assets, net	20,988			22,357
Goodwill	11,007			11,007
Other long-term assets	1,871			959
Total assets	$	234,226		$	184,968
Liabilities and Stockholders’ Equity
Liabilities
Accounts payable	$	16,483		$	9,061
Accrued liabilities	5,241			4,167
Deferred taxes	149			149
Income taxes payable	—			157
Total current liabilities	21,873			13,534
Long-term debt	64,210			19,780
Warrant derivative liability	1,809			3,189
Deferred taxes	2,375			3,593
Total liabilities	90,267			40,096
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, 100,000,000 shares authorized; 12,464,625 and 12,464,625 issued; 12,397,900 and 12,397,900 outstanding	124			124
Additional paid-in capital	153,851			152,615
Accumulated deficit	(9,270		)	(7,121		)
Treasury shares, at cost, 66,725 shares	(746		)	(746		)
Total stockholders’ equity	143,959			144,872
Total liabilities and stockholders’ equity	$	234,226		$	184,968

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

4

Independence Contract Drilling, Inc.

Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	14,661		$	9,784		$	28,210		$	18,041
Costs and expenses
Operating costs	9,283			6,787			18,060			12,724
Selling, general and administrative	2,073			1,990			4,167			4,088
Depreciation and amortization	3,901			2,366			7,317			4,491
Asset impairment, net	(2,038		)	—			2,612			—
Gain on disposition of assets	(2		)	—			(191		)	(41		)
Total cost and expenses	13,217			11,143			31,965			21,262
Operating income (loss)	1,444			(1,359		)	(3,755		)	(3,221		)
Interest expense, net	(598		)	(97		)	(992		)	(97		)
Gain (loss) on warrant derivative	1,377			355			1,380			(78		)
Income (loss) before income taxes	2,223			(1,101		)	(3,367		)	(3,396		)
Income tax expense (benefit)	667			(432		)	(1,218		)	(1,031		)
Net income (loss)	$	1,556		$	(669	)	$	(2,149	)	$	(2,365	)
Earnings (loss) per share:
Basic	$	0.13		$	(0.05	)	$	(0.18	)	$	(0.19	)
Diluted	$	0.13		$	(0.05	)	$	(0.18	)	$	(0.19	)
Weighted average number of common shares outstanding:
Basic	12,263			12,179			12,257			12,177
Diluted	12,306			12,179			12,257			12,177

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

5

Independence Contract Drilling, Inc.

Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share data)

	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
Balances at December 31, 2013	12,397,900	$	124	$	152,615	$	(7,121	)	$	(746	)	$	144,872
Stock-based compensation	—	—		1,236		—			—			1,236
Net loss	—	—		—		(2,149		)	—			(2,149		)
Balances at June 30, 2014	12,397,900	$	124	$	153,851	$	(9,270	)	$	(746	)	$	143,959

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

6

Independence Contract Drilling, Inc.

Statements of Cash Flows

(Unaudited)

(in thousands)

	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities
Net loss	$	(2,149	)	$	(2,365	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	7,317			4,491
Asset impairment, net	2,612			—
Stock-based compensation	1,022			872
(Gain) loss on warrant derivative	(1,380		)	78
Gain on disposition of assets	(191		)	(41		)
Deferred taxes	(1,218		)	(1,120		)
Amortization of deferred financing costs	329			49
Bad debt expense	—			144
Changes in assets and liabilities
Accounts receivable	(1,045		)	(3,896		)
Inventory	(958		)	(36		)
Vendor advances	(1,568		)	(764		)
Prepaid expenses and other assets	(1,945		)	(793		)
Accounts payable and accrued liabilities	2,486			2,653
Income taxes payable	(160		)	84
Related party receivable	—			442
Net cash provided by (used in) operating activities	3,152			(202		)
Cash flows from investing activities
Purchases of property, plant and equipment	(48,731		)	(29,833		)
Proceeds from insurance claim	2,038			—
Proceeds from the sale of property, plant and equipment	488			275
Net cash used in investing activities	(46,205		)	(29,558		)
Cash flows from financing activities
Borrowings under of credit facility	80,306			—
Repayments under credit facility	(35,875		)	—
Deferred financing costs	(1,235		)	(1,102		)
Net cash provided by (used for) financing activities	43,196			(1,102		)
Net increase (decrease) in cash and cash equivalents	143			(30,862		)
Cash and cash equivalents
Beginning of period	2,730			37,407
End of period	$	2,873		$	6,545
Supplemental disclosure of cash flow information
Cash paid during the period for taxes	$	160		—
Cash paid during the period for interest	$	1,079		$	—
Supplemental disclosure of non-cash investing and financing activity
Stock-based compensation capitalized as property, plant and equipment	$	214		$	196
Purchases of property plant and equipment in accounts payable	$	7,985		$	8,023

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

7

INDEPENDENCE CONTRACT DRILLING, INC.

Notes to Financial Statements

1. Nature of Operations

Independence Contract Drilling, Inc. (“we”, “us”, “our”, the “Company” or “ICD”) was 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 construct, own and operate a premium rig fleet comprised entirely of newly constructed, technologically advanced, custom designed ShaleDriller™ rigs that are specifically engineered and designed to optimize the development of our customers’ most technically demanding oil and gas properties. As of June 30, 2014, we had eight rigs operating, one rig being repaired and fitted with a multi-directional walking system and two additional rigs under construction.

Damage Sustained on Rig 102

On March 9, 2014, one of our non-walking drilling rigs (Rig 102) suspended drilling operations due to damage to the rig’s mast and other operating equipment. We believe the cost to repair and replace this equipment is covered by insurance, subject to a $250,000 deductible. During the period that this rig is under repair, we intend to upgrade this rig by adding a substructure and other equipment that includes a multi-directional walking system. The cost of the upgrades will not be covered by insurance. The repairs and upgrades are expected to be completed in October 2014. We recorded an asset impairment charge of $4.7 million during the three months ended March 31, 2014, representing a preliminary estimate of the damage sustained to the rig. During the three months ended June 30, 2014, we recorded approximately $2.3 million in insurance proceeds related to repairs to the damaged rig ($2.0 million) and out-of-pocket expenses ($0.3 million), for which we had received a partial proof of loss from the insurance company. We expect to record additional insurance recoveries during the second half of 2014 when additional proofs of loss are obtained or proceeds are received. We are currently unable to accurately estimate the total amount of the insurance recoveries related to this matter.

Stock Split

On July 14, 2014, our board of directors approved a resolution to effect a 1.57-for-1 stock split of our common stock in the form of a stock dividend. The dividend was distributed on July 24, 2014 to holders of record as of July 21, 2014. Following the stock dividend, we had 12,397,900 shares of common stock outstanding. The earnings per share information and all common stock information in these financial statements have been retroactively restated for all periods presented to reflect this stock split.

Initial Public Offering

On August 7, 2014, our registration statement on Form S-1 (File No. 333-196914) was declared effective by the Securities and Exchange Commission for our initial public offering pursuant to which we sold an aggregate of 11,500,000 shares of our common stock at a price to the public of $11.00 per share, including 1,500,000 share of our common stock pursuant to the exercise by the underwriters in full of their option to purchase additional shares of common stock to cover over-allotments. Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and Tudor, Pickering, Holt & Co. Securities, Inc. acted as book runners. We completed our initial public offering of 10,000,000 shares of our common stock on August 13, 2014 and subsequently closed the issuance and sale of the additional 1,500,000 shares of our common stock pursuant to the underwriters’ option to purchase additional shares of common stock on August 29, 2014. Our common stock trades on the New York Stock Exchange under the ticker symbol "ICD".

2. Interim Financial Information

These unaudited financial statements include all the accounts of ICD, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These financial statements should be read along with our audited financial statements for the year ended December 31, 2013 as certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted. 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 equity for all periods presented.

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

Interim results for the three and six months ended June 30, 2014 may not be indicative of results that will be realized for the full year ending December 31, 2014.

8

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

In April 2014, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the reporting of discontinued operations and the disclosures related to disposals of components of an entity. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. This guidance is effective for interim and annual periods that begin after December 15, 2014. Early application is permitted. We are currently evaluating the impact this will have on our consolidated financial statements.

In May 2014, the FASB issued an accounting standards update to provide guidance on the recognition of revenue from customers. Under this guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. This guidance also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty, if any, of revenue and cash flows arising from contracts with customers. This guidance is effective for interim and annual periods beginning after December 15, 2016. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In June 2014, the FASB issued an accounting standards update to provide guidance on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. This guidance is effective for interim and annual periods beginning after December 15, 2015. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

3. Financial Instruments and Fair Value

The carrying value of certain of our assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable and accounts payable, approximates their fair value due to the short-term nature of such instruments. Our financial instruments that are subject to fair value measurements consist of a warrant to purchase 2.2 million shares of our common stock, held by Global Energy Services Operating, LLC (the "GES Warrant") and long-term debt.

The GES Warrant contained a provision that protects the holder from a decline in the issue price of our common stock, or a “down-round” provision. Down-round provisions reduce the exercise or conversion price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise or conversion price of those instruments or issues new warrants or convertible instruments that have a lower exercise or conversion price. As a result of this provision, we accounted for this warrant as a liability.

In accordance with Accounting Standards Codification 815 “Accounting for Derivative Instruments and Hedging Activities,” as amended, this warrant derivative liability is marked-to-market each reporting period, with a corresponding non-cash gain or loss charged to the current period. 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; 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.

9

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

The warrant liability was recorded at fair value using Level 3 inputs for the three and six months ended June 30, 2013. Significant Level 3 inputs used to calculate the fair value of the warrants include the estimated share price on the valuation date, expected volatility, risk-free interest rate and management’s assumptions regarding the likelihood of a future repricing of these warrants pursuant to the adjustment provision. Due to the initial public offering completed on August 13, 2014, the warrant liability was recorded at fair value using Level 1 inputs for the three and six months ended June 30, 2014. It is expected that Level 1 inputs will be used going forward to value the warrant liability.

As of June 30, 2014 and December 31, 2013, the fair value of the GES Warrant was approximately $1.8 million and $3.2 million, respectively. We recorded a non-cash gain (loss) on warrant derivative associated with changes in fair value of and $1.4 million and $1.4 million for the three and six months ended June 30, 2014, respectively and $0.4 million and $(0.1) million for the three and six months ended and June 30, 2013, respectively.

The following provides a reconciliation of financial liabilities measured at fair value on a recurring basis:

(in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Beginning balance	$	3,186		$	4,657		$	3,189		$	4,224
(Gain) loss on warrant derivative	(1,377		)	(355		)	(1,380		)	78
Ending balance	$	1,809		$	4,302		$	1,809		$	4,302

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, or on the amount of future cash flows associated with the debt, discounted using our current borrowing rate for comparable debt instruments. The estimated fair value of our long-term debt totaled $64.5 million and $18.6 million as of June 30, 2014 and December 31, 2013, respectively, compared to carrying amounts of $64.2 million and $19.8 million as of June 30, 2014 and December 31, 2013, respectively.

Fair value measurements were applied with respect to our non-financial assets and liabilities measured on a non-recurring basis, which would consist of measurements primarily related to goodwill, intangible assets and other long-lived assets, and assets acquired and liabilities assumed in the contribution transactions, completed March 2, 2012 pursuant to an asset contribution and share subscription agreement that involved the Company acquiring certain assets and liabilities of Global Energy Services Operating, LLC and Independence Contract Drilling LLC.

4. Inventory

Inventory consisted of the following:

(in thousands)	June 30, 2014		December 31, 2013
Rig components and supplies	$	1,826	$	1,128

We determined that no reserve for obsolescence was needed at June 30, 2014 or December 31, 2013. No inventory obsolescence expense was recognized during the three and six months ended June 30, 2014 and 2013.

10

5. Accrued Liabilities

Accrued liabilities consisted of the following:

(in thousands)
	June 30, 2014		December 31, 2013
Accrued salaries and other compensation	$	1,057	$	1,868
Insurance	1,287		485
Deferred mobilization revenues	965		684
Property, sales and other tax	1,623		787
Other	309		343
	$	5,241	$	4,167

6. Long-Term Debt

On May 10, 2013, we entered into a credit agreement (the “Credit Facility”) with asyndicate of financial institutions led by CIT Finance, LLC, that provided for a committed $60.0 million revolving credit facility and an additional uncommitted $20.0 million accordion feature that allowed for future increases in the facility.

On February 21, 2014 we amended our Credit Facility in order to increase the aggregate commitments from $60.0 million to $125.0 million. The final $25.0 million of commitments under the amended Credit Facility is subject to us obtaining additional equity or indebtedness, subordinated to the Credit Facility, of at least $40.0 million (“Junior Event”). The Credit Facility, as amended, also provided for an additional uncommitted $25.0 million accordion feature that allows for future increases in the facility. On May 12, 2014 we amended our Credit Facility again, to expand the commitments not subject to the Junior Event from $100.0 million to $110.0 million. The amendment also adjusted the minimum EBITDA covenants contained in the Credit Facility to reflect the removal of Rig 102 from service during the pendency of its upgrade.

Borrowings under the Credit Facility are subject to a borrowing base formula that allows for borrowings of up to 85% of eligible trade accounts receivable not more than 90 days outstanding, plus up to 75% of the appraised forced liquidation value of our eligible, completed and owned drilling rigs. Beginning on February 21, 2015, the 75% advance rate on our eligible completed and owned drilling rigs decreases by 1.25% per quarter. The amended Credit Facility matures on February 21, 2017.

At our election, interest under the Credit Facility is determined by reference at our option to either (i) the London Interbank Offered Rate (“LIBOR”), plus 4.5% based upon availability under the Credit Facility or (ii) a “base rate” equal to the higher of the prime rate published by JP Morgan Chase Bank or three-month LIBOR plus 1%, plus in each case, an amount ranging from 3.0% to 3.5% based upon availability under the Credit Facility. We also pay, on a quarterly basis, a commitment fee of 0.50% per annum on the unused portion of the Credit Facility commitment. The obligations under the Credit Facility are secured by first priority liens on all shares of capital stock of each of our material present and future subsidiaries and substantially all of our assets, including all of our drilling rigs and equipment.

The amended Credit Facility contains various financial covenants including minimum EBITDA, fixed charge coverage ratio, rig utilization ratio and limitations on maintenance capital expenditures. Additionally, there are restrictive covenants that limit our ability to, among other things: incur or guarantee additional indebtedness or issue disqualified capital stock; transfer or sell assets; pay dividends or distributions, redeem subordinated indebtedness, make certain types of investments or make other restricted payments; create or incur liens; consummate a merger, consolidation or sale of all or substantially all assets; and engage in business other than a business that is the same or similar to the current business and reasonably related businesses.

Outstanding borrowings under the Credit Facility totaled $64.2 million at June 30, 2014, at a weighted average interest rate of 4.79%. Remaining availability under the Credit Facility is $25.0 million at June 30, 2014 and we are currently in compliance with all covenants under the Credit Facility.

11

7. Stock-Based Compensation

In March 2012, we adopted the 2012 Omnibus Long-Term Incentive Plan (the “2012 Plan”) providing for common stock-based awards to employees and to non-employee Directors. The 2012 Plan permits the granting of various types of awards, including stock options and restricted stock awards. Restricted stock 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. Stock options expire 10 years after the grant date. We have the right to satisfy option exercises from treasury shares and from authorized but unissued shares.There were no stock options or restricted stock granted during the six months ended June 30, 2014.

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

(in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Compensation cost recognized:
Stock options	$	420	$	266	$	692	$	535
Restricted stock	262		290		544		533
Total stock-based compensation	$	682	$	556	$	1,236	$	1,068

Approximately $0.1 million and $0.2 million in stock-based compensation was capitalized in connection with rig construction activity during the three and six months ended June 30, 2014, respectively. Approximately $0.1 million and $0.2 million in stock-based compensation was capitalized for the three and six months ended June 30, 2013, respectively.

Stock Options

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

There were no stock options granted during the six month period ended June 30, 2014. The fair value calculations for options granted during the six months ended June 30, 2013 are based on the following weighted-average assumptions:

	2013
Risk-free interest rate	0.88	%
Expected volatility	40	%
Dividend yield	—
Expected term	5.0 years

Risk-Free Interest Rate

The risk-free interest rate is based on U.S. Treasury securities for the expected term of the option.

Expected Volatility Rate

Expected volatilities are based on an analysis of volatilities for publicly traded companies engaged in the contract drilling business.

Expected Dividend Yield

We have no plans to pay dividends in the foreseeable future.

Expected Term

The expected term of the options granted represents the period of time that they are expected to be outstanding. We do not have any operating history with which to estimate the expected term, and have based our estimate upon the data available for other contract drilling companies and management estimates.

12

Based on these calculations, the weighted-average fair value per option granted during the six months ended June 30, 2013 was $4.27.

A summary of stock option activity and related information for the six months ended June 30, 2014 is as follows:

	Six Months Ended June 30, 2014
	Options	Weighted Average Exercise Price
Outstanding at January 1, 2014	963,196	$	12.74
Granted	—	—
Exercised	—	—
Forfeited/expired	—	—
Outstanding at June 30, 2014	963,196	$	12.74
Exercisable at June 30, 2014	541,389	$	12.74

A summary of our unvested stock options as of June 30, 2014, and the changes during the six months then ended is presented below:

	Six Months Ended June 30, 2014
	Outstanding		Weighted Average Grant-Date Fair Value
Unvested as of January 1, 2014	620,412		$	4.42
Granted	—		—
Vested	(198,605	)	4.83
Forfeited/expired	—		—
Unvested as of June 30, 2014	421,807		$	4.22

The number of options vested at June 30, 2014 was 541,389 with a weighted average remaining contractual life of 7.73 years and a weighted-average exercise price of $12.74 per share.

As of June 30, 2014, the unrecognized compensation cost related to outstanding stock options was $1.3 million. This cost is expected to be recognized over a weighted-average period of 1.0 year.

Restricted Stock

Restricted stock awards consist of our common stock and vest over three to four 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 fair market value of our shares on the grant date. As of June 30, 2014, there was $1.0 million of total unrecognized compensation cost related to unvested restricted stock awards. This cost is expected to be recognized over a weighted-average period of 0.8 years.

A summary of the status of our restricted stock awards as of June 30, 2014, and of changes in restricted stock outstanding during the six months ended June 30, 2014, is as follows:

13

	Six Months Ended June 30, 2014
	Shares		Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2014	147,451		$	12.48
Granted	—		—
Vested	(22,766	)	12.24
Forfeited/expired	—		—
Outstanding at June 30, 2014	124,685		$	12.53

8. Stockholders’ Equity and Earnings (loss) per Share

As of June 30, 2014, we have a total of 12,397,900 shares of common stock, $0.01 par value, issued and outstanding including 124,685 shares of restricted stock and 66,725 shares held as treasury stock. Total authorized common stock is 100,000,000 shares.

Basic earnings (loss) per common share (“EPS”) is 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:

(in thousands, except per share data)	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
Net income (loss) (numerator):	$	1,556	$	(669	)	$	(2,149	)	$	(2,365	)
Earnings (loss) per share:
Basic	$	0.13	$	(0.05	)	$	(0.18	)	$	(0.19	)
Diluted	$	0.13	$	(0.05	)	$	(0.18	)	$	(0.19	)
Shares (denominator):
Weighted-average number of shares outstanding - basic	12,263		12,179			12,257			12,177
Net effect of dilutive stock options and restricted stock	43		—			—			—
Weighted-average number of shares outstanding - diluted	12,306		12,179			12,257			12,177

For all periods presented, the computation of diluted earnings (loss) per share excludes certain outstanding stock options and warrants because their inclusion would be anti-dilutive. The number of options and warrants that were excluded from diluted earnings (loss) per share were 2,992,420 and 3,205,548 during the three months ended June 30,2014 and 2013 respectively, and 3,161,196 and 3,205,548 during the six months ended June 30,2014 and 2013 respectively. Restricted stock, which are not participating securities, excluded from our basic and diluted earnings (loss) per share, because they are anti-dilutive, were zero and 218,230 for the three months ended June 30,2014 and 2013, respectively and 124,685 and 218,230 for the six months ended June 30,2014 and 2013, respectively.

9. Commitments and Contingencies

Purchase Commitments

As of June 30, 2014 we had outstanding purchase commitments to a number of suppliers totaling $7.6 million related primarily to the construction of drilling rigs.

14

Lease Commitments

We lease certain buildings, equipment and vehicles under non-cancelable operating leases. The minimum rental commitments under non-cancelable operating leases, with lease terms in excess of one year subsequent to June 30, 2014, were as follows:

(in thousands)
2014	$	286
2015	329
2016	210
2017	47
	$	872

Contingencies

Our operations inherently expose us to various liabilities and exposures that could result in third party lawsuits, claims and other causes of action. While we insure against the risk of these proceedings to the extent deemed prudent by our management, we can offer no assurance that the type or value of this insurance will meet the liabilities that may arise from any pending or future legal proceedings related to our business activities.

10. Related Parties

During 2011, we entered into the Contribution Agreement with GES. Two of our directors as of June 30, 2014, also were directors of the parent company of GES.

We purchased certain items used in the construction of our drilling rigs from an affiliate of GES. Total purchases from this vendor during the six months ended June 30, 2014 amounted to $0.6 million and we had outstanding payables totaling $0.4 million with this vendor as of June 30, 2014. We did not transact any business with this vendor in the prior year periods.

One of our directors is also a director of Axon Pressure Products. Total purchases from this vendor were $2.6 million and $0.4 million during the six months ended June 30, 2014 and the twelve months ended December 31, 2013, respectively. We did not have any outstanding payables with this vendor as of June 30, 2014 and December 31, 2013 respectively.

One of our directors is also a director of one of our customers. We recorded $1.4 million in revenues with this customer for the six months ended June 30, 2014 and had outstanding trade receivables totaling $0.0 million and $0.9 million as of June 30, 2014 and December 31, 2013, respectively. We did not transact any business with this customer for the three and six months ended June 30, 2013.

15

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 prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities Exchange Commission on August 11, 2014 (the “Prospectus”). 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 set forth under “Risk Factors” or in other parts of the Prospectus.

Our Company

We provide land-based contract drilling services for oil and natural gas producers targeting unconventional resource plays in the United States. We construct, own and operate a premium fleet comprised entirely of newly constructed, technologically advanced, custom designed ShaleDriller™ rigs that are specifically engineered and designed to optimize the development of our customers’ most technically demanding oil and gas properties. Our first rig began drilling in May 2012.

Our standardized fleet consists of 11 premium rigs as of June 30, 2014. Of these 11 rigs, one was completed in August 2014, one is currently under construction and scheduled for completion in December of 2014, and one is being upgraded with an integrated multi-directional walking system scheduled for completion in October 2014. After this upgrade, nine of our eleven rigs will contain our integrated multi-directional walking system that is specifically designed to optimize pad drilling for our customers.

Our business depends on the level of exploration and production activity by oil and gas companies operating in the U.S., and in particular, the regions where we actively market our contract drilling services. The oil and gas exploration and production industry is a historically cyclical industry characterized by significant changes in the levels of exploration and development activities. Oil and 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 gas price volatility 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 U.S. and the regions where we market our contract drilling services, whether resulting from changes in oil and gas prices or otherwise, could materially and adversely affect our business.

Recent Developments

On March 9, 2014, one of our non-walking drilling rigs (Rig 102) suspended drilling operations due to damage to the rig’s mast and other operating equipment. We believe the cost to repair and replace this equipment is largely covered by insurance, subject to a $250,000 deductible. During the period that this rig is under repair, we intend to upgrade this rig by adding a substructure and other equipment that includes a multi-directional walking system. The cost of the upgrades will not be covered by insurance. The repairs and upgrades are expected to be completed in October 2014. We recorded an asset impairment charge of approximately $4.7 million during the three months ended March 31, 2014, representing a preliminary estimate of the damage sustained to the rig. During the three months ended June 30, 2014, we recorded approximately $2.3 million in insurance proceeds related to repairs to the damaged rig ($2.0 million) and out-of-pocket expenses ($0.3 million), for which we had received a partial proof of loss from the insurance company. We expect to record additional insurance recoveries during the second half of 2014 when additional proofs of loss are obtained or proceeds are received. We are currently unable to accurately estimate the total amount of the insurance recoveries related to this matter.

Stock Split

On July 14, 2014, our board of directors approved a resolution to effect a 1.57-for-1 stock split of our common stock in the form of a stock dividend. The dividend was distributed on July 24, 2014 to holders of record as of July 21, 2014. Following the stock dividend, we had 12,397,900 shares of common stock outstanding. The earnings per share information and all common stock information in this discussion and analysis have been retroactively restated for all periods presented to reflect this stock split.

Initial Public Offering

On August 7, 2014, our registration statement on Form S-1 (File No. 333-196914) was declared effective by the Securities and Exchange Commission for our initial public offering pursuant to which we sold an aggregate of 11,500,000 shares of our common stock at a price to the public of $11.00 per share, including 1,500,000 share of our common stock pursuant to the exercise by the underwriters in full of their option to purchase additional shares of common stock to cover

16

over-allotments. Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and Tudor, Pickering, Holt & Co. Securities, Inc. acted as book runners. We completed our initial public offering of 10,000,000 shares of our common stock on August 13, 2014 and subsequently closed the issuance and sale of the additional 1,500,000 shares of our common stock pursuant to the underwriters’ option to purchase additional shares of common stock on August 29, 2014. Our common stock trades on the New York Stock Exchange under the ticker symbol "ICD."

Our Revenues

We earn contract drilling revenues pursuant to drilling contracts entered into with our customers. We perform drilling services on a “daywork” contract basis, under which we charge a fixed 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. Our rigs generally earn a reduced rate while the rig is moving between wells or drilling locations, or on standby waiting for the customer, while under the contract.

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 believe we are one of the few land drillers that utilizes a safety management system that complies with the Bureau of Safety and Environmental Enforcement’s SEMS II workplace safety rules. 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.

● Utilization. Rig utilization measures the total amount of time that our rigs are operating under a contract during a particular period. We measure utilization by dividing the total number of Operating Days 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 operating under a contract, beginning when the rig spuds its initial well under the contract, and ending with the completion of the rig’s demobilization. Operating Days includes non-operating days associated with repairs and maintenance, while under contract, whether a day rate is earned or not.

● 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 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.

17

Factors Affecting Comparability of Historical Operating and Financial Results

Our future results of operations may not be comparable to our historical results of operations for the reasons described below:

● Increased Operating Costs Associated with Acceleration of Rig Construction. We intend to utilize the proceeds from our initial public offering and borrowings under our existing revolving credit facility to fund the construction of up to seven additional ShaleDriller™ rigs for completion in 2015, which will accelerate the growth of our drilling fleet. In addition to our rig crews who participate in our rig construction process, we also hire and train additional highly skilled spare crew personnel to work on our drilling rigs and eventually be assigned as permanent members of drilling crews. During the three months and six months ended June 30, 2014, the total costs associated with these additional personnel were approximately $0.5 million and $0.8 million respectively, and during the three months and six months ended June 30, 2013, the total costs associated with these additional personnel were approximately $0.3 million and $0.9 million respectively. We expect to increase our investment in this program in 2014 and 2015 as we expand the pace at which we construct and introduce rigs into our fleet, which we believe will require incrementally greater investment in training additional rig personnel. These costs are included in our direct operating costs, but we analyze them separately and thus exclude them when calculating our operating cost per day metrics.

● Costs Associated with Becoming a Public Company. We expect that our general and administrative expenses will increase as a result of being a publicly traded company, including expenses to comply with reporting obligations under the Securities Exchange Act of 1934, as amended, expenses associated with Sarbanes-Oxley Act of 2002 compliance, expenses associated with listing on the New York Stock Exchange, additional personnel costs, independent auditors fees, legal fees, investor relations expenses, registrar and transfer agent fees, and director and officer liability insurance costs.

● Changes in Components of our Executive and Director Compensation. Certain of the equity awards granted to directors, executives and employees in 2012 and 2013 will vested upon completion of our initial public offering and resulted in the acceleration of unrecognized compensation expense associated with these awards. Assuming our initial public offering occurred on June 30, 2014, we would have recognized an additional $0.2 million in non-cash stock-based compensation expense associated with this accelerated vesting.

18

Results of Operations

The following summarizes our financial and operating data for the three and six months ended June 30, 2014 and 2013 (in thousands):

	Three Months Ended										Six Months Ended
	June 30, 2014			%		June 30, 2013			%		June 30, 2014			%		June 30, 2013			%
Revenues	$	14,661		100.0	%	$	9,784		100.0	%	$	28,210		100.0	%	$	18,041		100.0	%
Costs and expenses
Operating costs	9,283			63.3	%	6,787			69.4	%	18,060			64.0	%	12,724			70.5	%
Selling, general and administrative	2,073			14.1	%	1,990			20.3	%	4,167			14.8	%	4,088			22.7	%
Depreciation and amortization	3,901			26.6	%	2,366			24.2	%	7,317			25.9	%	4,491			24.9	%
Asset impairment, net	(2,038		)	(13.9	)%	—			—	%	2,612			9.3	%	—			—	%
Gain on disposition of assets	(2		)	—	%	—			—	%	(191		)	(0.7	)%	(41		)	(0.2	)%
Total cost and expenses	13,217			90.2	%	11,143			113.9	%	31,965			113.3	%	21,262			117.9	%
Operating income (loss)	1,444			9.8	%	(1,359		)	(13.9	)%	(3,755		)	(13.3	)%	(3,221		)	(17.9	)%
Interest expense, net	(598		)	(4.1	)%	(97		)	(1.0	)%	(992		)	(3.5	)%	(97		)	(0.5	)%
Gain (loss) on warrant derivative	1,377			9.4	%	355			3.6	%	1,380			4.9	%	(78		)	(0.4	)%
Income (loss) before income taxes	2,223			15.2	%	(1,101		)	(11.3	)%	(3,367		)	(11.9	)%	(3,396		)	(18.8	)%
Income tax expense (benefit)	667			4.5	%	(432		)	(4.4	)%	(1,218		)	(4.3	)%	(1,031		)	(5.7	)%
Net income (loss)	$	1,556		10.6	%	$	(669	)	(6.8	)%	$	(2,149	)	(7.6	)%	$	(2,365	)	(13.1	)%
Other financial and operating data
Number of completed rigs (end of period) (1)	8					5					8					5
Rig operating days(2)	636.1					420.0					1,243.4					747.0
Average number of operating rigs(3)	7.0					4.6					6.9					4.1
Rig utilization(4)	100.0		%			97.4		%			100.0		%			94.4		%
Weighted average dayrate(5)	$	22,671				$	21,864				$	22,385				$	22,137
Average revenue per operating day(6)	$	22,026				$	20,490				$	21,480				$	21,475
Average cost per operating day(7)	$	12,740				$	12,768				$	12,716				$	12,950
Average rig margin per operating day	$	9,286				$	7,722				$	8,764				$	8,525

(1) Number of completed rigs as of June 30, 2014, increased by three compared to the number of completed rigs as of June 30, 2013, reflecting the addition of four newly constructed rigs, offset by the removal of one of our non-walking rigs from our fleet during its upgrade with a new substructure that includes a multi-directional walking system.

(2) Rig operating days represent the number of days our rigs are operating under a contract during the period.

19

(3) Average number of operating rigs is calculated by dividing rig operating days 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 rigs are available during the applicable period.

(5) Weighted average dayrate represents the average contractual dayrate for our rig fleet weighted by the total number of days the rig operated under contract for the period.

(6) Average revenue per operating day represents total contract drilling revenues during the period divided by total operating days in the period. The following revenues are excluded in calculating average revenue per operating day; (i) revenues associated with reimbursement of out-of-pocket costs paid by customers of $0.6 million and $0.5 million during the three months ended June 30, 2014 and 2013, respectively, and $1.3 million and $0.8 million during the six months ended June 30, 2014 and 2013, respectively and (ii) direct revenues associated with repair and service and other revenues from third-party drilling contractors of $0.0 million and $0.2 million during the three months ended June 30, 2014 and 2013, respectively, and $0.7 million and $1.2 million during the six months ended June 30, 2014 and 2013, respectively.

(7) Average cost per operating day represents operating costs during the period divided by rig operating days during the period. The following costs are excluded in calculating average cost per operating day: (i) costs relating to out-of-pocket costs reimbursed by customers of $0.6 million and $0.5 million during the three months ended June 30, 2014 and 2013, respectively and $1.3 million and $0.8 million related to the six months ended June 30, 2014 and 2013, respectively, (ii) non-recurring rentals of drilling equipment of $0.0 million and $0.2 million during the three months ended June 30, 2014 and 2013, respectively, and $0.0 million and $0.5 million during the six months ended June 30, 2014 and 2013, respectively, (iii) new crew training costs of $0.5 million and $0.3 million during the three months ended June 30, 2014 and 2013, respectively, and $0.8 million and $0.9 million during the six months ended June 30, 2014 and 2013, respectively, and (iv) direct operating costs associated with repair and service and other revenues from third-party drilling contractors of $0.0 million and $0.4 million during the three months ended June 30, 2014 and 2013, respectively, and $0.1 million and $0.8 million for the six months ended June 30, 2014 and 2013, respectively.

Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Revenues

Revenues for the three months ended June 30, 2014 were $14.7 million, representing a 49.8%increase as compared to revenues of $9.8 million for the three months ended June 30, 2013. This increase was directly attributable to the addition of drilling rigs to our fleet between June 30, 2013 and June 30, 2014, which is reflected in the increase in our average number of operating rigs to 7.0 during the three months ended June 30, 2014 as compared to 4.62 during the three months ended June 30, 2013. On a revenue per operating day basis, our revenue per day increased7.5% to $22,026 during the three months ended June 30, 2014, as compared to revenue per day of $20,490 for the three months ended June 30, 2013. This increase resulted primarily from an increase in average dayrates as compared to the prior year period.

Operating Costs

Operating costs for the three months ended June 30, 2014 were $9.3 million, representing a 36.8% increase as compared to operating costs of $6.8 million for the three months ended June 30, 2013. This increase was directly related to the addition of drilling rigs to our fleet between June 30, 2013 and June 30, 2014. On a cost per operating day basis, our cost per operating day decreased to $12,740 per day during the three months ended June 30, 2014, representing a 0.2%decrease compared to cost per operating day of $12,768 for the three months ended June 30, 2013. This decrease is due to continued efficiencies and economies of scale as compared to the prior year period.

Selling, General and Administrative

Selling, general and administrative expense for the three months ended June 30, 2014 were $2.1 million, representing a 4.2%increase as compared to selling, general and administrative expense of $2.0 million for the three months ended June 30, 2013. As a percentage of revenue, selling, general and administrative expenses decreased to 14.1% during the three months ended June 30, 2014 from 20.3% during the three months ended June 30, 2013. This decrease is due to greater leverage as we continued expanding our operating rig fleet and associated revenues.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended June 30, 2014 was $3.9 million, representing a 64.9%increase compared to depreciation and amortization expense of $2.4 million for the three months ended June 30, 2013.

20

This increase was related to the introduction of new drilling rigs constructed by us throughout 2013 and 2014. We begin depreciating our rigs when they commence drilling operations.

Asset Impairment, net

On March 9, 2014, one of our non-walking drilling rigs (Rig 102) suspended drilling operations due to damage to the rig’s mast and other operating equipment. We believe the cost to repair and replace this equipment is covered by insurance, subject to a $250,000 deductible. During the period that this rig is under repair, we intend to upgrade this rig by adding a substructure and other equipment that includes a multi-directional walking system. The cost of the upgrades will not be covered by insurance. The repairs and upgrades are expected to be completed in October 2014. We recorded an asset impairment charge of $4.7 million during the three months ended March 31, 2014, representing a preliminary estimate of the damage sustained to the rig. During the three months ended June 30, 2014, we recorded approximately $2.3 million in insurance proceeds related to repairs to the damaged rig ($2.0 million) and out-of-pocket expenses ($0.3 million), for which we had received a partial proof of loss from the insurance company. We expect to record additional insurance recoveries during the second half of 2014 when additional proofs of loss are obtained or proceeds are received. We are currently unable to accurately estimate the total amount of the insurance recoveries related to this matter.

Interest Expense, net

Interest expense, net for the three months ended June 30, 2014 was $0.6 million, as compared to $0.1 million for the three months ended June 30, 2013. Borrowings under our revolving credit facility are primarily used to fund our rig construction activity and we did not begin making such borrowings until July 2013. Interest expense in the prior year period relates primarily to the amortization of deferred financing costs and commitment fees.

Gain (loss) on Warrant Derivative

As part of the consideration paid to GES for their contribution of our rig construction operations and intellectual property, we issued to GES a warrant to purchase approximately 2.2 million shares of our common stock, which expires on March 2, 2015. The terms of this warrant contained a feature that allows the exercise price to be adjusted in the event we issued any shares of common stock at a price below $12.74 per share during the term of the warrant. As a result of this feature, we have accounted for the warrant as a derivative liability on our balance sheet and have recorded changes in fair value each reporting period through earnings. At June 30, 2014, the fair value of the warrant was estimated at $1.8 million, which resulted in us recording a gain of approximately $1.4 million for the second quarter of 2014. At June 30, 2013, the fair value of the warrant was estimated at $4.3 million, and we recorded a non-cash gain of $0.4 million for the second quarter of 2013.

Income Tax Expense (Benefit)

The income tax expense recorded for the three months ended June 30, 2014 amounted to $0.7 million compared to an income tax benefit of $0.4 million for the three months ended June 30, 2013. The effective tax rates for the three months ended June 30, 2014 and 2013 were 30.0% and 39.2%, respectively.

Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

Revenues

Revenues for the six months ended June 30, 2014 were $28.2 million, representing a 56.4%increase compared to revenues of $18.0 million for the six months ended June 30, 2013. This increase was directly related to the addition of drilling rigs to our fleet between June 30, 2013 and June 30, 2014, which is reflected in the increase in our average number of operating rigs to 6.87 during the six months ended June 30, 2014 compared to 4.13 during the six months ended June 30, 2013. On a revenue per operating day basis, our revenues per day increased to $21,480 during the six months ended June 30, 2014, representing only a slight increase compared to revenues per day of $21,475 for the six months ended June 30, 2013.

Operating Costs

Operating costs for the six months ended June 30, 2014 were $18.1 million, representing a 41.9%increase compared to operating costs of $12.7 million for the six months ended June 30, 2013. This increase was directly related to the addition of drilling rigs to our fleet between June 30, 2013 and June 30, 2014. On a cost per operating day basis, our cost per day decreased to $12,716 during the six months ended June 30, 2014, representing a 1.8%decrease compared to cost per day of $12,950 for the six months ended June 30, 2013. Cost decreases were due to continued efficiencies and economies of scale as compared to the prior year period.

21

Selling, General and Administrative

Selling, general and administrative expenses for the six months ended June 30, 2014 were $4.2 million, representing a 1.9%increase compared to selling, general and administrative expenses of $4.1 million for the six months ended June 30, 2013. As a percentage of revenue, selling, general and administrative expenses decreased to 14.8% during the six months ended June 30, 2014 from 22.7% during the six months ended June 30, 2013. This decrease is due to greater leverage as we continued expanding our operating rig fleet and associated revenues.

Depreciation and Amortization

Depreciation and amortization expense for the six months ended June 30, 2014 was $7.3 million, representing a 62.9%increase compared to depreciation and amortization expense of $4.5 million for the six months ended June 30, 2013. This increase was related to the introduction of new drilling rigs constructed by us throughout 2013 and 2014. We begin depreciating our rigs when they commence drilling operations.

Asset Impairment, net

On March 9, 2014, one of our non-walking drilling rigs (Rig 102) suspended drilling operations due to damage to the rig’s mast and other operating equipment. We believe the cost to repair and replace this equipment is covered by insurance, subject to a $250,000 deductible. During the period that this rig is under repair, we intend to upgrade this rig by adding a substructure and other equipment that includes a multi-directional walking system. The cost of the upgrades will not be covered by insurance. The repairs and upgrades are expected to be completed in October 2014. We recorded an asset impairment charge of $4.7 million during the three months ended March 31, 2014, representing a preliminary estimate of the damage sustained to the rig. During the three months ended June 30, 2014, we recorded approximately $2.3 million in insurance proceeds related to repairs to the damaged rig ($2.0 million) and out-of-pocket expenses ($0.3 million), for which we had received a partial proof of loss from the insurance company. We expect to record additional insurance recoveries during the second half of 2014 when additional proofs of loss are obtained or proceeds are received. We are currently unable to accurately estimate the total amount of the insurance recoveries related to this matter.

Interest Expense, net

Interest expense, net for the six months ended June 30, 2014 was $1.0 million compared to interest expense of $0.1 million for the six months ended June 30, 2013. Borrowings under our revolving credit facility are primarily used to fund our rig construction activity and we did not begin making such borrowings until July 2013. Interest expense in the prior year period relates primarily to the amortization of deferred financing costs and commitment fees.

Gain (loss) on Warrant Derivative

As part of the consideration paid to GES for their contribution of our rig construction operations and intellectual property, we issued to GES a warrant to purchase approximately 2.2 million shares of our common stock, which expires on March 2, 2015. The terms of this warrant contained a feature that allows the exercise price to be adjusted in the event we issued any shares of common stock at a price below $12.74 per share during the term of the warrant. As a result of this feature, we have accounted for the warrant as a derivative liability on our balance sheet and have recorded changes in fair value each reporting period through earnings. At June 30, 2014, the fair value of the warrant was estimated at $1.8 million, which resulted in us recording a gain of approximately $1.4 million during the six months endedJune 30, 2014. At June 30, 2013, the fair value of the warrant was estimated at $4.3 million, and we recorded a non-cash loss of $(0.1) million during the six months endedJune 30, 2013.

Income Tax Expense (Benefit)

The income tax benefit recorded for the six months ended June 30, 2014 amounted to $1.2 million compared to an income tax benefit of $1.0 million for the six months ended June 30, 2013. The effective tax rates for the six months ended June 30, 2014 and 2013 were 36.2% and 30.4%, respectively.

Liquidity and Capital Resources

We were incorporated in November 2011 and acquired our rig manufacturing intellectual property and facility in March 2012. Contemporaneously with this transaction, we also acquired RigAssetCo and completed a private placement of our common stock for net cash proceeds of approximately $98.4 million. We acquired $17.1 million in cash in connection with the RigAssetCo acquisition. The net proceeds from the private placement and the cash acquired from RigAssetCo were used to fund the construction of our rigs and for working capital purposes.

22

Our primary sources of capital to date have been funds received from our initial private placement of common stock, cash acquired from RigAssetCo and our revolving credit facility. As of June 30, 2014, we had cash and cash equivalents of $2.9 million compared to $2.7 million as of December 31, 2013.

Our principal use of capital has been the construction of land drilling rigs and associated equipment and equipment inventories required to support our growing drilling operations. Our first drilling rig was completed and began operating in May 2012. As of June 30, 2014, we had nine completed ShaleDriller™ rigs and two additional rigs under construction. In addition, one of our existing rigs is currently being retrofitted with a new substructure and multi-directional walking system.

Initial Public Offering

On August 7, 2014, our registration statement on Form S-1 (File No. 333-196914) was declared effective by the Securities and Exchange Commission for our initial public offering pursuant to which we sold an aggregate of 11,500,000 shares of our common stock at a price to the public of $11.00 per share, including 1,500,000 share of our common stock pursuant to the exercise by the underwriters in full of their option to purchase additional shares of common stock to cover over-allotments. Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and Tudor, Pickering, Holt & Co. Securities, Inc. acted as book runners. We completed our initial public offering of 10,000,000 shares of our common stock on August 13, 2014 and subsequently closed the issuance and sale of the additional 1,500,000 shares of our common stock pursuant to the underwriters’ option to purchase additional shares of common stock on August 29, 2014. Our common stock trades on the New York Stock Exchange under the ticker symbol "ICD."

Net Cash Provided By (Used In) Operating Activities

Cash provided by (used in) operating activities was $3.2 million for the six months ended June 30, 2014 compared to cash provided by (used in) operating activities of $(0.2) million during the same period in 2013. Cash flows from operating activities during the first six months of 2014 were higher as a result of an increase in the net income (loss), adjusted for non-cash items, to $6.3 million for the six months ended June 30, 2014 compared to $2.1 million during the same period in 2013. Working capital changes reduced cash flows from operating activities by $3.2 million for the six months ended June 30, 2014 compared to a reduction of $2.3 million during the same period in 2013.

Net Cash Used In Investing Activities

Cash used in investing activities was $46.2 million for the six months ended June 30, 2014 compared to cash used in investing activities of $29.6 million during the same period in 2013. During 2014, capital expenditures of $48.7 million, related primarily to new rig construction, was offset by insurance proceeds of $2.0 million and proceeds from the sale of property, plant and equipment of $0.5 million. During 2013, capital expenditures of $29.8 million, related primarily to new rig construction, was offset by proceeds from the sale of property, plant and equipment of $0.3 million.

Net Cash Provided By (Used For) Financing Activities

Cash provided by (used for) financing activities was $43.2 million for the six months ended June 30, 2014 compared to cash provided by (used for) financing activities of $(1.1) million during the same period in 2013. During 2014, borrowing under our revolving credit facility of $80.3 million were offset by repayments under our revolving credit facility of $35.9 million and expenditures for deferred financing costs of $1.2 million. During 2013, $1.1 million in cash was used for deferred financing costs.

Future Liquidity Requirements

We expect our future capital and liquidity needs to be related to funding capital expenditures for new rigs, operating expenses, expansion of our critical spare and tubular goods inventories, working capital and general corporate purposes. Using the proceeds from our initial public offering, we plan to complete the construction of the one rig currently in-progress in 2014 and to commence building up to an additional seven rigs for completion in 2015, assuming market conditions remain attractive for new construction, as well as fund capital expenditures associated with our inventory of critical spare parts and maintenance capital expenditures for our existing rigs. Historically, the average total “all in” capital expenditures incurred by us to construct a ShaleDriller™ rig fully equipped with a multi-directional walking system and bi-fuel system and deliver that rig fully equipped and ready to spud its first well has been approximately $18.8 million. This includes the cost of constructing the base rig, the purchase of all tubulars, crew housing and other assets and equipment typically purchased by a drilling contractor, all crew costs and direct labor associated with the construction of the rig and its full testing and commissioning, all overhead directly associated with the construction of the rig, capitalized interest and all applicable taxes and transportation costs associated with the rig’s construction. Our tenth rig, that was completed in August 2014, and our eleventh rig, scheduled for delivery in December 2014, are both equipped with 7500 psi rated mud pumps and circulating systems. This increased

23

pressure rating and capability is beneficial when drilling extended lateral length in horizontal wells that require use of mud mothers that are powered based upon hydraulic pressure provided by the drilling rig. These or other additional features will result in incremental costs per rig. We currently intend to include this feature in all of our future rigs.

Long-Term Debt

On May 10, 2013, we entered into a credit agreement (the “Credit Facility”) with asyndicate of financial institutions led by CIT Finance, LLC, that provided for a committed $60.0 million revolving credit facility and an additional uncommitted $20.0 million accordion feature that allowed for future increases in the facility.

On February 21, 2014 we amended our Credit Facility in order to increase the aggregate commitments from $60.0 million to $125.0 million. The final $25.0 million of commitments under the amended Credit Facility is subject to us obtaining additional equity or indebtedness, subordinated to the Credit Facility, of at least $40.0 million (“Junior Event”). The Credit Facility, as amended, also provided for an additional uncommitted $25.0 million accordion feature that allows for future increases in the facility. On May 12, 2014 we amended our Credit Facility again, to expand the commitments not subject to the Junior Event from $100.0 million to $110.0 million. The amendment also adjusted the minimum EBITDA covenants contained in the Credit Facility to reflect the removal of Rig 102 from service during the pendency of its upgrade.

Borrowings under the Credit Facility are subject to a borrowing base formula that allows for borrowings of up to 85% of eligible trade accounts receivable not more than 90 days outstanding, plus up to 75% of the appraised forced liquidation value of our eligible, completed and owned drilling rigs. Beginning on February 21, 2015, the 75% advance rate on our eligible completed and owned drilling rigs decreases by 1.25% per quarter. The amended Credit Facility matures on February 21, 2017.

At our election, interest under the Credit Facility is determined by reference at our option to either (i) the London Interbank Offered Rate (“LIBOR”), plus 4.5% based upon availability under the Credit Facility or (ii) a “base rate” equal to the higher of the prime rate published by JP Morgan Chase Bank or three-month LIBOR plus 1%, plus in each case, an amount ranging from 3.0% to 3.5% based upon availability under the Credit Facility. We also pay, on a quarterly basis, a commitment fee of 0.50% per annum on the unused portion of the Credit Facility commitment. The obligations under the Credit Facility are secured by first priority liens on all shares of capital stock of each of our material present and future subsidiaries and substantially all of our assets, including all of our drilling rigs and equipment.

The amended Credit Facility contains various financial covenants including minimum EBITDA, fixed charge coverage ratio, rig utilization ratio and limitations on maintenance capital expenditures. Additionally, there are restrictive covenants that limit our ability to, among other things: incur or guarantee additional indebtedness or issue disqualified capital stock; transfer or sell assets; pay dividends or distributions, redeem subordinated indebtedness, make certain types of investments or make other restricted payments; create or incur liens; consummate a merger, consolidation or sale of all or substantially all assets; and engage in business other than a business that is the same or similar to the current business and reasonably related businesses.

Outstanding borrowings under the Credit Facility totaled $64.2 million at June 30, 2014, at a weighted average interest rate of 4.79%. Remaining availability under the Credit Facility is $25.0 million at June 30, 2014 and we are currently in compliance with all covenants under the Credit Facility.

Other Matters

Off-Balance Sheet Arrangements

We have no 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.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the reporting of discontinued operations and the disclosures related to disposals of components of an entity. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. This guidance is effective for interim and annual periods that begin after December 15, 2014. Early application is permitted. We are currently evaluating the impact this will have on our consolidated financial statements.

In May 2014, the FASB issued an accounting standards update to provide guidance on the recognition of revenue from customers. Under this guidance, an entity will recognize revenue when it transfers promised goods or services to

24

customers in an amount that reflects what it expects in exchange for the goods or services. This guidance also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty, if any, of revenue and cash flows arising from contracts with customers. This guidance is effective for interim and annual periods beginning after December 15, 2016. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In June 2014, the FASB issued an accounting standards update to provide guidance on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. This guidance is effective for interim and annual periods beginning after December 15, 2015. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

25

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 December 31, 2013 included $19.8 million of floating-rate debt attributed to borrowings at an average interest rate of 5.2%. Total long-term debt at June 30, 2014 included $64.2 million of floating-rate debt attributed to borrowing at an average interest rate of 4.79%. As a result, our annual interest cost in 2014 will fluctuate based on short-term interest rates.

The impact on annual cash flow of a 10% change in the floating-rate (approximately 0.48%) would be approximately $0.3 million annually based on the floating-rate debt and other obligations outstanding at June 30, 2014; however, there are no assurances that possible rate changes would be limited to such amounts.

Commodity Price Risk

The demand for contract drilling services is a result of E&P companies spending money to explore and develop drilling prospects in search of oil and natural gas. This customer spending is driven by their cash flow and financial strength, which is affected by trends in crude oil and natural gas commodity prices. Crude oil prices are determined by a number of factors including supply and demand, worldwide economic conditions and geopolitical factors. Crude oil and natural gas prices have historically been volatile and very difficult to predict. While current energy prices are important contributors to positive cash flow for our customers, expectations about future prices and price volatility are generally more important for determining their future levels of capital expenditures. This volatility can lead many E&P companies to base their capital spending on much more conservative estimates of commodity prices. As a result, demand for contract drilling services is not always purely a function of the movement of current commodity prices.

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, such as that experienced in 2008 and 2009, 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 and results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and effective to ensure that information required to be disclosed in such reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

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.

26

PART II — OTHER INFORMATION

ITEM  1. LEGAL PROCEEDINGS

We are 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 the lawsuits and claims are asserted for amounts that may be material should an unfavorable outcome be the result, management does not currently expect that these matters will have a material adverse effect on our financial position or results of operations.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risks under the heading “Risk Factors” in the Prospectus. There has been no material change in our risk factors from those described in the Prospectus. These risks are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations.

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

Use of Proceeds from Initial Public Offering of Common Stock

On August 7, 2014, our registration statement on Form S-1 (File No. 333-196914) was declared effective by the Securities and Exchange Commission for our initial public offering pursuant to which we sold an aggregate of 11,500,000 shares of our common stock at a price to the public of $11.00 per share, including 1,500,000 share of our common stock pursuant to the exercise by the underwriters in full of their option to purchase additional shares of common stock to cover over-allotments. Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and Tudor, Pickering, Holt & Co. Securities, Inc. acted as book runners. We completed our initial public offering of 10,000,000 shares of our common stock on August 13, 2014 and subsequently closed the issuance and sale of the additional 1,500,000 shares of our common stock pursuant to the underwriters’ option to purchase additional shares of common stock on August 29, 2014.

We received net proceeds from the offering, including the underwriters’ option to purchase an additional 1,500,000 shares of our common stock, of approximately $116.8 million after deducting underwriting discounts and commissions of $7.6 million and other offering expenses of approximately $2.1 million. As of August 31, 2014, we have used approximately $83.2 million of the net proceeds received from the offering to repay outstanding amounts under our existing revolving credit facility and we have used $4.1 million primarily to finance the construction of additional drilling rigs. We intend to use the remaining net proceeds to finance the construction of additional drilling rigs and for working capital and general corporate purposes. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the Securities and Exchange Commission on August 11, 2014 pursuant to Rule 424(b).

27

ITEM 6. EXHIBITS

Exhibit number	Description
3.1	Amended and Restated Certificate of Incorporation of Independence Contract Drilling, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-36590) filed August 13, 2014, Exhibit 3.1)
3.2	Amended and Restated Bylaws of Independence Contract Drilling, Inc. (Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-196914) filed July 18, 2014, Exhibit 3.3)
4.1	Form of Common Stock Certificate (Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-196914) filed July 28, 2014, Exhibit 4.1)
4.2	Warrant to Purchase Common Stock of Independence Contract Drilling, Inc., dated March 2, 2012 (Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-196914) filed May 13, 2014, Exhibit 4.2)
10.1	Second Amendment to Credit Agreement, dated effective as of May 12, 2014, by and among Independence Contract Drilling, Inc., the Required Lenders party thereto and CIT Finance LLC, as Administrative Agent and Collateral Agent, as Issuing Bank and as Swingline Lender (Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 333-196914) filed July 18, 2014, Exhibit 10.9)
10.2#*	Amended and Restated Executive Employment Agreement between Independence Contract Drilling, Inc. and Byron A. Dunn effective as of August 13, 2014
10.3#*	Amended and Restated Executive Employment Agreement between Independence Contract Drilling, Inc. and Philip A. Choyce effective as of August 13, 2014
10.4#*	Amended and Restated Executive Employment Agreement between Independence Contract Drilling, Inc. and Edward S. Jacob III effective as of August 13, 2014
10.5#*	Amended and Restated Executive Employment Agreement between Independence Contract Drilling, Inc. and Dave C. Brown effective as of August 13, 2014
10.6#	Amended and Restated Independence Contract Drilling, Inc. 2012 Omnibus Incentive Plan (Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-36590) filed August 13, 2014, Exhibit 10.1)
10.7	Acknowledgement and Registration Rights Agreement, entered into as of July 17, 2014, by and among Independence Contract Drilling, Inc., FBR Capital Markets & Co., Sprott Resource Partnership, Independence Contract Drilling LLC, and Global Energy Services Operating, LLC (Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-196914) filed July 18, 2014, Exhibit 10.22)
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

28

101.PRE*	XBRL Presentation Linkbase Document
101.SCH*	XBRL Schema Document

* Filed with this report

# Indicates management contract or compensatory plan, contract or agreement.

29

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/ Byron A. Dunn
	Name:	Byron A. Dunn
	Title:	Chief Executive Officer and Director (Principal Executive Officer)

By:	/s/ Philip A. Choyce
	Name:	Philip A. Choyce
	Title:	Senior 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: September 19, 2014

30

EX-10.2

Exhibit 10.2#*

AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AGREEMENT

This Amended and Restated Executive EMPLOYMENT AGREEMENT (“Agreement”) is entered into effective as of August 13, 2014, by and between Independence Contract Drilling, Inc., a Delaware corporation (“ICD”), and Byron A. Dunn (“Executive”).

W I T N E S S E T H:

WHEREAS, the Company desires to employ, and Executive desires to be employed by the Company and its subsidiaries and affiliates, as applicable, on the terms set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual terms and agreements set forth herein, the parties hereto agree as follows:

1.Employment. The Company hereby agrees that the Company or an affiliated company will continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company or an affiliate subject to the terms and conditions of this Agreement, during the Employment Term (as defined below).

2.Term. The “Employment Term” shall mean the period commencing on the date hereof (the “Effective Date”) and ending on the third anniversary of the Effective Date; provided, however, if neither party shall have provided written notice of termination at least one year prior to the scheduled expiration of the then current term of this Agreement (each such date by which such notice must be provided, a “Renewal Date”), the Employment Term shall automatically be extended for one additional year so as to expire two years from such Renewal Date. Upon a Change of Control the Employment Term shall be automatically extended to the third anniversary of the Change of Control.

3.Position and Duties.

(a)During the Employment Term, (A) the Executive's position (including status, offices, titles and reporting requirements, authority, duties and responsibilities) shall be Chief Executive Officer reporting to the Board of Directors of the Company and (B) the Executive's services shall be performed at the Company's executive offices in Houston, Texas or other locations less than 50 miles from such location.

(b)During the Employment Term, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote the substantial portion of his attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Term it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures,

1

fulfill speaking engagements or teach at educational institutions and (C) manage personal investments and business endeavors, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the date hereof, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the date hereof shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.

4.Compensation and Related Matters. During the Employment Term, Executive shall be entitled to the following compensation and benefits:

(a)Salary. The Company shall pay to Executive a total annual base salary of $464,000 (which salary may be increased (but not decreased) by the Company in its discretion) (“Base Salary”), payable in accordance with the normal payroll practices of the Company. During the Employment Term, the Base Salary shall be reviewed by the Board of Directors of the Company (the “Board”) at least annually; provided, however, that a salary increase shall not necessarily be awarded as a result of such review. Any increase in Base Salary may not serve to limit or reduce any other obligation to the Executive under this Agreement. Base Salary shall not be reduced after any such increase. The term Base Salary as utilized in this Agreement shall refer to Base Salary as so increased.

(b)Bonus. Executive shall be eligible for an annual bonus and other annual incentive compensation (collectively, the “Annual Bonus”) for each fiscal year of the Company during the Employment Term, in accordance with the Company’s bonus plan for senior executives of the Company. The Annual Bonus shall be based upon a target amount of 100% of Base Salary, based upon performance criteria established by the Board in its sole discretion, and notwithstanding the foregoing, shall be payable in the sole discretion of the Board. Each such Annual Bonus shall be paid no later than March 15 of the year following the year for which the Annual Bonus is earned, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to a Company-sponsored deferred compensation plan in effect or the bonus plan provides for a different payment date.

(c)Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable and necessary expenses incurred by Executive in performing services hereunder, including all travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. Notwithstanding any provision of this Agreement to the contrary, the amount of expenses for which Executive is eligible to receive reimbursement during any given taxable year of Executive shall not affect the amount of expenses for which Executive is eligible to receive reimbursement during any other taxable year of Executive. Reimbursement of expenses under this Section 4(c) shall be made within thirty (30) days following submission of a completed expense reimbursement form (but in no event later than the last day of the calendar year following the calendar year in which the expense was incurred).

2

The right to reimbursement pursuant to this Section 4(c) is not subject to liquidation or exchange for another benefit.

(d)Benefits. Executive shall be eligible to participate in or receive benefits under any group health or other executive benefit plan or arrangement made available by the Company to its senior executive officers, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.

(e)Vacations. Executive shall be entitled to a minimum of four weeks paid vacation and holidays in accordance with the policies, programs and practices of the Company as in effect from time to time.

(f)Restricted Stock and Options and other Equity Compensation. Upon execution of this Agreement, the Executive will be granted the long term incentive awards as approved by the Board of Directors. The Executive also shall participate in any annual or special equity compensation or long-term compensation plans and programs made available to the senior executive officers of the Company.

5.Termination. Executive’s employment hereunder may be terminated during the Employment Term under the following circumstances:

(a)Death. Executive’s employment hereunder shall terminate upon Executive’s death.

(b)Disability. Executive’s status as an executive and employee of the Company may be terminated for “Disability,” and Executive will be deemed “Disabled,” if Executive shall have been unable to substantially perform Executive’s duties as an executive of the Company or any subsidiary thereof as a result of sickness or injury, with or without reasonable accommodation, and shall have remained unable to perform any such duties for a period of more than 120-days in any 12-month period. If the Company determines that Executive has become Disabled, the Company shall notify Executive of its determination. Executive may then request an accommodation from the Company to assist in his/her return to work. The Company will determine whether Executive’s request can be accommodated without undue hardship no later than 30 days after Executive requests an accommodation. In the event Executive’s request cannot be accommodated, the Company may, by notice given in the manner provided in this Agreement, terminate the status of Executive as an executive and employee of the Company. Any such termination shall become effective 30 days after such notice of termination is given, unless within such 30 day period, Executive becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Company so certifies in writing) and Executive in fact resumes such services.

(c)Cause. The Company may terminate Executive’s employment with or without Cause. For purposes of this Agreement, “Cause” shall mean Executive’s:

(i)willful and continued failure to comply with the reasonable written directives of the Company for a period of thirty (30) days after written notice from the Company;

3

(ii)willful and persistent inattention to duties for a period of thirty (30) days after written notice from the Company, or the commission of acts within employment with the Company amounting to gross negligence or willful misconduct;

(iii)misappropriation of funds or property of the Company or committing any fraud against the Company or against any other person or entity in the course of employment with the Company;

(iv)misappropriation of any corporate opportunity, or otherwise obtaining personal profit from any transaction which is adverse to the interests of the Company or to the benefits of which the Company is entitled;

(v)conviction of a felony involving moral turpitude;

(vi)willful failure to comply in any material respect with the terms of this Agreement and such non-compliance continues uncured after thirty (30) days after written notice from the Company; or

(vii)chronic substance abuse, including abuse of alcohol, drugs or other substances or use of illegal narcotics or substances, for which Executive fails to undertake treatment immediately after requested by the Company or to complete such treatment and which abuse continues or resumes after such treatment period, or possession of illegal narcotics or substances on Company premises or while performing Executive’s duties and responsibilities.

For purposes of this definition, no act, or failure to act, by Executive will be considered “willful” if done, or omitted to be done, by Executive in good faith and in the reasonable belief that the act or omission was in the best interest of the Company or required by applicable law.

Any termination during the Employment Term by the Company for Cause shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9 of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. “Date of Termination” shall mean the date that employment with the Company and its affiliates is terminated in all respects for any reason.

(d)Good Reason. Executive may terminate Executive’s employment without Good Reason or for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean without the express written consent of Executive, the occurrence of any of the following:

4

(i)any action or inaction that constitutes a material breach by the Company of this Agreement and such action or inaction continues uncured after thirty (30) days following written notice from the Executive;

(ii)the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company within 30 days of receipt of written notice thereof given by the Executive;

(iii)any failure by the Company to comply with the provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company as soon as reasonable possible, but no later than 30 days after receipt of written notice thereof given by the Executive;

(iv)a change in the geographic location at which Executive must perform services to a location more than fifty (50) miles from Houston, Texas or the location at which Executive normally performs such services as of the Effective Date; or

(v)in the event a Change of Control (as defined in Section 6(b)(v)) has occurred, the assignment to the Executive to any position (including status, offices, titles and reporting requirements), authority, duties or responsibilities that are not (A) as a senior executive officer with the ultimate parent company of the entity surviving or resulting from such Change of Control and (B) substantially identical to the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities as contemplated by this Agreement.

Notwithstanding anything herein to the contrary, the interim assignment of Executive’s position, authority, duties, or responsibilities to any person while Executive is absent from his duties during any of the 120 business days set forth under the definition of Disability shall not constitute a Good Reason for Executive to terminate his employment with the Company. In addition, the Executive’s termination of employment shall not constitute Good Reason unless Executive notifies the Company of the condition or event constituting Good Reason within ninety days (90) days of the condition’s occurrence (unless unknown to Executive) and the Company fails to cure the conditions, to the extent curable, specified in the notice within thirty (30) days following such notification. Any termination during the Employment Term by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9 of the Agreement.

6.Compensation Upon Termination. In the event that Executive’s employment under this Agreement terminates during the Employment Term for any reason, the Company will pay to Executive (a) subject to Section 10 (Compliance with Section 409A of the Code), in a single lump sum payment, in accordance with the normal payroll practices of the Company (or such earlier date as may be required by applicable law), the aggregate amount of (i) any earned but unpaid Base

5

Salary and (ii) accrued but unpaid vacation pay through the Date of Termination; (b) in accordance with Section 4(c) above, any unreimbursed business expenses incurred prior to the Date of Termination that are reimbursable in accordance with Section 4(c) above, and (c) such employee benefits, if any, as to which Executive may be entitled pursuant to the terms governing such benefits, payable in accordance with the terms of the applicable plan or other arrangement governing such benefits (collectively, the “Accrued Obligations”). Payment of the Accrued Obligations shall be the only compensation paid to Executive under this Agreement in the event of termination of employment due to death or Disability.

(a)For Cause or Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company shall pay Executive the Accrued Obligations, and the Company shall have no further obligations to Executive under this Agreement.

(b)Without Cause or For Good Reason Not in Contemplation of a Change of Control. If Executive’s employment is terminated by the Company without Cause (other than for Disability) or by Executive for Good Reason, and in each case not “in connection with a Change of Control” (as defined in Section 6(b)(v)), in addition to payment of the Accrued Obligations, Executive shall be entitled to the following additional benefits (collectively, the “Other Benefits”):

(viii)Executive shall be entitled to receive a single lump sum payment of the following, which amount shall be paid at the time provided in Section 6(d):

A.Any earned but unpaid Annual Bonus related to the calendar year prior to the calendar year in which the Date of Termination occurs plus;

B.the product of (x) the target Annual Bonus for the fiscal year during which termination of employment occurs, and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, it being understood that the target Annual Bonus prior to any IPO Event shall be deemed to mean 100% of Executive’s Base Salary for purposes of this calculation; and

C.An amount equal to the Severance Multiple (as defined in Section 6(b)(vi) multiplied by the sum of (1) Executive’s Base Salary (at the rate in effect as of the Date of Termination) and the target Annual Bonus for the fiscal year during which termination of employment occurs, it being understood that the target Annual Bonus prior to any IPO Event shall be deemed to mean 100% of Executive’s Base Salary for purposes of this calculation.

(ix)All benefits under the Company's equity or long-term incentive compensation plan, including all stock options and restricted stock held by the Executive, not already vested, shall be 100% vested.

(x)For a period of 18 months from the Executive's Date of Termination the Company shall continue to provide to Executive and/or Executive's dependents the same

6

level of medical and dental benefits equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(d) of this Agreement if the Executive's employment had not been terminated and shall reimburse Executive for the premiums Executive pays for such medical and dental benefits for up to 18 months following the Date of Termination as provided in Section 6(f), and provided further, that if the Executive becomes re-employed by another employer and is eligible to receive medical or dental benefits under another employer provided plan, the medical or dental benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility.

(xi)A termination shall be deemed to be “in connection with a Change of Control” if such termination occurs during the period beginning on the date that is (1) twelve (12) months prior to a Change of Control occurring and (2) ending on the second anniversary of the date of consummation of the Change of Control.

(xii)“Change of Control” shall mean:

A.The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50 percent or more of either (A) the then outstanding shares of common stock or membership interests of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors or managers (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection A, the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company or any acquisition by the Company; or (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (3) any acquisition by any corporation pursuant to a transaction that complies with clauses (1), (2) and (3) of subsection C of this definition; or

B. Individuals, who, as of the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders or members, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for purpose of this subsection B, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

7

C.Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 20 percent or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (3) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Corporate Transaction; or

D.Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(xiii)“Severance Multiple,” for purposes of calculating the Other Benefits due under this Section 6(b), shall be two (2) times, and for purposes of calculating the Other Benefits due under Section 6(c) shall be two (2) times. In addition, target Annual Bonus for purpose of calculating the Other Benefits due under Section 6(c) shall mean the target Annual Bonus for the fiscal year in which termination of employment occurred.

(c)Without Cause or For Good Reason in Contemplation of a Change of Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, and in each case “in connection with a Change of Control”, in addition to the payment of the Accrued Obligations, Company shall pay to Executive the Other Benefits.

(d)Release of Claims. Notwithstanding any other provisions of this Agreement to the contrary, in consideration for receiving the severance benefits described in Section 6(b) or (c), Executive hereby agrees to execute (and not revoke) a release in substantially the form attached hereto as Appendix A (the “Release”). If Executive is not a “specified employee” within the meaning

8

of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Final Department of Treasury Regulations issued thereunder (collectively, “Section 409A”) at the time of termination of Executive’s employment (“Specified Employee”), and Executive has timely signed and delivered to the Company, by the deadline established by the Company, the Release, which has become irrevocable by the time set forth below, the Company shall pay Executive the lump sum cash severance benefits described in Section 6(b) or (c) on the date that is sixty (60) days following the date of Executive’s “separation from service” within the meaning of Section 409A (“Separation From Service”). In the event that Executive is a Specified Employee and Executive has timely signed and delivered to the Company, by the deadline established by the Company, the Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the lump sum cash severance benefits described in Section 6(b) or (c) on the date that is six (6) months following the date of the Executive’s Separation From Service. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the lump sum cash severance benefits described in Section 6(b) or (c) or entitled to the benefits described in Section 6(b)(ii) or (iii) (except for Executive’s rights under section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)) and Executive shall forfeit any right to such payments and benefits, unless (i) Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is 60 days following the date of Executive’s Separation From Service. If Executive fails to properly execute and deliver such release (or revokes the Release), Executive agrees that Executive shall not be entitled to receive the severance benefits described in Section 6(b) or (c) or entitled to the benefits described in Section 6(b)(ii) or (iii) (other than COBRA benefits). For purposes of this Agreement, a Release shall be considered to have been executed by Executive if it is signed by Executive’s legal representative, in the case of Executive’s Disability or on behalf of Executive’s estate in the case of Executive’s death.

(e)Termination of Offices and Directorships. Upon termination of Executive’s employment for any reason, unless otherwise specified in a written agreement between Executive and the Company, Executive shall be deemed to have resigned from all offices, directorships, and other employment positions then held with the Company or its affiliates, if any, and shall take all actions reasonably requested by the Company to effectuate the foregoing.

(f)Reimbursement of Premiums. During the period that the Company is required to continue coverage in the Company’s group medical plan and the Company’s group dental plan (collectively, the “Group Plan”) as provided in Section 6(b)(iii) and Executive continues and pays the premium for such coverage to continue Executive’s and any qualifying dependent’s Group Plan coverage (“Coverage”) the Company will reimburse Executive the amount of the cost of the Coverage for up to 18 months Executive maintains such Coverage. Any reimbursements by the Company to Executive required under this Section 6(f) shall be made on the last day of each month Executive pays the amount required for such Coverage, for up to the first 18 months of Coverage. If Executive is a Specified Employee at the time of termination and the benefits specified in this Section 6(f) are taxable to Executive and not otherwise exempt from Section 409A then any amounts to which Executive would otherwise be entitled under this Section 6(f) during the first six months following the date of Executive’s Separation From Service shall be accumulated and paid to Executive on the date that is six months following the date of Executive’s Separation From

9

Service. Except for any reimbursements under the applicable Group Plan that are subject to a limitation on reimbursements during a specified period, the amount of expenses eligible for reimbursement under this Section 6(f), or in-kind benefits provided, during Executive’s taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of Executive. Executive’s right to reimbursement or in-kind benefits pursuant to this Section 6(f) shall not be subject to liquidation or exchange for another benefit.

7.Nondisclosure and Noncompetition.

(a)Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

(xiv)“Confidential Information” means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company, that is not generally known to persons engaged in a business similar to that conducted by the Company, whether produced by the Company or any of its consultants, agents or independent contractors or by Executive, and whether or not marked confidential. Confidential information does not include information that (1) at the time of disclosure is, or thereafter becomes, generally available to the public, (2) prior to or at the time of disclosure was already in the possession of Executive, (3) is obtained by Executive from a third party not in violation of any contractual, legal or fiduciary obligation to the Company with respect to that information or (3) is independently developed by Executive, but not including the confidential information provided by the Company.

(xv)“Restricted Business” means any the oil and natural gas land contract drilling business conducted in the United States of America.

(b)Nondisclosure of Confidential Information. Executive shall hold in a fiduciary capacity for the benefit of the Company all Confidential Information which shall have been obtained by Executive during Executive’s employment (whether prior to or after the Effective Date) and shall not use such Confidential Information other than within the scope of Executive’s employment with and for the exclusive benefit of the Company. At the end of the Employment Term, Executive agrees (i) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except (A) upon the prior written authorization of the Company, (B) as may be required by law or legal process, (C) as reasonably necessary in connection with the enforcement of any right or remedy related to this Agreement, or (D) unless no longer Confidential Information, and (ii) to deliver promptly to the Company any Confidential Information in Executive’s possession, including any duplicates thereof and any notes or other records Executive has prepared with respect thereto. In the event that the provisions of any applicable law or the order of any court would require Executive to disclose or otherwise make available any Confidential Information then Executive shall, to the extent practicable, give the Company prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings.

10

(c)Limited Covenant Not to Compete. In consideration of the provision of the Confidential Information during the term of this Agreement and the stock options, restricted stock awards and other compensation provided herein, if Executive’s employment is terminated hereunder by the Company for Cause or by Executive without Good Reason, Executive agrees that during the period of time beginning on the Effective Date and ending on the twelve (12) month anniversary of the Date of Termination:

(i)Executive shall not, directly or indirectly, for himself or others, own, manage, operate, control or participate in the ownership, management, operation or control of any business, whether in corporate, proprietorship or partnership form or otherwise, that is engaged, directly or indirectly, in the United States in the Restricted Business; provided, however, that the restrictions contained herein shall not restrict the acquisition by Executive of less than 2% of the outstanding capital stock of any publicly traded company engaged in a Restricted Business or Executive from being employed by an entity in which the majority of such entity’s revenues on a consolidated basis determined in accordance with generally accepted accounting principles are from activities and businesses that do not constitute a Restricted Business; and

(ii)Executive shall not, directly or indirectly (other than in the performance of Executive’s duties under this Agreement) (A) solicit any individual, who, at the time of time of such solicitation is an executive of the Company or its affiliates, to leave such employment or hire, employ or otherwise engage any such individual (other than employees of the Company or its affiliates who respond to general advertisements for employment in newspapers or other periodicals of general circulation (including trade journals)), or (B) cause, induce or encourage any material actual or prospective client, customer, supplier, landlord, lessor or licensor of the Company or its affiliates to terminate or modify any such actual or prospective contractual relationship that exists on the Date of Termination.

(d)Injunctive Relief; Remedies. The covenants and undertakings contained in this Section 7 relate to matters which are of a special, unique and extraordinary character and a violation of any of the terms of this Section 7 will cause irreparable injury to the Company, the amount of which will be impossible to estimate or determine and which cannot be adequately compensated. Accordingly, the remedy at law for any breach of this Section 7 may be inadequate. Therefore, notwithstanding anything to the contrary, the Company will be entitled to an injunction, restraining order or other equitable relief from any court of competent jurisdiction in the event of any breach of any provision of this Section 7 without the necessity of proving actual damages or posting any bond whatsoever. The rights and remedies provided by this Section 7 are cumulative and in addition to any other rights and remedies which the Company may have hereunder or at law or in equity. The parties hereto further agree that, if any court of competent jurisdiction in a final nonappealable judgment determines that a time period, a specified business limitation or any other relevant feature of this Section 7 is unreasonable, arbitrary or against public policy, then a lesser time period, geographical area, business limitation or other relevant feature which is determined by such court to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

11

(e)Governing Law of this Section 7; Consent to Jurisdiction. Any dispute regarding the reasonableness of the covenants and agreements set forth in this Section 7, or the territorial scope or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, shall be governed by and interpreted in accordance with the laws of the state in which the prohibited competing activity or disclosure occurs, and, with respect to each such dispute, the Company and Executive each hereby irrevocably consent to the exclusive jurisdiction of the State of Texas for resolution of such dispute, and further agree that service of process may be made upon Executive in any legal proceeding relating to this Section 7 by any means allowed under the laws of such state.

(f)Executive’s Understanding of this Section. Executive hereby represents to the Company that Executive has read and understands, and agrees to be bound by, the terms of this Section 7. Executive acknowledges that the geographic scope and duration of the covenants contained in Section 7(c) are the result of arm’s-length bargaining and are fair and reasonable in light of (i) the importance of the functions performed by Executive and the length of time it would take the Company to find and train a suitable replacement, (ii) the nature and wide geographic scope of the operations of the Company, (iii) Executive’s level of control over and contact with the Company’s business and operations in all jurisdictions where they are located, and (iv) the fact that the Restricted Business is conducted throughout the geographic area where competition is restricted by this Agreement. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Section 7 invalid or unenforceable.

8.Certain Tax Matters.

(a)Notwithstanding any other provision of this Agreement to the contrary, if any portion of the payments or benefits provided to or for the benefit of Executive under this Agreement or which Executive otherwise receives or is entitled to receive from the Company or any successor would be subject to the excise tax imposed by Section 4999 of the Code, or any interest, penalties or additions to tax with respect to such excise tax (such excise tax, together with any interest, penalties or additions to tax with respect to such excise tax, is herein collectively referred to as the “Excise Tax”), all such payments and benefits being collectively referred to herein as the “Total Payments”, then, except as otherwise provided in Section 8(b), the Total Payments shall be reduced (but not below zero) or eliminated (as further provided for in Section 8(c)) to the extent the Independent Tax Advisor (as hereinafter defined) shall reasonably determine is necessary so that no portion of the Total Payments shall be subject to the Excise Tax.

(b)Notwithstanding the provisions of Section 8(a), if the Independent Tax Advisor reasonably determines that Executive would receive, in the aggregate, a greater amount of the Total Payments on an after-tax basis (after including and taking into account all applicable federal, state, and local income, employment and other applicable taxes and the Excise Tax) if the Total Payments were not reduced or eliminated pursuant to Section 8(a), then no such reduction or elimination shall be made notwithstanding that all or any portion of the Total Payments may be subject to the Excise Tax.

12

(c)For purposes of determining which of Section 8(a) and Section 8(b) shall be given effect, the determination of which of the Total Payments shall be reduced or eliminated to avoid the Excise Tax shall be made by the Independent Tax Advisor, provided that the Independent Tax Advisor shall reduce or eliminate, as the case may be, the Total Payments in the following order (and within the category described in each of the following Sections 8(c)(i) through 8(c)(v), in reverse order beginning with the Total Payments which are to be paid farthest in time except as otherwise provided in Section 8(c)(iii)):

(i)by first reducing or eliminating the portion of the Total Payments otherwise due and which are not payable in cash (other than that portion of the Total Payments subject to Sections 8(c)(iv) and 8(c)(v));

(ii)then by reducing or eliminating the portion of the Total Payments otherwise due and which are payable in cash (other than that portion of the Total Payments subject to Sections 8(c)(iii) and 8(e)(iv));

(iii)then by reducing or eliminating the portion of the Total Payments otherwise due to or for the benefit of Executive pursuant to the terms of this Agreement and which are payable in cash;

(iv)then by reducing or eliminating the portion of the Total Payments otherwise due that represent equity-based compensation, such reduction or elimination to be made in reverse chronological order with the most recent equity-based compensation awards reduced first; and

(v)then by reducing or eliminating the portion of the Total Payments otherwise due to or for the benefit of Executive pursuant to the terms of this Agreement and which are not payable in cash.

(d)The Independent Tax Advisor shall provide its determinations, together with detailed supporting calculations and documentation, to the Company and Executive for their review no later than ten (10) days after the Date of Termination. The determinations of the Independent Tax Advisor under this Section 8 shall, after due consideration of the Company’s and Executive’s comments with respect to such determinations and the interpretation and application of this Section 8, be final and binding on all parties hereto absent manifest error. The Company and Executive shall furnish to the Independent Tax Advisor such information and documents as the Independent Tax Advisor may reasonably request in order to make the determinations required under this Section 8.

(e)For purposes of this Section 8, “Independent Tax Advisor” shall mean a lawyer with a nationally recognized law firm, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm, in each case with expertise in the area of executive compensation tax law, who shall be selected by the Company and shall be acceptable to Executive (Executive’s acceptance not to be unreasonably withheld), and all of whose fees and disbursements shall be paid by the Company.

13

9.Notice. All notices hereunder must be in writing and shall be deemed to have been given when personally delivered to the designated individual, or (unless otherwise specified) mailed or sent by (a) United States certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service with confirmation of receipt or (d) facsimile transmission with confirmation of receipt.

All such notices must be addressed as follows or to such other address as to which any party hereto may have notified the other in writing.

To the Company:

11616 Galayda

Houston, Texas 77066
Attn: Chief Executive Officer

To Executive:

At Executive’s then current address shown in the Company’s records

or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

10.Compliance with Section 409A of the Code.

(a)Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation the severance payments and benefits under Section 6 will be paid to Executive if Executive is a Specified Employee until the six-month anniversary of Executive’s Separation From Service to the extent that paying such amounts at the time or times indicated in this Agreement would result in a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code.

(b)To the extent applicable, this Agreement shall be interpreted and applied consistent and in accordance with Section 409A. The parties agree to act in good faith in complying with the requirements of Section 409A. For purposes of this Agreement, all references to “termination,” “termination of employment,” Date of Termination and correlative phrases shall mean a Separation From Service. In the event additional regulations or other guidance are issued under Section 409A or a court of competent jurisdiction provides additional authority concerning the application of Section 409A with respect to the payments described in this Agreement, then the parties agree to act in good faith to amend the provisions of this Agreement to permit such payments to be made at the earliest time permitted under such additional regulations, guidance or authority that as closely as practicable achieves the original intent of this Agreement.

(c)To the extent permitted under Section 409A, any separate payment or benefit under this Agreement or otherwise shall not be deemed “nonqualified deferred compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §1.409A-1(b)(9) or any other applicable exception or provision of Section 409A.

14

(d)To the extent that any payments or reimbursements provided to Executive under this Agreement are deemed to constitute compensation to which Treasury Regulation §1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed to Executive reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred. The amounts of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and Executive’s right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

11.Miscellaneous.

(a)Withholding. All amounts payable under this Agreement will be subject to reduction to reflect such federal, state, local or foreign taxes as will be required to be withheld pursuant to any applicable law or regulation.

(b)No Guarantee of Tax Consequences. The Company makes no commitment or guarantee that any federal, state, local or other tax treatment will (or will not) apply or be available to any person eligible for compensation or benefits under this Agreement. The Executive has been advised and been provided the opportunity to obtain independent legal and tax advice regarding the compensation and benefits payable pursuant to this Agreement.

(c)Successors; Binding Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, including Executive’s estate and legal representatives. Neither this Agreement nor any rights, interests or obligations hereunder may be assigned by any party hereto without the prior written consent of the other parties hereto; provided that the Company may assign any rights, interests or obligations hereunder to any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company. The Company agrees to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined any successor to its business and/or assets as aforesaid which assume and agrees to perform this Agreement by operation of law or otherwise.

(d)Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and an authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

15

(e)Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(f)Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

(g)Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, Executive or representative of any party hereto, including the Prior Agreement; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

(h)Governing Law. This Agreement has been made and entered into and shall be governed by the internal laws of the State of Texas without regard to principles of conflict of laws, except as expressly provided in Section 7(e) above with respect to the resolution of disputes arising under, or the Company’s enforcement of, Section 7.

(i)Jurisdiction. If any party commences a lawsuit or other proceeding related to or arising from this Agreement, the parties hereto agree that the State District Court in Houston, Harris County Texas shall have sole and exclusive jurisdiction over any such proceeding. The State District Court shall be the proper venue for any such lawsuit or judicial proceeding and the parties hereto waive any objection to such venue. The parties consent to and agree to submit to the jurisdiction of the court specified herein and agree to accept service of process to vest personal jurisdiction over them in the State District Court of Harris County Texas.

(j)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

(k)Amendment. It is understood and agreed that this Agreement amends and restates and supersedes in its entirety any prior Employment Agreement between the Company and Executive.

Signature Page Follows

16

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

ICD:

INDEPENDENCE CONTRACT DRILLING, INC.

By:     /s/ Philip A. Choyce

Name:    Philip A. Choyce

Title:     Senior Vice President and

Chief Financial Officer

EXECUTIVE:

/s/ Byron A. Dunn

Byron A. Dunn

Executive Employment Agreement

17

APPENDIX A

AGREEMENT AND RELEASE

This Agreement and Release (“Release”) is entered into between you, the undersigned employee, and Independence Contract Drilling, Inc. (the “Company”). You have [__] days to consider this Release, which you agree is a reasonable amount of time. While you may sign this Release prior to the expiration of this [___]-day period, you are not to sign it prior to the date of your termination of employment with the Company.

1.Definitions.

a.“Released Parties” means the Company and its past, present and future parents, subsidiaries, divisions, successors, predecessors, employee benefit plans and affiliated or related companies, and also each of the foregoing entities’ past, present and future owners, officers, directors, stockholders, investors, partners, managers, principals, members, committees, administrators, sponsors, executors, trustees, fiduciaries, employees, agents, assigns, representatives and attorneys, in their personal and representative capacities. Each of the Released Parties is an intended beneficiary of this Release.

b.“Claims” means all theories of recovery of whatever nature, whether known or unknown, recognized by the law or equity of any jurisdiction. It includes but is not limited to any and all actions, causes of action, lawsuits, claims, complaints, petitions, charges, demands, liabilities, indebtedness, losses, damages, rights and judgments in which you have had or may have an interest. It also includes but is not limited to any claim for wages, benefits or other compensation. It also includes but is not limited to claims asserted by you or on your behalf by some other person, entity or government agency.

2.Consideration. The Company agrees to pay you the consideration set forth in sections 6 and 8 of the Amended and Restated Employment Agreement between you and the Company dated as of [_________] (the “Employment Agreement”). The Company will make such payments to you at the times set forth in the Employment Agreement. You acknowledge that the payment that the Company will make to you in consideration for this Release is in addition to anything else of value to which you are entitled and that the Company is not otherwise obligated to make this payment to you.

3.Release of Claims.

a.You — on behalf of yourself and your heirs, executors, administrators, legal representatives, successors, beneficiaries, and assigns — unconditionally release and forever discharge the Released Parties from, and waive, any and all Claims that you have or may have against any of the Released Parties arising from your employment with the Company, the termination thereof, and any other acts or omissions occurring on or before the date you sign this Release; provided, however, that this Agreement shall not operate to release any Claims that you may have to payments or benefits under Section 6 of the Employment Agreement or any rights you may have to indemnification under any indemnification agreement between you and the Company or any of

its affiliates, or the bylaws or any directors and officers liability insurance policy of the Company or any of its affiliates (collectively, the “Unreleased Claims”).

b.The release set forth in Paragraph 3(a) includes, but is not limited to, any and all Claims under (i) the common law (tort, contract or other) of any jurisdiction; (ii) the Rehabilitation Act of 1973, the Age Discrimination in Employment Act (as amended by the Older Workers Benefit Protection Act), the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, and any other federal, state and local statutes, ordinances, executive orders and regulations prohibiting discrimination or retaliation upon the basis of age, race, sex, national original, religion, disability, or other unlawful factor; (iii) the National Labor Relations Act; (iv) the Employee Retirement Income Security Act; (v) the Family and Medical Leave Act; (vi) the Fair Labor Standards Act; (vii) the Equal Pay Act; (viii) the Worker Adjustment and Retraining Notification Act; and (ix) any other federal, state or local law.

c.In furtherance of this Release, you promise not to bring any Claims (other than Unreleased Claims) against any of the Released Parties in or before any court or arbitral authority. You also agree effective as of the date of this release to resign any and all directorships with the Company and any of its subsidiaries and affiliates.

4.Confidentiality. You agree that you will not reveal, or cause to be revealed, this Release or its terms to any third party (other than your attorney, tax advisor, or spouse), except as required by law.

5.Acknowledgment. You acknowledge that, by entering into this Release, the Company does not admit to any wrongdoing in connection with your employment or termination, and that this Release is intended as a compromise of any Claims you have or may have against the Released Parties. You further acknowledge that you have carefully read this Release and understand its final and binding effect, have had a reasonable amount of time to consider it, and are entering this Release voluntarily. You acknowledge that the Company has advised you in writing to seek the advice of legal counsel prior to executing this release, and that you have had the opportunity to seek legal counsel of your choosing. You acknowledge that you have had at least twenty-one (21) days to consider this Release.

6.Applicable Law. This Release shall be construed and interpreted pursuant to the laws of Texas without regard to its choice of law rules.

7.Severability. Each part, term, or provision of this Release is severable from the others. Notwithstanding any possible future finding by a duly constituted authority that a particular part, term, or provision is invalid, void, or unenforceable, this Release has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby. If any part, term, or provision is so found invalid, void or unenforceable, the applicability of any such part, term, or provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

A-2

8.Effective Date:    You acknowledge that you have seven (7) days after execution to revoke this Release, and that this Release shall not become final and binding until the expiration of seven (7) days after execution.

[Signature page follows]

A-3

IN WITNESS WHEREOF, the parties have executed this Release on the date set forth below.

EXECUTIVE:

Date: [_______________, 20___]

[Name]

COMPANY:

INDEPENDENCE CONTRACT DRILLING, INC.

Date: [_______________, 20___]

By:        

Name:         

Title:         

EX-10.3

Exhibit 10.3#*

AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AGREEMENT

This Amended and Restated Executive EMPLOYMENT AGREEMENT (“Agreement”) is entered into effective as of August 13, 2014, by and between Independence Contract Drilling, Inc., a Delaware corporation (“ICD”), and Philip A. Choyce (“Executive”).

W I T N E S S E T H:

WHEREAS, the Company desires to employ, and Executive desires to be employed by the Company and its subsidiaries and affiliates, as applicable, on the terms set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual terms and agreements set forth herein, the parties hereto agree as follows:

1.Employment. The Company hereby agrees that the Company or an affiliated company will continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company or an affiliate subject to the terms and conditions of this Agreement, during the Employment Term (as defined below).

2.Term. The “Employment Term” shall mean the period commencing on the date hereof (the “Effective Date”) and ending on the third anniversary of the Effective Date; provided, however, if neither party shall have provided written notice of termination at least one year prior to the scheduled expiration of the then current term of this Agreement (each such date by which such notice must be provided, a “Renewal Date”), the Employment Term shall automatically be extended for one additional year so as to expire two years from such Renewal Date. Upon a Change of Control the Employment Term shall be automatically extended to the third anniversary of the Change of Control.

3.Position and Duties.

(a)During the Employment Term, (A) the Executive's position (including status, offices, titles and reporting requirements, authority, duties and responsibilities) shall be Senior Vice President and Chief Financial Officer reporting to the Board of Directors of the Company and (B) the Executive's services shall be performed at the Company's executive offices in Houston, Texas or other locations less than 50 miles from such location.

(b)During the Employment Term, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote the substantial portion of his attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Term it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures,

1

fulfill speaking engagements or teach at educational institutions and (C) manage personal investments and business endeavors, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the date hereof, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the date hereof shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.

4.Compensation and Related Matters. During the Employment Term, Executive shall be entitled to the following compensation and benefits:

(a)Salary. The Company shall pay to Executive a total annual base salary of $319,000 (which salary may be increased (but not decreased) by the Company in its discretion) (“Base Salary”), payable in accordance with the normal payroll practices of the Company. During the Employment Term, the Base Salary shall be reviewed by the Board of Directors of the Company (the “Board”) at least annually; provided, however, that a salary increase shall not necessarily be awarded as a result of such review. Any increase in Base Salary may not serve to limit or reduce any other obligation to the Executive under this Agreement. Base Salary shall not be reduced after any such increase. The term Base Salary as utilized in this Agreement shall refer to Base Salary as so increased.

(b)Bonus. Executive shall be eligible for an annual bonus and other annual incentive compensation (collectively, the “Annual Bonus”) for each fiscal year of the Company during the Employment Term, in accordance with the Company’s bonus plan for senior executives of the Company. The Annual Bonus shall be based upon a target amount of 70% of Base Salary, based upon performance criteria established by the Board in its sole discretion, and notwithstanding the foregoing, shall be payable in the sole discretion of the Board. Each such Annual Bonus shall be paid no later than March 15 of the year following the year for which the Annual Bonus is earned, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to a Company-sponsored deferred compensation plan in effect or the bonus plan provides for a different payment date.

(c)Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable and necessary expenses incurred by Executive in performing services hereunder, including all travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. Notwithstanding any provision of this Agreement to the contrary, the amount of expenses for which Executive is eligible to receive reimbursement during any given taxable year of Executive shall not affect the amount of expenses for which Executive is eligible to receive reimbursement during any other taxable year of Executive. Reimbursement of expenses under this Section 4(c) shall be made within thirty (30) days following submission of a completed expense reimbursement form (but in no event later than the last day of the calendar year following the calendar year in which the expense was incurred).

2

The right to reimbursement pursuant to this Section 4(c) is not subject to liquidation or exchange for another benefit.

(d)Benefits. Executive shall be eligible to participate in or receive benefits under any group health or other executive benefit plan or arrangement made available by the Company to its senior executive officers, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.

(e)Vacations. Executive shall be entitled to a minimum of four weeks paid vacation and holidays in accordance with the policies, programs and practices of the Company as in effect from time to time.

(f)Restricted Stock and Options and other Equity Compensation. Upon execution of this Agreement, the Executive will be granted the long term incentive awards as approved by the Board of Directors. The Executive also shall participate in any annual or special equity compensation or long-term compensation plans and programs made available to the senior executive officers of the Company.

5.Termination. Executive’s employment hereunder may be terminated during the Employment Term under the following circumstances:

(a)Death. Executive’s employment hereunder shall terminate upon Executive’s death.

(b)Disability. Executive’s status as an executive and employee of the Company may be terminated for “Disability,” and Executive will be deemed “Disabled,” if Executive shall have been unable to substantially perform Executive’s duties as an executive of the Company or any subsidiary thereof as a result of sickness or injury, with or without reasonable accommodation, and shall have remained unable to perform any such duties for a period of more than 120-days in any 12-month period. If the Company determines that Executive has become Disabled, the Company shall notify Executive of its determination. Executive may then request an accommodation from the Company to assist in his/her return to work. The Company will determine whether Executive’s request can be accommodated without undue hardship no later than 30 days after Executive requests an accommodation. In the event Executive’s request cannot be accommodated, the Company may, by notice given in the manner provided in this Agreement, terminate the status of Executive as an executive and employee of the Company. Any such termination shall become effective 30 days after such notice of termination is given, unless within such 30 day period, Executive becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Company so certifies in writing) and Executive in fact resumes such services.

(c)Cause. The Company may terminate Executive’s employment with or without Cause. For purposes of this Agreement, “Cause” shall mean Executive’s:

(i)willful and continued failure to comply with the reasonable written directives of the Company for a period of thirty (30) days after written notice from the Company;

3

(ii)willful and persistent inattention to duties for a period of thirty (30) days after written notice from the Company, or the commission of acts within employment with the Company amounting to gross negligence or willful misconduct;

(iii)misappropriation of funds or property of the Company or committing any fraud against the Company or against any other person or entity in the course of employment with the Company;

(iv)misappropriation of any corporate opportunity, or otherwise obtaining personal profit from any transaction which is adverse to the interests of the Company or to the benefits of which the Company is entitled;

(v)conviction of a felony involving moral turpitude;

(vi)willful failure to comply in any material respect with the terms of this Agreement and such non-compliance continues uncured after thirty (30) days after written notice from the Company; or

(vii)chronic substance abuse, including abuse of alcohol, drugs or other substances or use of illegal narcotics or substances, for which Executive fails to undertake treatment immediately after requested by the Company or to complete such treatment and which abuse continues or resumes after such treatment period, or possession of illegal narcotics or substances on Company premises or while performing Executive’s duties and responsibilities.

For purposes of this definition, no act, or failure to act, by Executive will be considered “willful” if done, or omitted to be done, by Executive in good faith and in the reasonable belief that the act or omission was in the best interest of the Company or required by applicable law.

Any termination during the Employment Term by the Company for Cause shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9 of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. “Date of Termination” shall mean the date that employment with the Company and its affiliates is terminated in all respects for any reason.

(d)Good Reason. Executive may terminate Executive’s employment without Good Reason or for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean without the express written consent of Executive, the occurrence of any of the following:

4

(i)any action or inaction that constitutes a material breach by the Company of this Agreement and such action or inaction continues uncured after thirty (30) days following written notice from the Executive;

(ii)the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company within 30 days of receipt of written notice thereof given by the Executive;

(iii)any failure by the Company to comply with the provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company as soon as reasonable possible, but no later than 30 days after receipt of written notice thereof given by the Executive;

(iv)a change in the geographic location at which Executive must perform services to a location more than fifty (50) miles from Houston, Texas or the location at which Executive normally performs such services as of the Effective Date; or

(v)in the event a Change of Control (as defined in Section 6(b)(v)) has occurred, the assignment to the Executive to any position (including status, offices, titles and reporting requirements), authority, duties or responsibilities that are not (A) as a senior executive officer with the ultimate parent company of the entity surviving or resulting from such Change of Control and (B) substantially identical to the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities as contemplated by this Agreement.

Notwithstanding anything herein to the contrary, the interim assignment of Executive’s position, authority, duties, or responsibilities to any person while Executive is absent from his duties during any of the 120 business days set forth under the definition of Disability shall not constitute a Good Reason for Executive to terminate his employment with the Company. In addition, the Executive’s termination of employment shall not constitute Good Reason unless Executive notifies the Company of the condition or event constituting Good Reason within ninety days (90) days of the condition’s occurrence (unless unknown to Executive) and the Company fails to cure the conditions, to the extent curable, specified in the notice within thirty (30) days following such notification. Any termination during the Employment Term by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9 of the Agreement.

6.Compensation Upon Termination. In the event that Executive’s employment under this Agreement terminates during the Employment Term for any reason, the Company will pay to Executive (a) subject to Section 10 (Compliance with Section 409A of the Code), in a single lump sum payment, in accordance with the normal payroll practices of the Company (or such earlier date as may be required by applicable law), the aggregate amount of (i) any earned but unpaid Base

5

Salary and (ii) accrued but unpaid vacation pay through the Date of Termination; (b) in accordance with Section 4(c) above, any unreimbursed business expenses incurred prior to the Date of Termination that are reimbursable in accordance with Section 4(c) above, and (c) such employee benefits, if any, as to which Executive may be entitled pursuant to the terms governing such benefits, payable in accordance with the terms of the applicable plan or other arrangement governing such benefits (collectively, the “Accrued Obligations”). Payment of the Accrued Obligations shall be the only compensation paid to Executive under this Agreement in the event of termination of employment due to death or Disability.

(a)For Cause or Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company shall pay Executive the Accrued Obligations, and the Company shall have no further obligations to Executive under this Agreement.

(b)Without Cause or For Good Reason Not in Contemplation of a Change of Control. If Executive’s employment is terminated by the Company without Cause (other than for Disability) or by Executive for Good Reason, and in each case not “in connection with a Change of Control” (as defined in Section 6(b)(v)), in addition to payment of the Accrued Obligations, Executive shall be entitled to the following additional benefits (collectively, the “Other Benefits”):

(viii)Executive shall be entitled to receive a single lump sum payment of the following, which amount shall be paid at the time provided in Section 6(d):

A.Any earned but unpaid Annual Bonus related to the calendar year prior to the calendar year in which the Date of Termination occurs plus;

B.the product of (x) the target Annual Bonus for the fiscal year during which termination of employment occurs, and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, it being understood that the target Annual Bonus prior to any IPO Event shall be deemed to mean 100% of Executive’s Base Salary for purposes of this calculation; and

C.An amount equal to the Severance Multiple (as defined in Section 6(b)(vi) multiplied by the sum of (1) Executive’s Base Salary (at the rate in effect as of the Date of Termination) and the target Annual Bonus for the fiscal year during which termination of employment occurs, it being understood that the target Annual Bonus prior to any IPO Event shall be deemed to mean 100% of Executive’s Base Salary for purposes of this calculation.

(ix)All benefits under the Company's equity or long-term incentive compensation plan, including all stock options and restricted stock held by the Executive, not already vested, shall be 100% vested.

(x)For a period of 18 months from the Executive's Date of Termination the Company shall continue to provide to Executive and/or Executive's dependents the same

6

level of medical and dental benefits equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(d) of this Agreement if the Executive's employment had not been terminated and shall reimburse Executive for the premiums Executive pays for such medical and dental benefits for up to 18 months following the Date of Termination as provided in Section 6(f), and provided further, that if the Executive becomes re-employed by another employer and is eligible to receive medical or dental benefits under another employer provided plan, the medical or dental benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility.

(xi)A termination shall be deemed to be “in connection with a Change of Control” if such termination occurs during the period beginning on the date that is (1) twelve (12) months prior to a Change of Control occurring and (2) ending on the second anniversary of the date of consummation of the Change of Control.

(xii)“Change of Control” shall mean:

A.The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50 percent or more of either (A) the then outstanding shares of common stock or membership interests of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors or managers (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection A, the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company or any acquisition by the Company; or (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (3) any acquisition by any corporation pursuant to a transaction that complies with clauses (1), (2) and (3) of subsection C of this definition; or

B. Individuals, who, as of the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders or members, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for purpose of this subsection B, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

7

C.Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 20 percent or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (3) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Corporate Transaction; or

D.Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(xiii)“Severance Multiple,” for purposes of calculating the Other Benefits due under this Section 6(b), shall be two (2) times, and for purposes of calculating the Other Benefits due under Section 6(c) shall be two (2) times. In addition, target Annual Bonus for purpose of calculating the Other Benefits due under Section 6(c) shall mean the target Annual Bonus for the fiscal year in which termination of employment occurred.

(c)Without Cause or For Good Reason in Contemplation of a Change of Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, and in each case “in connection with a Change of Control”, in addition to the payment of the Accrued Obligations, Company shall pay to Executive the Other Benefits.

(d)Release of Claims. Notwithstanding any other provisions of this Agreement to the contrary, in consideration for receiving the severance benefits described in Section 6(b) or (c), Executive hereby agrees to execute (and not revoke) a release in substantially the form attached hereto as Appendix A (the “Release”). If Executive is not a “specified employee” within the meaning

8

of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Final Department of Treasury Regulations issued thereunder (collectively, “Section 409A”) at the time of termination of Executive’s employment (“Specified Employee”), and Executive has timely signed and delivered to the Company, by the deadline established by the Company, the Release, which has become irrevocable by the time set forth below, the Company shall pay Executive the lump sum cash severance benefits described in Section 6(b) or (c) on the date that is sixty (60) days following the date of Executive’s “separation from service” within the meaning of Section 409A (“Separation From Service”). In the event that Executive is a Specified Employee and Executive has timely signed and delivered to the Company, by the deadline established by the Company, the Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the lump sum cash severance benefits described in Section 6(b) or (c) on the date that is six (6) months following the date of the Executive’s Separation From Service. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the lump sum cash severance benefits described in Section 6(b) or (c) or entitled to the benefits described in Section 6(b)(ii) or (iii) (except for Executive’s rights under section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)) and Executive shall forfeit any right to such payments and benefits, unless (i) Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is 60 days following the date of Executive’s Separation From Service. If Executive fails to properly execute and deliver such release (or revokes the Release), Executive agrees that Executive shall not be entitled to receive the severance benefits described in Section 6(b) or (c) or entitled to the benefits described in Section 6(b)(ii) or (iii) (other than COBRA benefits). For purposes of this Agreement, a Release shall be considered to have been executed by Executive if it is signed by Executive’s legal representative, in the case of Executive’s Disability or on behalf of Executive’s estate in the case of Executive’s death.

(e)Termination of Offices and Directorships. Upon termination of Executive’s employment for any reason, unless otherwise specified in a written agreement between Executive and the Company, Executive shall be deemed to have resigned from all offices, directorships, and other employment positions then held with the Company or its affiliates, if any, and shall take all actions reasonably requested by the Company to effectuate the foregoing.

(f)Reimbursement of Premiums. During the period that the Company is required to continue coverage in the Company’s group medical plan and the Company’s group dental plan (collectively, the “Group Plan”) as provided in Section 6(b)(iii) and Executive continues and pays the premium for such coverage to continue Executive’s and any qualifying dependent’s Group Plan coverage (“Coverage”) the Company will reimburse Executive the amount of the cost of the Coverage for up to 18 months Executive maintains such Coverage. Any reimbursements by the Company to Executive required under this Section 6(f) shall be made on the last day of each month Executive pays the amount required for such Coverage, for up to the first 18 months of Coverage. If Executive is a Specified Employee at the time of termination and the benefits specified in this Section 6(f) are taxable to Executive and not otherwise exempt from Section 409A then any amounts to which Executive would otherwise be entitled under this Section 6(f) during the first six months following the date of Executive’s Separation From Service shall be accumulated and paid to Executive on the date that is six months following the date of Executive’s Separation From

9

Service. Except for any reimbursements under the applicable Group Plan that are subject to a limitation on reimbursements during a specified period, the amount of expenses eligible for reimbursement under this Section 6(f), or in-kind benefits provided, during Executive’s taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of Executive. Executive’s right to reimbursement or in-kind benefits pursuant to this Section 6(f) shall not be subject to liquidation or exchange for another benefit.

7.Nondisclosure and Noncompetition.

(a)Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

(xiv)“Confidential Information” means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company, that is not generally known to persons engaged in a business similar to that conducted by the Company, whether produced by the Company or any of its consultants, agents or independent contractors or by Executive, and whether or not marked confidential. Confidential information does not include information that (1) at the time of disclosure is, or thereafter becomes, generally available to the public, (2) prior to or at the time of disclosure was already in the possession of Executive, (3) is obtained by Executive from a third party not in violation of any contractual, legal or fiduciary obligation to the Company with respect to that information or (3) is independently developed by Executive, but not including the confidential information provided by the Company.

(xv)“Restricted Business” means any the oil and natural gas land contract drilling business conducted in the United States of America.

(b)Nondisclosure of Confidential Information. Executive shall hold in a fiduciary capacity for the benefit of the Company all Confidential Information which shall have been obtained by Executive during Executive’s employment (whether prior to or after the Effective Date) and shall not use such Confidential Information other than within the scope of Executive’s employment with and for the exclusive benefit of the Company. At the end of the Employment Term, Executive agrees (i) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except (A) upon the prior written authorization of the Company, (B) as may be required by law or legal process, (C) as reasonably necessary in connection with the enforcement of any right or remedy related to this Agreement, or (D) unless no longer Confidential Information, and (ii) to deliver promptly to the Company any Confidential Information in Executive’s possession, including any duplicates thereof and any notes or other records Executive has prepared with respect thereto. In the event that the provisions of any applicable law or the order of any court would require Executive to disclose or otherwise make available any Confidential Information then Executive shall, to the extent practicable, give the Company prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings.

10

(c)Limited Covenant Not to Compete. In consideration of the provision of the Confidential Information during the term of this Agreement and the stock options, restricted stock awards and other compensation provided herein, if Executive’s employment is terminated hereunder by the Company for Cause or by Executive without Good Reason, Executive agrees that during the period of time beginning on the Effective Date and ending on the twelve (12) month anniversary of the Date of Termination:

(i)Executive shall not, directly or indirectly, for himself or others, own, manage, operate, control or participate in the ownership, management, operation or control of any business, whether in corporate, proprietorship or partnership form or otherwise, that is engaged, directly or indirectly, in the United States in the Restricted Business; provided, however, that the restrictions contained herein shall not restrict the acquisition by Executive of less than 2% of the outstanding capital stock of any publicly traded company engaged in a Restricted Business or Executive from being employed by an entity in which the majority of such entity’s revenues on a consolidated basis determined in accordance with generally accepted accounting principles are from activities and businesses that do not constitute a Restricted Business; and

(ii)Executive shall not, directly or indirectly (other than in the performance of Executive’s duties under this Agreement) (A) solicit any individual, who, at the time of time of such solicitation is an executive of the Company or its affiliates, to leave such employment or hire, employ or otherwise engage any such individual (other than employees of the Company or its affiliates who respond to general advertisements for employment in newspapers or other periodicals of general circulation (including trade journals)), or (B) cause, induce or encourage any material actual or prospective client, customer, supplier, landlord, lessor or licensor of the Company or its affiliates to terminate or modify any such actual or prospective contractual relationship that exists on the Date of Termination.

(d)Injunctive Relief; Remedies. The covenants and undertakings contained in this Section 7 relate to matters which are of a special, unique and extraordinary character and a violation of any of the terms of this Section 7 will cause irreparable injury to the Company, the amount of which will be impossible to estimate or determine and which cannot be adequately compensated. Accordingly, the remedy at law for any breach of this Section 7 may be inadequate. Therefore, notwithstanding anything to the contrary, the Company will be entitled to an injunction, restraining order or other equitable relief from any court of competent jurisdiction in the event of any breach of any provision of this Section 7 without the necessity of proving actual damages or posting any bond whatsoever. The rights and remedies provided by this Section 7 are cumulative and in addition to any other rights and remedies which the Company may have hereunder or at law or in equity. The parties hereto further agree that, if any court of competent jurisdiction in a final nonappealable judgment determines that a time period, a specified business limitation or any other relevant feature of this Section 7 is unreasonable, arbitrary or against public policy, then a lesser time period, geographical area, business limitation or other relevant feature which is determined by such court to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

11

(e)Governing Law of this Section 7; Consent to Jurisdiction. Any dispute regarding the reasonableness of the covenants and agreements set forth in this Section 7, or the territorial scope or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, shall be governed by and interpreted in accordance with the laws of the state in which the prohibited competing activity or disclosure occurs, and, with respect to each such dispute, the Company and Executive each hereby irrevocably consent to the exclusive jurisdiction of the State of Texas for resolution of such dispute, and further agree that service of process may be made upon Executive in any legal proceeding relating to this Section 7 by any means allowed under the laws of such state.

(f)Executive’s Understanding of this Section. Executive hereby represents to the Company that Executive has read and understands, and agrees to be bound by, the terms of this Section 7. Executive acknowledges that the geographic scope and duration of the covenants contained in Section 7(c) are the result of arm’s-length bargaining and are fair and reasonable in light of (i) the importance of the functions performed by Executive and the length of time it would take the Company to find and train a suitable replacement, (ii) the nature and wide geographic scope of the operations of the Company, (iii) Executive’s level of control over and contact with the Company’s business and operations in all jurisdictions where they are located, and (iv) the fact that the Restricted Business is conducted throughout the geographic area where competition is restricted by this Agreement. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Section 7 invalid or unenforceable.

8.Certain Tax Matters.

(a)Notwithstanding any other provision of this Agreement to the contrary, if any portion of the payments or benefits provided to or for the benefit of Executive under this Agreement or which Executive otherwise receives or is entitled to receive from the Company or any successor would be subject to the excise tax imposed by Section 4999 of the Code, or any interest, penalties or additions to tax with respect to such excise tax (such excise tax, together with any interest, penalties or additions to tax with respect to such excise tax, is herein collectively referred to as the “Excise Tax”), all such payments and benefits being collectively referred to herein as the “Total Payments”, then, except as otherwise provided in Section 8(b), the Total Payments shall be reduced (but not below zero) or eliminated (as further provided for in Section 8(c)) to the extent the Independent Tax Advisor (as hereinafter defined) shall reasonably determine is necessary so that no portion of the Total Payments shall be subject to the Excise Tax.

(b)Notwithstanding the provisions of Section 8(a), if the Independent Tax Advisor reasonably determines that Executive would receive, in the aggregate, a greater amount of the Total Payments on an after-tax basis (after including and taking into account all applicable federal, state, and local income, employment and other applicable taxes and the Excise Tax) if the Total Payments were not reduced or eliminated pursuant to Section 8(a), then no such reduction or elimination shall be made notwithstanding that all or any portion of the Total Payments may be subject to the Excise Tax.

12

(c)For purposes of determining which of Section 8(a) and Section 8(b) shall be given effect, the determination of which of the Total Payments shall be reduced or eliminated to avoid the Excise Tax shall be made by the Independent Tax Advisor, provided that the Independent Tax Advisor shall reduce or eliminate, as the case may be, the Total Payments in the following order (and within the category described in each of the following Sections 8(c)(i) through 8(c)(v), in reverse order beginning with the Total Payments which are to be paid farthest in time except as otherwise provided in Section 8(c)(iii)):

(i)by first reducing or eliminating the portion of the Total Payments otherwise due and which are not payable in cash (other than that portion of the Total Payments subject to Sections 8(c)(iv) and 8(c)(v));

(ii)then by reducing or eliminating the portion of the Total Payments otherwise due and which are payable in cash (other than that portion of the Total Payments subject to Sections 8(c)(iii) and 8(e)(iv));

(iii)then by reducing or eliminating the portion of the Total Payments otherwise due to or for the benefit of Executive pursuant to the terms of this Agreement and which are payable in cash;

(iv)then by reducing or eliminating the portion of the Total Payments otherwise due that represent equity-based compensation, such reduction or elimination to be made in reverse chronological order with the most recent equity-based compensation awards reduced first; and

(v)then by reducing or eliminating the portion of the Total Payments otherwise due to or for the benefit of Executive pursuant to the terms of this Agreement and which are not payable in cash.

(d)The Independent Tax Advisor shall provide its determinations, together with detailed supporting calculations and documentation, to the Company and Executive for their review no later than ten (10) days after the Date of Termination. The determinations of the Independent Tax Advisor under this Section 8 shall, after due consideration of the Company’s and Executive’s comments with respect to such determinations and the interpretation and application of this Section 8, be final and binding on all parties hereto absent manifest error. The Company and Executive shall furnish to the Independent Tax Advisor such information and documents as the Independent Tax Advisor may reasonably request in order to make the determinations required under this Section 8.

(e)For purposes of this Section 8, “Independent Tax Advisor” shall mean a lawyer with a nationally recognized law firm, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm, in each case with expertise in the area of executive compensation tax law, who shall be selected by the Company and shall be acceptable to Executive (Executive’s acceptance not to be unreasonably withheld), and all of whose fees and disbursements shall be paid by the Company.

13

9.Notice. All notices hereunder must be in writing and shall be deemed to have been given when personally delivered to the designated individual, or (unless otherwise specified) mailed or sent by (a) United States certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service with confirmation of receipt or (d) facsimile transmission with confirmation of receipt.

All such notices must be addressed as follows or to such other address as to which any party hereto may have notified the other in writing.

To the Company:

11616 Galayda

Houston, Texas 77066
Attn: Chief Executive Officer

To Executive:

At Executive’s then current address shown in the Company’s records

or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

10.Compliance with Section 409A of the Code.

(a)Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation the severance payments and benefits under Section 6 will be paid to Executive if Executive is a Specified Employee until the six-month anniversary of Executive’s Separation From Service to the extent that paying such amounts at the time or times indicated in this Agreement would result in a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code.

(b)To the extent applicable, this Agreement shall be interpreted and applied consistent and in accordance with Section 409A. The parties agree to act in good faith in complying with the requirements of Section 409A. For purposes of this Agreement, all references to “termination,” “termination of employment,” Date of Termination and correlative phrases shall mean a Separation From Service. In the event additional regulations or other guidance are issued under Section 409A or a court of competent jurisdiction provides additional authority concerning the application of Section 409A with respect to the payments described in this Agreement, then the parties agree to act in good faith to amend the provisions of this Agreement to permit such payments to be made at the earliest time permitted under such additional regulations, guidance or authority that as closely as practicable achieves the original intent of this Agreement.

(c)To the extent permitted under Section 409A, any separate payment or benefit under this Agreement or otherwise shall not be deemed “nonqualified deferred compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §1.409A-1(b)(9) or any other applicable exception or provision of Section 409A.

14

(d)To the extent that any payments or reimbursements provided to Executive under this Agreement are deemed to constitute compensation to which Treasury Regulation §1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed to Executive reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred. The amounts of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and Executive’s right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

11.Miscellaneous.

(a)Withholding. All amounts payable under this Agreement will be subject to reduction to reflect such federal, state, local or foreign taxes as will be required to be withheld pursuant to any applicable law or regulation.

(b)No Guarantee of Tax Consequences. The Company makes no commitment or guarantee that any federal, state, local or other tax treatment will (or will not) apply or be available to any person eligible for compensation or benefits under this Agreement. The Executive has been advised and been provided the opportunity to obtain independent legal and tax advice regarding the compensation and benefits payable pursuant to this Agreement.

(c)Successors; Binding Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, including Executive’s estate and legal representatives. Neither this Agreement nor any rights, interests or obligations hereunder may be assigned by any party hereto without the prior written consent of the other parties hereto; provided that the Company may assign any rights, interests or obligations hereunder to any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company. The Company agrees to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined any successor to its business and/or assets as aforesaid which assume and agrees to perform this Agreement by operation of law or otherwise.

(d)Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and an authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

15

(e)Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(f)Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

(g)Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, Executive or representative of any party hereto, including the Prior Agreement; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

(h)Governing Law. This Agreement has been made and entered into and shall be governed by the internal laws of the State of Texas without regard to principles of conflict of laws, except as expressly provided in Section 7(e) above with respect to the resolution of disputes arising under, or the Company’s enforcement of, Section 7.

(i)Jurisdiction. If any party commences a lawsuit or other proceeding related to or arising from this Agreement, the parties hereto agree that the State District Court in Houston, Harris County Texas shall have sole and exclusive jurisdiction over any such proceeding. The State District Court shall be the proper venue for any such lawsuit or judicial proceeding and the parties hereto waive any objection to such venue. The parties consent to and agree to submit to the jurisdiction of the court specified herein and agree to accept service of process to vest personal jurisdiction over them in the State District Court of Harris County Texas.

(j)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

(k)Amendment. It is understood and agreed that this Agreement amends and restates and supersedes in its entirety any prior Employment Agreement between the Company and Executive.

Signature Page Follows

16

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

ICD:

INDEPENDENCE CONTRACT DRILLING, INC.

By:     /s/ Edward S. Jacob, III

Name:    Edward S. Jacob, III

Title:     President & Chief Operating Officer

EXECUTIVE:

/s/ Philip A. Choyce

Philip A. Choyce

17

APPENDIX A

AGREEMENT AND RELEASE

This Agreement and Release (“Release”) is entered into between you, the undersigned employee, and Independence Contract Drilling, Inc. (the “Company”). You have [__] days to consider this Release, which you agree is a reasonable amount of time. While you may sign this Release prior to the expiration of this [___]-day period, you are not to sign it prior to the date of your termination of employment with the Company.

1.Definitions.

a.“Released Parties” means the Company and its past, present and future parents, subsidiaries, divisions, successors, predecessors, employee benefit plans and affiliated or related companies, and also each of the foregoing entities’ past, present and future owners, officers, directors, stockholders, investors, partners, managers, principals, members, committees, administrators, sponsors, executors, trustees, fiduciaries, employees, agents, assigns, representatives and attorneys, in their personal and representative capacities. Each of the Released Parties is an intended beneficiary of this Release.

b.“Claims” means all theories of recovery of whatever nature, whether known or unknown, recognized by the law or equity of any jurisdiction. It includes but is not limited to any and all actions, causes of action, lawsuits, claims, complaints, petitions, charges, demands, liabilities, indebtedness, losses, damages, rights and judgments in which you have had or may have an interest. It also includes but is not limited to any claim for wages, benefits or other compensation. It also includes but is not limited to claims asserted by you or on your behalf by some other person, entity or government agency.

2.Consideration. The Company agrees to pay you the consideration set forth in sections 6 and 8 of the Amended and Restated Employment Agreement between you and the Company dated as of [_________] (the “Employment Agreement”). The Company will make such payments to you at the times set forth in the Employment Agreement. You acknowledge that the payment that the Company will make to you in consideration for this Release is in addition to anything else of value to which you are entitled and that the Company is not otherwise obligated to make this payment to you.

3.Release of Claims.

a.You — on behalf of yourself and your heirs, executors, administrators, legal representatives, successors, beneficiaries, and assigns — unconditionally release and forever discharge the Released Parties from, and waive, any and all Claims that you have or may have against any of the Released Parties arising from your employment with the Company, the termination thereof, and any other acts or omissions occurring on or before the date you sign this Release; provided, however, that this Agreement shall not operate to release any Claims that you may have to payments or benefits under Section 6 of the Employment Agreement or any rights you may have to indemnification under any indemnification agreement between you and the Company or any of

its affiliates, or the bylaws or any directors and officers liability insurance policy of the Company or any of its affiliates (collectively, the “Unreleased Claims”).

b.The release set forth in Paragraph 3(a) includes, but is not limited to, any and all Claims under (i) the common law (tort, contract or other) of any jurisdiction; (ii) the Rehabilitation Act of 1973, the Age Discrimination in Employment Act (as amended by the Older Workers Benefit Protection Act), the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, and any other federal, state and local statutes, ordinances, executive orders and regulations prohibiting discrimination or retaliation upon the basis of age, race, sex, national original, religion, disability, or other unlawful factor; (iii) the National Labor Relations Act; (iv) the Employee Retirement Income Security Act; (v) the Family and Medical Leave Act; (vi) the Fair Labor Standards Act; (vii) the Equal Pay Act; (viii) the Worker Adjustment and Retraining Notification Act; and (ix) any other federal, state or local law.

c.In furtherance of this Release, you promise not to bring any Claims (other than Unreleased Claims) against any of the Released Parties in or before any court or arbitral authority. You also agree effective as of the date of this release to resign any and all directorships with the Company and any of its subsidiaries and affiliates.

4.Confidentiality. You agree that you will not reveal, or cause to be revealed, this Release or its terms to any third party (other than your attorney, tax advisor, or spouse), except as required by law.

5.Acknowledgment. You acknowledge that, by entering into this Release, the Company does not admit to any wrongdoing in connection with your employment or termination, and that this Release is intended as a compromise of any Claims you have or may have against the Released Parties. You further acknowledge that you have carefully read this Release and understand its final and binding effect, have had a reasonable amount of time to consider it, and are entering this Release voluntarily. You acknowledge that the Company has advised you in writing to seek the advice of legal counsel prior to executing this release, and that you have had the opportunity to seek legal counsel of your choosing. You acknowledge that you have had at least twenty-one (21) days to consider this Release.

6.Applicable Law. This Release shall be construed and interpreted pursuant to the laws of Texas without regard to its choice of law rules.

7.Severability. Each part, term, or provision of this Release is severable from the others. Notwithstanding any possible future finding by a duly constituted authority that a particular part, term, or provision is invalid, void, or unenforceable, this Release has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby. If any part, term, or provision is so found invalid, void or unenforceable, the applicability of any such part, term, or provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

A-2

8.Effective Date:    You acknowledge that you have seven (7) days after execution to revoke this Release, and that this Release shall not become final and binding until the expiration of seven (7) days after execution.

[Signature page follows]

A-3

IN WITNESS WHEREOF, the parties have executed this Release on the date set forth below.

EXECUTIVE:

Date: [_______________, 20___]

[Name]

COMPANY:

INDEPENDENCE CONTRACT DRILLING, INC.

Date: [_______________, 20___]

By:        

Name:         

Title:         

EX-10.4

Exhibit 10.4#*

AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AGREEMENT

This Amended and Restated Executive EMPLOYMENT AGREEMENT (“Agreement”) is entered into effective as of August 13, 2014, by and between Independence Contract Drilling, Inc., a Delaware corporation (“ICD”), and Edward S. Jacob, III (“Executive”).

W I T N E S S E T H:

WHEREAS, the Company desires to employ, and Executive desires to be employed by the Company and its subsidiaries and affiliates, as applicable, on the terms set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual terms and agreements set forth herein, the parties hereto agree as follows:

1.Employment. The Company hereby agrees that the Company or an affiliated company will continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company or an affiliate subject to the terms and conditions of this Agreement, during the Employment Term (as defined below).

2.Term. The “Employment Term” shall mean the period commencing on the date hereof (the “Effective Date”) and ending on the third anniversary of the Effective Date; provided, however, if neither party shall have provided written notice of termination at least one year prior to the scheduled expiration of the then current term of this Agreement (each such date by which such notice must be provided, a “Renewal Date”), the Employment Term shall automatically be extended for one additional year so as to expire two years from such Renewal Date. Upon a Change of Control the Employment Term shall be automatically extended to the third anniversary of the Change of Control.

3.Position and Duties.

(a)During the Employment Term, (A) the Executive's position (including status, offices, titles and reporting requirements, authority, duties and responsibilities) shall be President and Chief Operating Officer reporting to the Board of Directors of the Company and (B) the Executive's services shall be performed at the Company's executive offices in Houston, Texas or other locations less than 50 miles from such location.

(b)During the Employment Term, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote the substantial portion of his attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Term it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures,

1

fulfill speaking engagements or teach at educational institutions and (C) manage personal investments and business endeavors, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the date hereof, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the date hereof shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.

4.Compensation and Related Matters. During the Employment Term, Executive shall be entitled to the following compensation and benefits:

(a)Salary. The Company shall pay to Executive a total annual base salary of $353,000 (which salary may be increased (but not decreased) by the Company in its discretion) (“Base Salary”), payable in accordance with the normal payroll practices of the Company. During the Employment Term, the Base Salary shall be reviewed by the Board of Directors of the Company (the “Board”) at least annually; provided, however, that a salary increase shall not necessarily be awarded as a result of such review. Any increase in Base Salary may not serve to limit or reduce any other obligation to the Executive under this Agreement. Base Salary shall not be reduced after any such increase. The term Base Salary as utilized in this Agreement shall refer to Base Salary as so increased.

(b)Bonus. Executive shall be eligible for an annual bonus and other annual incentive compensation (collectively, the “Annual Bonus”) for each fiscal year of the Company during the Employment Term, in accordance with the Company’s bonus plan for senior executives of the Company. The Annual Bonus shall be based upon a target amount of 90% of Base Salary, based upon performance criteria established by the Board in its sole discretion, and notwithstanding the foregoing, shall be payable in the sole discretion of the Board. Each such Annual Bonus shall be paid no later than March 15 of the year following the year for which the Annual Bonus is earned, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to a Company-sponsored deferred compensation plan in effect or the bonus plan provides for a different payment date.

(c)Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable and necessary expenses incurred by Executive in performing services hereunder, including all travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. Notwithstanding any provision of this Agreement to the contrary, the amount of expenses for which Executive is eligible to receive reimbursement during any given taxable year of Executive shall not affect the amount of expenses for which Executive is eligible to receive reimbursement during any other taxable year of Executive. Reimbursement of expenses under this Section 4(c) shall be made within thirty (30) days following submission of a completed expense reimbursement form (but in no event later than the last day of the calendar year following the calendar year in which the expense was incurred).

2

The right to reimbursement pursuant to this Section 4(c) is not subject to liquidation or exchange for another benefit.

(d)Benefits. Executive shall be eligible to participate in or receive benefits under any group health or other executive benefit plan or arrangement made available by the Company to its senior executive officers, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.

(e)Vacations. Executive shall be entitled to a minimum of four weeks paid vacation and holidays in accordance with the policies, programs and practices of the Company as in effect from time to time.

(f)Restricted Stock and Options and other Equity Compensation. Upon execution of this Agreement, the Executive will be granted the long term incentive awards as approved by the Board of Directors. The Executive also shall participate in any annual or special equity compensation or long-term compensation plans and programs made available to the senior executive officers of the Company.

5.Termination. Executive’s employment hereunder may be terminated during the Employment Term under the following circumstances:

(a)Death. Executive’s employment hereunder shall terminate upon Executive’s death.

(b)Disability. Executive’s status as an executive and employee of the Company may be terminated for “Disability,” and Executive will be deemed “Disabled,” if Executive shall have been unable to substantially perform Executive’s duties as an executive of the Company or any subsidiary thereof as a result of sickness or injury, with or without reasonable accommodation, and shall have remained unable to perform any such duties for a period of more than 120-days in any 12-month period. If the Company determines that Executive has become Disabled, the Company shall notify Executive of its determination. Executive may then request an accommodation from the Company to assist in his/her return to work. The Company will determine whether Executive’s request can be accommodated without undue hardship no later than 30 days after Executive requests an accommodation. In the event Executive’s request cannot be accommodated, the Company may, by notice given in the manner provided in this Agreement, terminate the status of Executive as an executive and employee of the Company. Any such termination shall become effective 30 days after such notice of termination is given, unless within such 30 day period, Executive becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Company so certifies in writing) and Executive in fact resumes such services.

(c)Cause. The Company may terminate Executive’s employment with or without Cause. For purposes of this Agreement, “Cause” shall mean Executive’s:

(i)willful and continued failure to comply with the reasonable written directives of the Company for a period of thirty (30) days after written notice from the Company;

3

(ii)willful and persistent inattention to duties for a period of thirty (30) days after written notice from the Company, or the commission of acts within employment with the Company amounting to gross negligence or willful misconduct;

(iii)misappropriation of funds or property of the Company or committing any fraud against the Company or against any other person or entity in the course of employment with the Company;

(iv)misappropriation of any corporate opportunity, or otherwise obtaining personal profit from any transaction which is adverse to the interests of the Company or to the benefits of which the Company is entitled;

(v)conviction of a felony involving moral turpitude;

(vi)willful failure to comply in any material respect with the terms of this Agreement and such non-compliance continues uncured after thirty (30) days after written notice from the Company; or

(vii)chronic substance abuse, including abuse of alcohol, drugs or other substances or use of illegal narcotics or substances, for which Executive fails to undertake treatment immediately after requested by the Company or to complete such treatment and which abuse continues or resumes after such treatment period, or possession of illegal narcotics or substances on Company premises or while performing Executive’s duties and responsibilities.

For purposes of this definition, no act, or failure to act, by Executive will be considered “willful” if done, or omitted to be done, by Executive in good faith and in the reasonable belief that the act or omission was in the best interest of the Company or required by applicable law.

Any termination during the Employment Term by the Company for Cause shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9 of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. “Date of Termination” shall mean the date that employment with the Company and its affiliates is terminated in all respects for any reason.

(d)Good Reason. Executive may terminate Executive’s employment without Good Reason or for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean without the express written consent of Executive, the occurrence of any of the following:

4

(i)any action or inaction that constitutes a material breach by the Company of this Agreement and such action or inaction continues uncured after thirty (30) days following written notice from the Executive;

(ii)the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company within 30 days of receipt of written notice thereof given by the Executive;

(iii)any failure by the Company to comply with the provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company as soon as reasonable possible, but no later than 30 days after receipt of written notice thereof given by the Executive;

(iv)a change in the geographic location at which Executive must perform services to a location more than fifty (50) miles from Houston, Texas or the location at which Executive normally performs such services as of the Effective Date; or

(v)in the event a Change of Control (as defined in Section 6(b)(v)) has occurred, the assignment to the Executive to any position (including status, offices, titles and reporting requirements), authority, duties or responsibilities that are not (A) as a senior executive officer with the ultimate parent company of the entity surviving or resulting from such Change of Control and (B) substantially identical to the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities as contemplated by this Agreement.

Notwithstanding anything herein to the contrary, the interim assignment of Executive’s position, authority, duties, or responsibilities to any person while Executive is absent from his duties during any of the 120 business days set forth under the definition of Disability shall not constitute a Good Reason for Executive to terminate his employment with the Company. In addition, the Executive’s termination of employment shall not constitute Good Reason unless Executive notifies the Company of the condition or event constituting Good Reason within ninety days (90) days of the condition’s occurrence (unless unknown to Executive) and the Company fails to cure the conditions, to the extent curable, specified in the notice within thirty (30) days following such notification. Any termination during the Employment Term by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9 of the Agreement.

6.Compensation Upon Termination. In the event that Executive’s employment under this Agreement terminates during the Employment Term for any reason, the Company will pay to Executive (a) subject to Section 10 (Compliance with Section 409A of the Code), in a single lump sum payment, in accordance with the normal payroll practices of the Company (or such earlier date as may be required by applicable law), the aggregate amount of (i) any earned but unpaid Base

5

Salary and (ii) accrued but unpaid vacation pay through the Date of Termination; (b) in accordance with Section 4(c) above, any unreimbursed business expenses incurred prior to the Date of Termination that are reimbursable in accordance with Section 4(c) above, and (c) such employee benefits, if any, as to which Executive may be entitled pursuant to the terms governing such benefits, payable in accordance with the terms of the applicable plan or other arrangement governing such benefits (collectively, the “Accrued Obligations”). Payment of the Accrued Obligations shall be the only compensation paid to Executive under this Agreement in the event of termination of employment due to death or Disability.

(a)For Cause or Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company shall pay Executive the Accrued Obligations, and the Company shall have no further obligations to Executive under this Agreement.

(b)Without Cause or For Good Reason Not in Contemplation of a Change of Control. If Executive’s employment is terminated by the Company without Cause (other than for Disability) or by Executive for Good Reason, and in each case not “in connection with a Change of Control” (as defined in Section 6(b)(v)), in addition to payment of the Accrued Obligations, Executive shall be entitled to the following additional benefits (collectively, the “Other Benefits”):

(viii)Executive shall be entitled to receive a single lump sum payment of the following, which amount shall be paid at the time provided in Section 6(d):

A.Any earned but unpaid Annual Bonus related to the calendar year prior to the calendar year in which the Date of Termination occurs plus;

B.the product of (x) the target Annual Bonus for the fiscal year during which termination of employment occurs, and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, it being understood that the target Annual Bonus prior to any IPO Event shall be deemed to mean 100% of Executive’s Base Salary for purposes of this calculation; and

C.An amount equal to the Severance Multiple (as defined in Section 6(b)(vi) multiplied by the sum of (1) Executive’s Base Salary (at the rate in effect as of the Date of Termination) and the target Annual Bonus for the fiscal year during which termination of employment occurs, it being understood that the target Annual Bonus prior to any IPO Event shall be deemed to mean 100% of Executive’s Base Salary for purposes of this calculation.

(ix)All benefits under the Company's equity or long-term incentive compensation plan, including all stock options and restricted stock held by the Executive, not already vested, shall be 100% vested.

(x)For a period of 18 months from the Executive's Date of Termination the Company shall continue to provide to Executive and/or Executive's dependents the same

6

level of medical and dental benefits equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(d) of this Agreement if the Executive's employment had not been terminated and shall reimburse Executive for the premiums Executive pays for such medical and dental benefits for up to 18 months following the Date of Termination as provided in Section 6(f), and provided further, that if the Executive becomes re-employed by another employer and is eligible to receive medical or dental benefits under another employer provided plan, the medical or dental benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility.

(xi)A termination shall be deemed to be “in connection with a Change of Control” if such termination occurs during the period beginning on the date that is (1) twelve (12) months prior to a Change of Control occurring and (2) ending on the second anniversary of the date of consummation of the Change of Control.

(xii)“Change of Control” shall mean:

A.The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50 percent or more of either (A) the then outstanding shares of common stock or membership interests of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors or managers (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection A, the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company or any acquisition by the Company; or (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (3) any acquisition by any corporation pursuant to a transaction that complies with clauses (1), (2) and (3) of subsection C of this definition; or

B. Individuals, who, as of the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders or members, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for purpose of this subsection B, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

7

C.Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 20 percent or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (3) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Corporate Transaction; or

D.Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(xiii)“Severance Multiple,” for purposes of calculating the Other Benefits due under this Section 6(b), shall be two (2) times, and for purposes of calculating the Other Benefits due under Section 6(c) shall be two (2) times. In addition, target Annual Bonus for purpose of calculating the Other Benefits due under Section 6(c) shall mean the target Annual Bonus for the fiscal year in which termination of employment occurred.

(c)Without Cause or For Good Reason in Contemplation of a Change of Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, and in each case “in connection with a Change of Control”, in addition to the payment of the Accrued Obligations, Company shall pay to Executive the Other Benefits.

(d)Release of Claims. Notwithstanding any other provisions of this Agreement to the contrary, in consideration for receiving the severance benefits described in Section 6(b) or (c), Executive hereby agrees to execute (and not revoke) a release in substantially the form attached hereto as Appendix A (the “Release”). If Executive is not a “specified employee” within the meaning

8

of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Final Department of Treasury Regulations issued thereunder (collectively, “Section 409A”) at the time of termination of Executive’s employment (“Specified Employee”), and Executive has timely signed and delivered to the Company, by the deadline established by the Company, the Release, which has become irrevocable by the time set forth below, the Company shall pay Executive the lump sum cash severance benefits described in Section 6(b) or (c) on the date that is sixty (60) days following the date of Executive’s “separation from service” within the meaning of Section 409A (“Separation From Service”). In the event that Executive is a Specified Employee and Executive has timely signed and delivered to the Company, by the deadline established by the Company, the Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the lump sum cash severance benefits described in Section 6(b) or (c) on the date that is six (6) months following the date of the Executive’s Separation From Service. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the lump sum cash severance benefits described in Section 6(b) or (c) or entitled to the benefits described in Section 6(b)(ii) or (iii) (except for Executive’s rights under section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)) and Executive shall forfeit any right to such payments and benefits, unless (i) Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is 60 days following the date of Executive’s Separation From Service. If Executive fails to properly execute and deliver such release (or revokes the Release), Executive agrees that Executive shall not be entitled to receive the severance benefits described in Section 6(b) or (c) or entitled to the benefits described in Section 6(b)(ii) or (iii) (other than COBRA benefits). For purposes of this Agreement, a Release shall be considered to have been executed by Executive if it is signed by Executive’s legal representative, in the case of Executive’s Disability or on behalf of Executive’s estate in the case of Executive’s death.

(e)Termination of Offices and Directorships. Upon termination of Executive’s employment for any reason, unless otherwise specified in a written agreement between Executive and the Company, Executive shall be deemed to have resigned from all offices, directorships, and other employment positions then held with the Company or its affiliates, if any, and shall take all actions reasonably requested by the Company to effectuate the foregoing.

(f)Reimbursement of Premiums. During the period that the Company is required to continue coverage in the Company’s group medical plan and the Company’s group dental plan (collectively, the “Group Plan”) as provided in Section 6(b)(iii) and Executive continues and pays the premium for such coverage to continue Executive’s and any qualifying dependent’s Group Plan coverage (“Coverage”) the Company will reimburse Executive the amount of the cost of the Coverage for up to 18 months Executive maintains such Coverage. Any reimbursements by the Company to Executive required under this Section 6(f) shall be made on the last day of each month Executive pays the amount required for such Coverage, for up to the first 18 months of Coverage. If Executive is a Specified Employee at the time of termination and the benefits specified in this Section 6(f) are taxable to Executive and not otherwise exempt from Section 409A then any amounts to which Executive would otherwise be entitled under this Section 6(f) during the first six months following the date of Executive’s Separation From Service shall be accumulated and paid to Executive on the date that is six months following the date of Executive’s Separation From

9

Service. Except for any reimbursements under the applicable Group Plan that are subject to a limitation on reimbursements during a specified period, the amount of expenses eligible for reimbursement under this Section 6(f), or in-kind benefits provided, during Executive’s taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of Executive. Executive’s right to reimbursement or in-kind benefits pursuant to this Section 6(f) shall not be subject to liquidation or exchange for another benefit.

7.Nondisclosure and Noncompetition.

(a)Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

(xiv)“Confidential Information” means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company, that is not generally known to persons engaged in a business similar to that conducted by the Company, whether produced by the Company or any of its consultants, agents or independent contractors or by Executive, and whether or not marked confidential. Confidential information does not include information that (1) at the time of disclosure is, or thereafter becomes, generally available to the public, (2) prior to or at the time of disclosure was already in the possession of Executive, (3) is obtained by Executive from a third party not in violation of any contractual, legal or fiduciary obligation to the Company with respect to that information or (3) is independently developed by Executive, but not including the confidential information provided by the Company.

(xv)“Restricted Business” means any the oil and natural gas land contract drilling business conducted in the United States of America.

(b)Nondisclosure of Confidential Information. Executive shall hold in a fiduciary capacity for the benefit of the Company all Confidential Information which shall have been obtained by Executive during Executive’s employment (whether prior to or after the Effective Date) and shall not use such Confidential Information other than within the scope of Executive’s employment with and for the exclusive benefit of the Company. At the end of the Employment Term, Executive agrees (i) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except (A) upon the prior written authorization of the Company, (B) as may be required by law or legal process, (C) as reasonably necessary in connection with the enforcement of any right or remedy related to this Agreement, or (D) unless no longer Confidential Information, and (ii) to deliver promptly to the Company any Confidential Information in Executive’s possession, including any duplicates thereof and any notes or other records Executive has prepared with respect thereto. In the event that the provisions of any applicable law or the order of any court would require Executive to disclose or otherwise make available any Confidential Information then Executive shall, to the extent practicable, give the Company prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings.

10

(c)Limited Covenant Not to Compete. In consideration of the provision of the Confidential Information during the term of this Agreement and the stock options, restricted stock awards and other compensation provided herein, if Executive’s employment is terminated hereunder by the Company for Cause or by Executive without Good Reason, Executive agrees that during the period of time beginning on the Effective Date and ending on the twelve (12) month anniversary of the Date of Termination:

(i)Executive shall not, directly or indirectly, for himself or others, own, manage, operate, control or participate in the ownership, management, operation or control of any business, whether in corporate, proprietorship or partnership form or otherwise, that is engaged, directly or indirectly, in the United States in the Restricted Business; provided, however, that the restrictions contained herein shall not restrict the acquisition by Executive of less than 2% of the outstanding capital stock of any publicly traded company engaged in a Restricted Business or Executive from being employed by an entity in which the majority of such entity’s revenues on a consolidated basis determined in accordance with generally accepted accounting principles are from activities and businesses that do not constitute a Restricted Business; and

(ii)Executive shall not, directly or indirectly (other than in the performance of Executive’s duties under this Agreement) (A) solicit any individual, who, at the time of time of such solicitation is an executive of the Company or its affiliates, to leave such employment or hire, employ or otherwise engage any such individual (other than employees of the Company or its affiliates who respond to general advertisements for employment in newspapers or other periodicals of general circulation (including trade journals)), or (B) cause, induce or encourage any material actual or prospective client, customer, supplier, landlord, lessor or licensor of the Company or its affiliates to terminate or modify any such actual or prospective contractual relationship that exists on the Date of Termination.

(d)Injunctive Relief; Remedies. The covenants and undertakings contained in this Section 7 relate to matters which are of a special, unique and extraordinary character and a violation of any of the terms of this Section 7 will cause irreparable injury to the Company, the amount of which will be impossible to estimate or determine and which cannot be adequately compensated. Accordingly, the remedy at law for any breach of this Section 7 may be inadequate. Therefore, notwithstanding anything to the contrary, the Company will be entitled to an injunction, restraining order or other equitable relief from any court of competent jurisdiction in the event of any breach of any provision of this Section 7 without the necessity of proving actual damages or posting any bond whatsoever. The rights and remedies provided by this Section 7 are cumulative and in addition to any other rights and remedies which the Company may have hereunder or at law or in equity. The parties hereto further agree that, if any court of competent jurisdiction in a final nonappealable judgment determines that a time period, a specified business limitation or any other relevant feature of this Section 7 is unreasonable, arbitrary or against public policy, then a lesser time period, geographical area, business limitation or other relevant feature which is determined by such court to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

11

(e)Governing Law of this Section 7; Consent to Jurisdiction. Any dispute regarding the reasonableness of the covenants and agreements set forth in this Section 7, or the territorial scope or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, shall be governed by and interpreted in accordance with the laws of the state in which the prohibited competing activity or disclosure occurs, and, with respect to each such dispute, the Company and Executive each hereby irrevocably consent to the exclusive jurisdiction of the State of Texas for resolution of such dispute, and further agree that service of process may be made upon Executive in any legal proceeding relating to this Section 7 by any means allowed under the laws of such state.

(f)Executive’s Understanding of this Section. Executive hereby represents to the Company that Executive has read and understands, and agrees to be bound by, the terms of this Section 7. Executive acknowledges that the geographic scope and duration of the covenants contained in Section 7(c) are the result of arm’s-length bargaining and are fair and reasonable in light of (i) the importance of the functions performed by Executive and the length of time it would take the Company to find and train a suitable replacement, (ii) the nature and wide geographic scope of the operations of the Company, (iii) Executive’s level of control over and contact with the Company’s business and operations in all jurisdictions where they are located, and (iv) the fact that the Restricted Business is conducted throughout the geographic area where competition is restricted by this Agreement. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Section 7 invalid or unenforceable.

8.Certain Tax Matters.

(a)Notwithstanding any other provision of this Agreement to the contrary, if any portion of the payments or benefits provided to or for the benefit of Executive under this Agreement or which Executive otherwise receives or is entitled to receive from the Company or any successor would be subject to the excise tax imposed by Section 4999 of the Code, or any interest, penalties or additions to tax with respect to such excise tax (such excise tax, together with any interest, penalties or additions to tax with respect to such excise tax, is herein collectively referred to as the “Excise Tax”), all such payments and benefits being collectively referred to herein as the “Total Payments”, then, except as otherwise provided in Section 8(b), the Total Payments shall be reduced (but not below zero) or eliminated (as further provided for in Section 8(c)) to the extent the Independent Tax Advisor (as hereinafter defined) shall reasonably determine is necessary so that no portion of the Total Payments shall be subject to the Excise Tax.

(b)Notwithstanding the provisions of Section 8(a), if the Independent Tax Advisor reasonably determines that Executive would receive, in the aggregate, a greater amount of the Total Payments on an after-tax basis (after including and taking into account all applicable federal, state, and local income, employment and other applicable taxes and the Excise Tax) if the Total Payments were not reduced or eliminated pursuant to Section 8(a), then no such reduction or elimination shall be made notwithstanding that all or any portion of the Total Payments may be subject to the Excise Tax.

12

(c)For purposes of determining which of Section 8(a) and Section 8(b) shall be given effect, the determination of which of the Total Payments shall be reduced or eliminated to avoid the Excise Tax shall be made by the Independent Tax Advisor, provided that the Independent Tax Advisor shall reduce or eliminate, as the case may be, the Total Payments in the following order (and within the category described in each of the following Sections 8(c)(i) through 8(c)(v), in reverse order beginning with the Total Payments which are to be paid farthest in time except as otherwise provided in Section 8(c)(iii)):

(i)by first reducing or eliminating the portion of the Total Payments otherwise due and which are not payable in cash (other than that portion of the Total Payments subject to Sections 8(c)(iv) and 8(c)(v));

(ii)then by reducing or eliminating the portion of the Total Payments otherwise due and which are payable in cash (other than that portion of the Total Payments subject to Sections 8(c)(iii) and 8(e)(iv));

(iii)then by reducing or eliminating the portion of the Total Payments otherwise due to or for the benefit of Executive pursuant to the terms of this Agreement and which are payable in cash;

(iv)then by reducing or eliminating the portion of the Total Payments otherwise due that represent equity-based compensation, such reduction or elimination to be made in reverse chronological order with the most recent equity-based compensation awards reduced first; and

(v)then by reducing or eliminating the portion of the Total Payments otherwise due to or for the benefit of Executive pursuant to the terms of this Agreement and which are not payable in cash.

(d)The Independent Tax Advisor shall provide its determinations, together with detailed supporting calculations and documentation, to the Company and Executive for their review no later than ten (10) days after the Date of Termination. The determinations of the Independent Tax Advisor under this Section 8 shall, after due consideration of the Company’s and Executive’s comments with respect to such determinations and the interpretation and application of this Section 8, be final and binding on all parties hereto absent manifest error. The Company and Executive shall furnish to the Independent Tax Advisor such information and documents as the Independent Tax Advisor may reasonably request in order to make the determinations required under this Section 8.

(e)For purposes of this Section 8, “Independent Tax Advisor” shall mean a lawyer with a nationally recognized law firm, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm, in each case with expertise in the area of executive compensation tax law, who shall be selected by the Company and shall be acceptable to Executive (Executive’s acceptance not to be unreasonably withheld), and all of whose fees and disbursements shall be paid by the Company.

13

9.Notice. All notices hereunder must be in writing and shall be deemed to have been given when personally delivered to the designated individual, or (unless otherwise specified) mailed or sent by (a) United States certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service with confirmation of receipt or (d) facsimile transmission with confirmation of receipt.

All such notices must be addressed as follows or to such other address as to which any party hereto may have notified the other in writing.

To the Company:

11616 Galayda

Houston, Texas 77066
Attn: Chief Executive Officer

To Executive:

At Executive’s then current address shown in the Company’s records

or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

10.Compliance with Section 409A of the Code.

(a)Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation the severance payments and benefits under Section 6 will be paid to Executive if Executive is a Specified Employee until the six-month anniversary of Executive’s Separation From Service to the extent that paying such amounts at the time or times indicated in this Agreement would result in a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code.

(b)To the extent applicable, this Agreement shall be interpreted and applied consistent and in accordance with Section 409A. The parties agree to act in good faith in complying with the requirements of Section 409A. For purposes of this Agreement, all references to “termination,” “termination of employment,” Date of Termination and correlative phrases shall mean a Separation From Service. In the event additional regulations or other guidance are issued under Section 409A or a court of competent jurisdiction provides additional authority concerning the application of Section 409A with respect to the payments described in this Agreement, then the parties agree to act in good faith to amend the provisions of this Agreement to permit such payments to be made at the earliest time permitted under such additional regulations, guidance or authority that as closely as practicable achieves the original intent of this Agreement.

(c)To the extent permitted under Section 409A, any separate payment or benefit under this Agreement or otherwise shall not be deemed “nonqualified deferred compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §1.409A-1(b)(9) or any other applicable exception or provision of Section 409A.

14

(d)To the extent that any payments or reimbursements provided to Executive under this Agreement are deemed to constitute compensation to which Treasury Regulation §1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed to Executive reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred. The amounts of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and Executive’s right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

11.Miscellaneous.

(a)Withholding. All amounts payable under this Agreement will be subject to reduction to reflect such federal, state, local or foreign taxes as will be required to be withheld pursuant to any applicable law or regulation.

(b)No Guarantee of Tax Consequences. The Company makes no commitment or guarantee that any federal, state, local or other tax treatment will (or will not) apply or be available to any person eligible for compensation or benefits under this Agreement. The Executive has been advised and been provided the opportunity to obtain independent legal and tax advice regarding the compensation and benefits payable pursuant to this Agreement.

(c)Successors; Binding Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, including Executive’s estate and legal representatives. Neither this Agreement nor any rights, interests or obligations hereunder may be assigned by any party hereto without the prior written consent of the other parties hereto; provided that the Company may assign any rights, interests or obligations hereunder to any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company. The Company agrees to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined any successor to its business and/or assets as aforesaid which assume and agrees to perform this Agreement by operation of law or otherwise.

(d)Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and an authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

15

(e)Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(f)Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

(g)Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, Executive or representative of any party hereto, including the Prior Agreement; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

(h)Governing Law. This Agreement has been made and entered into and shall be governed by the internal laws of the State of Texas without regard to principles of conflict of laws, except as expressly provided in Section 7(e) above with respect to the resolution of disputes arising under, or the Company’s enforcement of, Section 7.

(i)Jurisdiction. If any party commences a lawsuit or other proceeding related to or arising from this Agreement, the parties hereto agree that the State District Court in Houston, Harris County Texas shall have sole and exclusive jurisdiction over any such proceeding. The State District Court shall be the proper venue for any such lawsuit or judicial proceeding and the parties hereto waive any objection to such venue. The parties consent to and agree to submit to the jurisdiction of the court specified herein and agree to accept service of process to vest personal jurisdiction over them in the State District Court of Harris County Texas.

(j)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

(k)Amendment. It is understood and agreed that this Agreement amends and restates and supersedes in its entirety any prior Employment Agreement between the Company and Executive.

Signature Page Follows

16

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

ICD:

INDEPENDENCE CONTRACT DRILLING, INC.

By:     /s/ Philip A. Choyce

Name:    Philip A. Choyce

Title:     Senior Vice President and

Chief Financial Officer

EXECUTIVE:

/s/ Edward S. Jacob, III

Edward S. Jacob, III

17

APPENDIX A

AGREEMENT AND RELEASE

This Agreement and Release (“Release”) is entered into between you, the undersigned employee, and Independence Contract Drilling, Inc. (the “Company”). You have [__] days to consider this Release, which you agree is a reasonable amount of time. While you may sign this Release prior to the expiration of this [___]-day period, you are not to sign it prior to the date of your termination of employment with the Company.

1.Definitions.

a.“Released Parties” means the Company and its past, present and future parents, subsidiaries, divisions, successors, predecessors, employee benefit plans and affiliated or related companies, and also each of the foregoing entities’ past, present and future owners, officers, directors, stockholders, investors, partners, managers, principals, members, committees, administrators, sponsors, executors, trustees, fiduciaries, employees, agents, assigns, representatives and attorneys, in their personal and representative capacities. Each of the Released Parties is an intended beneficiary of this Release.

b.“Claims” means all theories of recovery of whatever nature, whether known or unknown, recognized by the law or equity of any jurisdiction. It includes but is not limited to any and all actions, causes of action, lawsuits, claims, complaints, petitions, charges, demands, liabilities, indebtedness, losses, damages, rights and judgments in which you have had or may have an interest. It also includes but is not limited to any claim for wages, benefits or other compensation. It also includes but is not limited to claims asserted by you or on your behalf by some other person, entity or government agency.

2.Consideration. The Company agrees to pay you the consideration set forth in sections 6 and 8 of the Amended and Restated Employment Agreement between you and the Company dated as of [_________] (the “Employment Agreement”). The Company will make such payments to you at the times set forth in the Employment Agreement. You acknowledge that the payment that the Company will make to you in consideration for this Release is in addition to anything else of value to which you are entitled and that the Company is not otherwise obligated to make this payment to you.

3.Release of Claims.

a.You — on behalf of yourself and your heirs, executors, administrators, legal representatives, successors, beneficiaries, and assigns — unconditionally release and forever discharge the Released Parties from, and waive, any and all Claims that you have or may have against any of the Released Parties arising from your employment with the Company, the termination thereof, and any other acts or omissions occurring on or before the date you sign this Release; provided, however, that this Agreement shall not operate to release any Claims that you may have to payments or benefits under Section 6 of the Employment Agreement or any rights you may have to indemnification under any indemnification agreement between you and the Company or any of

its affiliates, or the bylaws or any directors and officers liability insurance policy of the Company or any of its affiliates (collectively, the “Unreleased Claims”).

b.The release set forth in Paragraph 3(a) includes, but is not limited to, any and all Claims under (i) the common law (tort, contract or other) of any jurisdiction; (ii) the Rehabilitation Act of 1973, the Age Discrimination in Employment Act (as amended by the Older Workers Benefit Protection Act), the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, and any other federal, state and local statutes, ordinances, executive orders and regulations prohibiting discrimination or retaliation upon the basis of age, race, sex, national original, religion, disability, or other unlawful factor; (iii) the National Labor Relations Act; (iv) the Employee Retirement Income Security Act; (v) the Family and Medical Leave Act; (vi) the Fair Labor Standards Act; (vii) the Equal Pay Act; (viii) the Worker Adjustment and Retraining Notification Act; and (ix) any other federal, state or local law.

c.In furtherance of this Release, you promise not to bring any Claims (other than Unreleased Claims) against any of the Released Parties in or before any court or arbitral authority. You also agree effective as of the date of this release to resign any and all directorships with the Company and any of its subsidiaries and affiliates.

4.Confidentiality. You agree that you will not reveal, or cause to be revealed, this Release or its terms to any third party (other than your attorney, tax advisor, or spouse), except as required by law.

5.Acknowledgment. You acknowledge that, by entering into this Release, the Company does not admit to any wrongdoing in connection with your employment or termination, and that this Release is intended as a compromise of any Claims you have or may have against the Released Parties. You further acknowledge that you have carefully read this Release and understand its final and binding effect, have had a reasonable amount of time to consider it, and are entering this Release voluntarily. You acknowledge that the Company has advised you in writing to seek the advice of legal counsel prior to executing this release, and that you have had the opportunity to seek legal counsel of your choosing. You acknowledge that you have had at least twenty-one (21) days to consider this Release.

6.Applicable Law. This Release shall be construed and interpreted pursuant to the laws of Texas without regard to its choice of law rules.

7.Severability. Each part, term, or provision of this Release is severable from the others. Notwithstanding any possible future finding by a duly constituted authority that a particular part, term, or provision is invalid, void, or unenforceable, this Release has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby. If any part, term, or provision is so found invalid, void or unenforceable, the applicability of any such part, term, or provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

A-2

8.Effective Date:    You acknowledge that you have seven (7) days after execution to revoke this Release, and that this Release shall not become final and binding until the expiration of seven (7) days after execution.

[Signature page follows]

A-3

IN WITNESS WHEREOF, the parties have executed this Release on the date set forth below.

EXECUTIVE:

Date: [_______________, 20___]

[Name]

COMPANY:

INDEPENDENCE CONTRACT DRILLING, INC.

Date: [_______________, 20___]

By:        

Name:         

Title:         

EX-10.5

Exhibit 10.5#*

AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AGREEMENT

This Amended and Restated Executive EMPLOYMENT AGREEMENT (“Agreement”) is entered into effective as of August 13, 2014, by and between Independence Contract Drilling, Inc., a Delaware corporation (“ICD”), and Dave C. Brown (“Executive”).

W I T N E S S E T H:

WHEREAS, the Company desires to employ, and Executive desires to be employed by the Company and its subsidiaries and affiliates, as applicable, on the terms set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual terms and agreements set forth herein, the parties hereto agree as follows:

1.Employment. The Company hereby agrees that the Company or an affiliated company will continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company or an affiliate subject to the terms and conditions of this Agreement, during the Employment Term (as defined below).

2.Term. The “Employment Term” shall mean the period commencing on the date hereof (the “Effective Date”) and ending on the third anniversary of the Effective Date; provided, however, if neither party shall have provided written notice of termination at least one year prior to the scheduled expiration of the then current term of this Agreement (each such date by which such notice must be provided, a “Renewal Date”), the Employment Term shall automatically be extended for one additional year so as to expire two years from such Renewal Date. Upon a Change of Control the Employment Term shall be automatically extended to the third anniversary of the Change of Control.

3.Position and Duties.

(a)During the Employment Term, (A) the Executive's position (including status, offices, titles and reporting requirements, authority, duties and responsibilities) shall be Senior Vice President—Construction and Engineering reporting to the Board of Directors of the Company and (B) the Executive's services shall be performed at the Company's executive offices in Houston, Texas or other locations less than 50 miles from such location.

(b)During the Employment Term, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote the substantial portion of his attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Term it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures,

1

fulfill speaking engagements or teach at educational institutions and (C) manage personal investments and business endeavors, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the date hereof, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the date hereof shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.

4.Compensation and Related Matters. During the Employment Term, Executive shall be entitled to the following compensation and benefits:

(a)Salary. The Company shall pay to Executive a total annual base salary of $216,000 (which salary may be increased (but not decreased) by the Company in its discretion) (“Base Salary”), payable in accordance with the normal payroll practices of the Company. During the Employment Term, the Base Salary shall be reviewed by the Board of Directors of the Company (the “Board”) at least annually; provided, however, that a salary increase shall not necessarily be awarded as a result of such review. Any increase in Base Salary may not serve to limit or reduce any other obligation to the Executive under this Agreement. Base Salary shall not be reduced after any such increase. The term Base Salary as utilized in this Agreement shall refer to Base Salary as so increased.

(b)Bonus. Executive shall be eligible for an annual bonus and other annual incentive compensation (collectively, the “Annual Bonus”) for each fiscal year of the Company during the Employment Term, in accordance with the Company’s bonus plan for senior executives of the Company. The Annual Bonus shall be based upon a target amount of 50% of Base Salary, based upon performance criteria established by the Board in its sole discretion, and notwithstanding the foregoing, shall be payable in the sole discretion of the Board. Each such Annual Bonus shall be paid no later than March 15 of the year following the year for which the Annual Bonus is earned, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to a Company-sponsored deferred compensation plan in effect or the bonus plan provides for a different payment date.

(c)Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable and necessary expenses incurred by Executive in performing services hereunder, including all travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. Notwithstanding any provision of this Agreement to the contrary, the amount of expenses for which Executive is eligible to receive reimbursement during any given taxable year of Executive shall not affect the amount of expenses for which Executive is eligible to receive reimbursement during any other taxable year of Executive. Reimbursement of expenses under this Section 4(c) shall be made within thirty (30) days following submission of a completed expense reimbursement form (but in no event later than the last day of the calendar year following the calendar year in which the expense was incurred).

2

The right to reimbursement pursuant to this Section 4(c) is not subject to liquidation or exchange for another benefit.

(d)Benefits. Executive shall be eligible to participate in or receive benefits under any group health or other executive benefit plan or arrangement made available by the Company to its senior executive officers, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.

(e)Vacations. Executive shall be entitled to a minimum of four weeks paid vacation and holidays in accordance with the policies, programs and practices of the Company as in effect from time to time.

(f)Restricted Stock and Options and other Equity Compensation. Upon execution of this Agreement, the Executive will be granted the long term incentive awards as approved by the Board of Directors. The Executive also shall participate in any annual or special equity compensation or long-term compensation plans and programs made available to the senior executive officers of the Company.

5.Termination. Executive’s employment hereunder may be terminated during the Employment Term under the following circumstances:

(a)Death. Executive’s employment hereunder shall terminate upon Executive’s death.

(b)Disability. Executive’s status as an executive and employee of the Company may be terminated for “Disability,” and Executive will be deemed “Disabled,” if Executive shall have been unable to substantially perform Executive’s duties as an executive of the Company or any subsidiary thereof as a result of sickness or injury, with or without reasonable accommodation, and shall have remained unable to perform any such duties for a period of more than 120-days in any 12-month period. If the Company determines that Executive has become Disabled, the Company shall notify Executive of its determination. Executive may then request an accommodation from the Company to assist in his/her return to work. The Company will determine whether Executive’s request can be accommodated without undue hardship no later than 30 days after Executive requests an accommodation. In the event Executive’s request cannot be accommodated, the Company may, by notice given in the manner provided in this Agreement, terminate the status of Executive as an executive and employee of the Company. Any such termination shall become effective 30 days after such notice of termination is given, unless within such 30 day period, Executive becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Company so certifies in writing) and Executive in fact resumes such services.

(c)Cause. The Company may terminate Executive’s employment with or without Cause. For purposes of this Agreement, “Cause” shall mean Executive’s:

(i)willful and continued failure to comply with the reasonable written directives of the Company for a period of thirty (30) days after written notice from the Company;

3

(ii)willful and persistent inattention to duties for a period of thirty (30) days after written notice from the Company, or the commission of acts within employment with the Company amounting to gross negligence or willful misconduct;

(iii)misappropriation of funds or property of the Company or committing any fraud against the Company or against any other person or entity in the course of employment with the Company;

(iv)misappropriation of any corporate opportunity, or otherwise obtaining personal profit from any transaction which is adverse to the interests of the Company or to the benefits of which the Company is entitled;

(v)conviction of a felony involving moral turpitude;

(vi)willful failure to comply in any material respect with the terms of this Agreement and such non-compliance continues uncured after thirty (30) days after written notice from the Company; or

(vii)chronic substance abuse, including abuse of alcohol, drugs or other substances or use of illegal narcotics or substances, for which Executive fails to undertake treatment immediately after requested by the Company or to complete such treatment and which abuse continues or resumes after such treatment period, or possession of illegal narcotics or substances on Company premises or while performing Executive’s duties and responsibilities.

For purposes of this definition, no act, or failure to act, by Executive will be considered “willful” if done, or omitted to be done, by Executive in good faith and in the reasonable belief that the act or omission was in the best interest of the Company or required by applicable law.

Any termination during the Employment Term by the Company for Cause shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9 of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. “Date of Termination” shall mean the date that employment with the Company and its affiliates is terminated in all respects for any reason.

(d)Good Reason. Executive may terminate Executive’s employment without Good Reason or for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean without the express written consent of Executive, the occurrence of any of the following:

4

(i)any action or inaction that constitutes a material breach by the Company of this Agreement and such action or inaction continues uncured after thirty (30) days following written notice from the Executive;

(ii)the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company within 30 days of receipt of written notice thereof given by the Executive;

(iii)any failure by the Company to comply with the provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company as soon as reasonable possible, but no later than 30 days after receipt of written notice thereof given by the Executive;

(iv)a change in the geographic location at which Executive must perform services to a location more than fifty (50) miles from Houston, Texas or the location at which Executive normally performs such services as of the Effective Date; or

(v)in the event a Change of Control (as defined in Section 6(b)(v)) has occurred, the assignment to the Executive to any position (including status, offices, titles and reporting requirements), authority, duties or responsibilities that are not (A) as a senior executive officer with the ultimate parent company of the entity surviving or resulting from such Change of Control and (B) substantially identical to the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities as contemplated by this Agreement.

Notwithstanding anything herein to the contrary, the interim assignment of Executive’s position, authority, duties, or responsibilities to any person while Executive is absent from his duties during any of the 120 business days set forth under the definition of Disability shall not constitute a Good Reason for Executive to terminate his employment with the Company. In addition, the Executive’s termination of employment shall not constitute Good Reason unless Executive notifies the Company of the condition or event constituting Good Reason within ninety days (90) days of the condition’s occurrence (unless unknown to Executive) and the Company fails to cure the conditions, to the extent curable, specified in the notice within thirty (30) days following such notification. Any termination during the Employment Term by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 9 of the Agreement.

6.Compensation Upon Termination. In the event that Executive’s employment under this Agreement terminates during the Employment Term for any reason, the Company will pay to Executive (a) subject to Section 10 (Compliance with Section 409A of the Code), in a single lump sum payment, in accordance with the normal payroll practices of the Company (or such earlier date as may be required by applicable law), the aggregate amount of (i) any earned but unpaid Base

5

Salary and (ii) accrued but unpaid vacation pay through the Date of Termination; (b) in accordance with Section 4(c) above, any unreimbursed business expenses incurred prior to the Date of Termination that are reimbursable in accordance with Section 4(c) above, and (c) such employee benefits, if any, as to which Executive may be entitled pursuant to the terms governing such benefits, payable in accordance with the terms of the applicable plan or other arrangement governing such benefits (collectively, the “Accrued Obligations”). Payment of the Accrued Obligations shall be the only compensation paid to Executive under this Agreement in the event of termination of employment due to death or Disability.

(a)For Cause or Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company shall pay Executive the Accrued Obligations, and the Company shall have no further obligations to Executive under this Agreement.

(b)Without Cause or For Good Reason Not in Contemplation of a Change of Control. If Executive’s employment is terminated by the Company without Cause (other than for Disability) or by Executive for Good Reason, and in each case not “in connection with a Change of Control” (as defined in Section 6(b)(v)), in addition to payment of the Accrued Obligations, Executive shall be entitled to the following additional benefits (collectively, the “Other Benefits”):

(viii)Executive shall be entitled to receive a single lump sum payment of the following, which amount shall be paid at the time provided in Section 6(d):

A.Any earned but unpaid Annual Bonus related to the calendar year prior to the calendar year in which the Date of Termination occurs plus;

B.the product of (x) the target Annual Bonus for the fiscal year during which termination of employment occurs, and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, it being understood that the target Annual Bonus prior to any IPO Event shall be deemed to mean 100% of Executive’s Base Salary for purposes of this calculation; and

C.An amount equal to the Severance Multiple (as defined in Section 6(b)(vi) multiplied by the sum of (1) Executive’s Base Salary (at the rate in effect as of the Date of Termination) and the target Annual Bonus for the fiscal year during which termination of employment occurs, it being understood that the target Annual Bonus prior to any IPO Event shall be deemed to mean 100% of Executive’s Base Salary for purposes of this calculation.

(ix)All benefits under the Company's equity or long-term incentive compensation plan, including all stock options and restricted stock held by the Executive, not already vested, shall be 100% vested.

(x)For a period of 18 months from the Executive's Date of Termination the Company shall continue to provide to Executive and/or Executive's dependents the same

6

level of medical and dental benefits equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(d) of this Agreement if the Executive's employment had not been terminated and shall reimburse Executive for the premiums Executive pays for such medical and dental benefits for up to 18 months following the Date of Termination as provided in Section 6(f), and provided further, that if the Executive becomes re-employed by another employer and is eligible to receive medical or dental benefits under another employer provided plan, the medical or dental benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility.

(xi)A termination shall be deemed to be “in connection with a Change of Control” if such termination occurs during the period beginning on the date that is (1) twelve (12) months prior to a Change of Control occurring and (2) ending on the second anniversary of the date of consummation of the Change of Control.

(xii)“Change of Control” shall mean:

A.The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50 percent or more of either (A) the then outstanding shares of common stock or membership interests of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors or managers (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection A, the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company or any acquisition by the Company; or (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or (3) any acquisition by any corporation pursuant to a transaction that complies with clauses (1), (2) and (3) of subsection C of this definition; or

B. Individuals, who, as of the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders or members, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for purpose of this subsection B, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

7

C.Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”) in each case, unless, following such Corporate Transaction, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60 percent of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Corporate Transaction or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 20 percent or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (3) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Corporate Transaction; or

D.Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

(xiii)“Severance Multiple,” for purposes of calculating the Other Benefits due under this Section 6(b), shall be two (2) times, and for purposes of calculating the Other Benefits due under Section 6(c) shall be two (2) times. In addition, target Annual Bonus for purpose of calculating the Other Benefits due under Section 6(c) shall mean the target Annual Bonus for the fiscal year in which termination of employment occurred.

(c)Without Cause or For Good Reason in Contemplation of a Change of Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, and in each case “in connection with a Change of Control”, in addition to the payment of the Accrued Obligations, Company shall pay to Executive the Other Benefits.

(d)Release of Claims. Notwithstanding any other provisions of this Agreement to the contrary, in consideration for receiving the severance benefits described in Section 6(b) or (c), Executive hereby agrees to execute (and not revoke) a release in substantially the form attached hereto as Appendix A (the “Release”). If Executive is not a “specified employee” within the meaning

8

of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Final Department of Treasury Regulations issued thereunder (collectively, “Section 409A”) at the time of termination of Executive’s employment (“Specified Employee”), and Executive has timely signed and delivered to the Company, by the deadline established by the Company, the Release, which has become irrevocable by the time set forth below, the Company shall pay Executive the lump sum cash severance benefits described in Section 6(b) or (c) on the date that is sixty (60) days following the date of Executive’s “separation from service” within the meaning of Section 409A (“Separation From Service”). In the event that Executive is a Specified Employee and Executive has timely signed and delivered to the Company, by the deadline established by the Company, the Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the lump sum cash severance benefits described in Section 6(b) or (c) on the date that is six (6) months following the date of the Executive’s Separation From Service. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the lump sum cash severance benefits described in Section 6(b) or (c) or entitled to the benefits described in Section 6(b)(ii) or (iii) (except for Executive’s rights under section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)) and Executive shall forfeit any right to such payments and benefits, unless (i) Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is 60 days following the date of Executive’s Separation From Service. If Executive fails to properly execute and deliver such release (or revokes the Release), Executive agrees that Executive shall not be entitled to receive the severance benefits described in Section 6(b) or (c) or entitled to the benefits described in Section 6(b)(ii) or (iii) (other than COBRA benefits). For purposes of this Agreement, a Release shall be considered to have been executed by Executive if it is signed by Executive’s legal representative, in the case of Executive’s Disability or on behalf of Executive’s estate in the case of Executive’s death.

(e)Termination of Offices and Directorships. Upon termination of Executive’s employment for any reason, unless otherwise specified in a written agreement between Executive and the Company, Executive shall be deemed to have resigned from all offices, directorships, and other employment positions then held with the Company or its affiliates, if any, and shall take all actions reasonably requested by the Company to effectuate the foregoing.

(f)Reimbursement of Premiums. During the period that the Company is required to continue coverage in the Company’s group medical plan and the Company’s group dental plan (collectively, the “Group Plan”) as provided in Section 6(b)(iii) and Executive continues and pays the premium for such coverage to continue Executive’s and any qualifying dependent’s Group Plan coverage (“Coverage”) the Company will reimburse Executive the amount of the cost of the Coverage for up to 18 months Executive maintains such Coverage. Any reimbursements by the Company to Executive required under this Section 6(f) shall be made on the last day of each month Executive pays the amount required for such Coverage, for up to the first 18 months of Coverage. If Executive is a Specified Employee at the time of termination and the benefits specified in this Section 6(f) are taxable to Executive and not otherwise exempt from Section 409A then any amounts to which Executive would otherwise be entitled under this Section 6(f) during the first six months following the date of Executive’s Separation From Service shall be accumulated and paid to Executive on the date that is six months following the date of Executive’s Separation From

9

Service. Except for any reimbursements under the applicable Group Plan that are subject to a limitation on reimbursements during a specified period, the amount of expenses eligible for reimbursement under this Section 6(f), or in-kind benefits provided, during Executive’s taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of Executive. Executive’s right to reimbursement or in-kind benefits pursuant to this Section 6(f) shall not be subject to liquidation or exchange for another benefit.

7.Nondisclosure and Noncompetition.

(a)Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

(xiv)“Confidential Information” means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company, that is not generally known to persons engaged in a business similar to that conducted by the Company, whether produced by the Company or any of its consultants, agents or independent contractors or by Executive, and whether or not marked confidential. Confidential information does not include information that (1) at the time of disclosure is, or thereafter becomes, generally available to the public, (2) prior to or at the time of disclosure was already in the possession of Executive, (3) is obtained by Executive from a third party not in violation of any contractual, legal or fiduciary obligation to the Company with respect to that information or (3) is independently developed by Executive, but not including the confidential information provided by the Company.

(xv)“Restricted Business” means any the oil and natural gas land contract drilling business conducted in the United States of America.

(b)Nondisclosure of Confidential Information. Executive shall hold in a fiduciary capacity for the benefit of the Company all Confidential Information which shall have been obtained by Executive during Executive’s employment (whether prior to or after the Effective Date) and shall not use such Confidential Information other than within the scope of Executive’s employment with and for the exclusive benefit of the Company. At the end of the Employment Term, Executive agrees (i) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except (A) upon the prior written authorization of the Company, (B) as may be required by law or legal process, (C) as reasonably necessary in connection with the enforcement of any right or remedy related to this Agreement, or (D) unless no longer Confidential Information, and (ii) to deliver promptly to the Company any Confidential Information in Executive’s possession, including any duplicates thereof and any notes or other records Executive has prepared with respect thereto. In the event that the provisions of any applicable law or the order of any court would require Executive to disclose or otherwise make available any Confidential Information then Executive shall, to the extent practicable, give the Company prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings.

10

(c)Limited Covenant Not to Compete. In consideration of the provision of the Confidential Information during the term of this Agreement and the stock options, restricted stock awards and other compensation provided herein, if Executive’s employment is terminated hereunder by the Company for Cause or by Executive without Good Reason, Executive agrees that during the period of time beginning on the Effective Date and ending on the twelve (12) month anniversary of the Date of Termination:

(i)Executive shall not, directly or indirectly, for himself or others, own, manage, operate, control or participate in the ownership, management, operation or control of any business, whether in corporate, proprietorship or partnership form or otherwise, that is engaged, directly or indirectly, in the United States in the Restricted Business; provided, however, that the restrictions contained herein shall not restrict the acquisition by Executive of less than 2% of the outstanding capital stock of any publicly traded company engaged in a Restricted Business or Executive from being employed by an entity in which the majority of such entity’s revenues on a consolidated basis determined in accordance with generally accepted accounting principles are from activities and businesses that do not constitute a Restricted Business; and

(ii)Executive shall not, directly or indirectly (other than in the performance of Executive’s duties under this Agreement) (A) solicit any individual, who, at the time of time of such solicitation is an executive of the Company or its affiliates, to leave such employment or hire, employ or otherwise engage any such individual (other than employees of the Company or its affiliates who respond to general advertisements for employment in newspapers or other periodicals of general circulation (including trade journals)), or (B) cause, induce or encourage any material actual or prospective client, customer, supplier, landlord, lessor or licensor of the Company or its affiliates to terminate or modify any such actual or prospective contractual relationship that exists on the Date of Termination.

(d)Injunctive Relief; Remedies. The covenants and undertakings contained in this Section 7 relate to matters which are of a special, unique and extraordinary character and a violation of any of the terms of this Section 7 will cause irreparable injury to the Company, the amount of which will be impossible to estimate or determine and which cannot be adequately compensated. Accordingly, the remedy at law for any breach of this Section 7 may be inadequate. Therefore, notwithstanding anything to the contrary, the Company will be entitled to an injunction, restraining order or other equitable relief from any court of competent jurisdiction in the event of any breach of any provision of this Section 7 without the necessity of proving actual damages or posting any bond whatsoever. The rights and remedies provided by this Section 7 are cumulative and in addition to any other rights and remedies which the Company may have hereunder or at law or in equity. The parties hereto further agree that, if any court of competent jurisdiction in a final nonappealable judgment determines that a time period, a specified business limitation or any other relevant feature of this Section 7 is unreasonable, arbitrary or against public policy, then a lesser time period, geographical area, business limitation or other relevant feature which is determined by such court to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

11

(e)Governing Law of this Section 7; Consent to Jurisdiction. Any dispute regarding the reasonableness of the covenants and agreements set forth in this Section 7, or the territorial scope or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, shall be governed by and interpreted in accordance with the laws of the state in which the prohibited competing activity or disclosure occurs, and, with respect to each such dispute, the Company and Executive each hereby irrevocably consent to the exclusive jurisdiction of the State of Texas for resolution of such dispute, and further agree that service of process may be made upon Executive in any legal proceeding relating to this Section 7 by any means allowed under the laws of such state.

(f)Executive’s Understanding of this Section. Executive hereby represents to the Company that Executive has read and understands, and agrees to be bound by, the terms of this Section 7. Executive acknowledges that the geographic scope and duration of the covenants contained in Section 7(c) are the result of arm’s-length bargaining and are fair and reasonable in light of (i) the importance of the functions performed by Executive and the length of time it would take the Company to find and train a suitable replacement, (ii) the nature and wide geographic scope of the operations of the Company, (iii) Executive’s level of control over and contact with the Company’s business and operations in all jurisdictions where they are located, and (iv) the fact that the Restricted Business is conducted throughout the geographic area where competition is restricted by this Agreement. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Section 7 invalid or unenforceable.

8.Certain Tax Matters.

(a)Notwithstanding any other provision of this Agreement to the contrary, if any portion of the payments or benefits provided to or for the benefit of Executive under this Agreement or which Executive otherwise receives or is entitled to receive from the Company or any successor would be subject to the excise tax imposed by Section 4999 of the Code, or any interest, penalties or additions to tax with respect to such excise tax (such excise tax, together with any interest, penalties or additions to tax with respect to such excise tax, is herein collectively referred to as the “Excise Tax”), all such payments and benefits being collectively referred to herein as the “Total Payments”, then, except as otherwise provided in Section 8(b), the Total Payments shall be reduced (but not below zero) or eliminated (as further provided for in Section 8(c)) to the extent the Independent Tax Advisor (as hereinafter defined) shall reasonably determine is necessary so that no portion of the Total Payments shall be subject to the Excise Tax.

(b)Notwithstanding the provisions of Section 8(a), if the Independent Tax Advisor reasonably determines that Executive would receive, in the aggregate, a greater amount of the Total Payments on an after-tax basis (after including and taking into account all applicable federal, state, and local income, employment and other applicable taxes and the Excise Tax) if the Total Payments were not reduced or eliminated pursuant to Section 8(a), then no such reduction or elimination shall be made notwithstanding that all or any portion of the Total Payments may be subject to the Excise Tax.

12

(c)For purposes of determining which of Section 8(a) and Section 8(b) shall be given effect, the determination of which of the Total Payments shall be reduced or eliminated to avoid the Excise Tax shall be made by the Independent Tax Advisor, provided that the Independent Tax Advisor shall reduce or eliminate, as the case may be, the Total Payments in the following order (and within the category described in each of the following Sections 8(c)(i) through 8(c)(v), in reverse order beginning with the Total Payments which are to be paid farthest in time except as otherwise provided in Section 8(c)(iii)):

(i)by first reducing or eliminating the portion of the Total Payments otherwise due and which are not payable in cash (other than that portion of the Total Payments subject to Sections 8(c)(iv) and 8(c)(v));

(ii)then by reducing or eliminating the portion of the Total Payments otherwise due and which are payable in cash (other than that portion of the Total Payments subject to Sections 8(c)(iii) and 8(e)(iv));

(iii)then by reducing or eliminating the portion of the Total Payments otherwise due to or for the benefit of Executive pursuant to the terms of this Agreement and which are payable in cash;

(iv)then by reducing or eliminating the portion of the Total Payments otherwise due that represent equity-based compensation, such reduction or elimination to be made in reverse chronological order with the most recent equity-based compensation awards reduced first; and

(v)then by reducing or eliminating the portion of the Total Payments otherwise due to or for the benefit of Executive pursuant to the terms of this Agreement and which are not payable in cash.

(d)The Independent Tax Advisor shall provide its determinations, together with detailed supporting calculations and documentation, to the Company and Executive for their review no later than ten (10) days after the Date of Termination. The determinations of the Independent Tax Advisor under this Section 8 shall, after due consideration of the Company’s and Executive’s comments with respect to such determinations and the interpretation and application of this Section 8, be final and binding on all parties hereto absent manifest error. The Company and Executive shall furnish to the Independent Tax Advisor such information and documents as the Independent Tax Advisor may reasonably request in order to make the determinations required under this Section 8.

(e)For purposes of this Section 8, “Independent Tax Advisor” shall mean a lawyer with a nationally recognized law firm, a certified public accountant with a nationally recognized accounting firm, or a compensation consultant with a nationally recognized actuarial and benefits consulting firm, in each case with expertise in the area of executive compensation tax law, who shall be selected by the Company and shall be acceptable to Executive (Executive’s acceptance not to be unreasonably withheld), and all of whose fees and disbursements shall be paid by the Company.

13

9.Notice. All notices hereunder must be in writing and shall be deemed to have been given when personally delivered to the designated individual, or (unless otherwise specified) mailed or sent by (a) United States certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service with confirmation of receipt or (d) facsimile transmission with confirmation of receipt.

All such notices must be addressed as follows or to such other address as to which any party hereto may have notified the other in writing.

To the Company:

11616 Galayda

Houston, Texas 77066
Attn: Chief Executive Officer

To Executive:

At Executive’s then current address shown in the Company’s records

or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

10.Compliance with Section 409A of the Code.

(a)Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation the severance payments and benefits under Section 6 will be paid to Executive if Executive is a Specified Employee until the six-month anniversary of Executive’s Separation From Service to the extent that paying such amounts at the time or times indicated in this Agreement would result in a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code.

(b)To the extent applicable, this Agreement shall be interpreted and applied consistent and in accordance with Section 409A. The parties agree to act in good faith in complying with the requirements of Section 409A. For purposes of this Agreement, all references to “termination,” “termination of employment,” Date of Termination and correlative phrases shall mean a Separation From Service. In the event additional regulations or other guidance are issued under Section 409A or a court of competent jurisdiction provides additional authority concerning the application of Section 409A with respect to the payments described in this Agreement, then the parties agree to act in good faith to amend the provisions of this Agreement to permit such payments to be made at the earliest time permitted under such additional regulations, guidance or authority that as closely as practicable achieves the original intent of this Agreement.

(c)To the extent permitted under Section 409A, any separate payment or benefit under this Agreement or otherwise shall not be deemed “nonqualified deferred compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §1.409A-1(b)(9) or any other applicable exception or provision of Section 409A.

14

(d)To the extent that any payments or reimbursements provided to Executive under this Agreement are deemed to constitute compensation to which Treasury Regulation §1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed to Executive reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred. The amounts of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and Executive’s right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

11.Miscellaneous.

(a)Withholding. All amounts payable under this Agreement will be subject to reduction to reflect such federal, state, local or foreign taxes as will be required to be withheld pursuant to any applicable law or regulation.

(b)No Guarantee of Tax Consequences. The Company makes no commitment or guarantee that any federal, state, local or other tax treatment will (or will not) apply or be available to any person eligible for compensation or benefits under this Agreement. The Executive has been advised and been provided the opportunity to obtain independent legal and tax advice regarding the compensation and benefits payable pursuant to this Agreement.

(c)Successors; Binding Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, including Executive’s estate and legal representatives. Neither this Agreement nor any rights, interests or obligations hereunder may be assigned by any party hereto without the prior written consent of the other parties hereto; provided that the Company may assign any rights, interests or obligations hereunder to any successor (whether direct or indirect, by merger, purchase, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company. The Company agrees to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined any successor to its business and/or assets as aforesaid which assume and agrees to perform this Agreement by operation of law or otherwise.

(d)Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and an authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

15

(e)Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(f)Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

(g)Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, Executive or representative of any party hereto, including the Prior Agreement; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

(h)Governing Law. This Agreement has been made and entered into and shall be governed by the internal laws of the State of Texas without regard to principles of conflict of laws, except as expressly provided in Section 7(e) above with respect to the resolution of disputes arising under, or the Company’s enforcement of, Section 7.

(i)Jurisdiction. If any party commences a lawsuit or other proceeding related to or arising from this Agreement, the parties hereto agree that the State District Court in Houston, Harris County Texas shall have sole and exclusive jurisdiction over any such proceeding. The State District Court shall be the proper venue for any such lawsuit or judicial proceeding and the parties hereto waive any objection to such venue. The parties consent to and agree to submit to the jurisdiction of the court specified herein and agree to accept service of process to vest personal jurisdiction over them in the State District Court of Harris County Texas.

(j)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

(k)Amendment. It is understood and agreed that this Agreement amends and restates and supersedes in its entirety any prior Employment Agreement between the Company and Executive.

Signature Page Follows

16

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

ICD:

INDEPENDENCE CONTRACT DRILLING, INC.

By:     /s/ Philip A. Choyce

Name:    Philip A. Choyce

Title:     Senior Vice President and

Chief Financial Officer

EXECUTIVE:

/s/ Dave C. Brown

Dave C. Brown

17

APPENDIX A

AGREEMENT AND RELEASE

This Agreement and Release (“Release”) is entered into between you, the undersigned employee, and Independence Contract Drilling, Inc. (the “Company”). You have [__] days to consider this Release, which you agree is a reasonable amount of time. While you may sign this Release prior to the expiration of this [___]-day period, you are not to sign it prior to the date of your termination of employment with the Company.

1.Definitions.

a.“Released Parties” means the Company and its past, present and future parents, subsidiaries, divisions, successors, predecessors, employee benefit plans and affiliated or related companies, and also each of the foregoing entities’ past, present and future owners, officers, directors, stockholders, investors, partners, managers, principals, members, committees, administrators, sponsors, executors, trustees, fiduciaries, employees, agents, assigns, representatives and attorneys, in their personal and representative capacities. Each of the Released Parties is an intended beneficiary of this Release.

b.“Claims” means all theories of recovery of whatever nature, whether known or unknown, recognized by the law or equity of any jurisdiction. It includes but is not limited to any and all actions, causes of action, lawsuits, claims, complaints, petitions, charges, demands, liabilities, indebtedness, losses, damages, rights and judgments in which you have had or may have an interest. It also includes but is not limited to any claim for wages, benefits or other compensation. It also includes but is not limited to claims asserted by you or on your behalf by some other person, entity or government agency.

2.Consideration. The Company agrees to pay you the consideration set forth in sections 6 and 8 of the Amended and Restated Employment Agreement between you and the Company dated as of [_________] (the “Employment Agreement”). The Company will make such payments to you at the times set forth in the Employment Agreement. You acknowledge that the payment that the Company will make to you in consideration for this Release is in addition to anything else of value to which you are entitled and that the Company is not otherwise obligated to make this payment to you.

3.Release of Claims.

a.You — on behalf of yourself and your heirs, executors, administrators, legal representatives, successors, beneficiaries, and assigns — unconditionally release and forever discharge the Released Parties from, and waive, any and all Claims that you have or may have against any of the Released Parties arising from your employment with the Company, the termination thereof, and any other acts or omissions occurring on or before the date you sign this Release; provided, however, that this Agreement shall not operate to release any Claims that you may have to payments or benefits under Section 6 of the Employment Agreement or any rights you may have to indemnification under any indemnification agreement between you and the Company or any of

its affiliates, or the bylaws or any directors and officers liability insurance policy of the Company or any of its affiliates (collectively, the “Unreleased Claims”).

b.The release set forth in Paragraph 3(a) includes, but is not limited to, any and all Claims under (i) the common law (tort, contract or other) of any jurisdiction; (ii) the Rehabilitation Act of 1973, the Age Discrimination in Employment Act (as amended by the Older Workers Benefit Protection Act), the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, and any other federal, state and local statutes, ordinances, executive orders and regulations prohibiting discrimination or retaliation upon the basis of age, race, sex, national original, religion, disability, or other unlawful factor; (iii) the National Labor Relations Act; (iv) the Employee Retirement Income Security Act; (v) the Family and Medical Leave Act; (vi) the Fair Labor Standards Act; (vii) the Equal Pay Act; (viii) the Worker Adjustment and Retraining Notification Act; and (ix) any other federal, state or local law.

c.In furtherance of this Release, you promise not to bring any Claims (other than Unreleased Claims) against any of the Released Parties in or before any court or arbitral authority. You also agree effective as of the date of this release to resign any and all directorships with the Company and any of its subsidiaries and affiliates.

4.Confidentiality. You agree that you will not reveal, or cause to be revealed, this Release or its terms to any third party (other than your attorney, tax advisor, or spouse), except as required by law.

5.Acknowledgment. You acknowledge that, by entering into this Release, the Company does not admit to any wrongdoing in connection with your employment or termination, and that this Release is intended as a compromise of any Claims you have or may have against the Released Parties. You further acknowledge that you have carefully read this Release and understand its final and binding effect, have had a reasonable amount of time to consider it, and are entering this Release voluntarily. You acknowledge that the Company has advised you in writing to seek the advice of legal counsel prior to executing this release, and that you have had the opportunity to seek legal counsel of your choosing. You acknowledge that you have had at least twenty-one (21) days to consider this Release.

6.Applicable Law. This Release shall be construed and interpreted pursuant to the laws of Texas without regard to its choice of law rules.

7.Severability. Each part, term, or provision of this Release is severable from the others. Notwithstanding any possible future finding by a duly constituted authority that a particular part, term, or provision is invalid, void, or unenforceable, this Release has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby. If any part, term, or provision is so found invalid, void or unenforceable, the applicability of any such part, term, or provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

A-2

8.Effective Date:    You acknowledge that you have seven (7) days after execution to revoke this Release, and that this Release shall not become final and binding until the expiration of seven (7) days after execution.

[Signature page follows]

A-3

IN WITNESS WHEREOF, the parties have executed this Release on the date set forth below.

EXECUTIVE:

Date: [_______________, 20___]

[Name]

COMPANY:

INDEPENDENCE CONTRACT DRILLING, INC.

Date: [_______________, 20___]

By:        

Name:         

Title:         

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, Byron A. Dunn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Independence Contract Drilling, Inc.;

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) 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: September 19, 2014

/s/ Byron A. Dunn

Byron A. Dunn

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 of Independence Contract Drilling, Inc.;

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) 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: September 19, 2014

/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 June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Byron A. Dunn, 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; and

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

/s/ Byron A. Dunn

Byron A. Dunn

Chief Executive Officer

September 19, 2014

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 June 30, 2014 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; and

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

/s/ Philip A. Choyce

Philip A. Choyce

Chief Financial Officer

September 19, 2014

XML

Related Parties (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Affiliated entity
Related Party Transaction [Line Items]
Purchases	$ 600,000
Outstanding payables	400,000
Axon Pressure Products
Related Party Transaction [Line Items]
Purchases	2,600,000	400,000
Outstanding payables	0	0
Director
Related Party Transaction [Line Items]
Recorded revenue	1,400,000
Trade receivables	$ 0	$ 900,000

XML

Stock-Based Compensation (Stock Option Activity) (Details) (USD $)	6 Months Ended
	Jun. 30, 2014
Options
Beginning balance	963,196
Granted	0
Exercised	0
Forfeited/expired	0
Ending balance	963,196
Exercisable	541,389
Weighted Average Exercise Price
Beginning balance	$ 12.74
Granted	$ 0.00
Exercised	$ 0.00
Forfeited/expired	$ 0.00
Ending balance	$ 12.74
Exercisable, Weighted-average exercise price	$ 12.74

XML

Interim Financial Information (Details)	6 Months Ended
	Jun. 30, 2014 segment
Accounting Policies [Abstract]
Reportable segments	1

XML

Stockholders’ Equity and Earnings (loss) per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Numerator [Abstract]
Net loss	$ 1,556	$ (669)	$ (2,149)	$ (2,365)
Basic	$ 0.13	$ (0.05)	$ (0.18)	$ (0.19)
Diluted	$ 0.13	$ (0.05)	$ (0.18)	$ (0.19)
Denominator [Abstract]
Weighted-average number of shares outstanding - basic	12,263,000	12,179,000	12,257,000	12,177,000
Net effect of dilutive stock options and restricted stock	43,000	0	0	0
Weighted-average number of shares outstanding - diluted	12,306,000	12,179,000	12,257,000	12,177,000
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares outstanding	12,397,900		12,397,900		12,397,900
Common stock, par value	$ 0.01		$ 0.01		$ 0.01
Treasury stock, number of shares held	66,725		66,725
Shares authorized	100,000,000		100,000,000		100,000,000
Warrant and stock option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	2,992,420	3,205,548	3,161,196	3,205,548
Restricted stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	0	218,230	124,685	218,230

XML

Financial Instruments and Fair Value

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Financial Instruments and Fair Value

Financial Instruments and Fair Value

The carrying value of certain of our assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable and accounts payable, approximates their fair value due to the short-term nature of such instruments. Our financial instruments that are subject to fair value measurements consist of a warrant to purchase 2.2 million shares of our common stock, held by Global Energy Services Operating, LLC (the "GES Warrant") and long-term debt.

The GES Warrant contained a provision that protects the holder from a decline in the issue price of our common stock, or a “down-round” provision. Down-round provisions reduce the exercise or conversion price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise or conversion price of those instruments or issues new warrants or convertible instruments that have a lower exercise or conversion price. As a result of this provision, we accounted for this warrant as a liability.

In accordance with Accounting Standards Codification 815 “Accounting for Derivative Instruments and Hedging Activities,” as amended, this warrant derivative liability is marked-to-market each reporting period, with a corresponding non-cash gain or loss charged to the current period. 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; 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 warrant liability was recorded at fair value using Level 3 inputs for the three and six months ended June 30, 2013. Significant Level 3 inputs used to calculate the fair value of the warrants include the estimated share price on the valuation date, expected volatility, risk-free interest rate and management’s assumptions regarding the likelihood of a future repricing of these warrants pursuant to the adjustment provision. Due to the initial public offering completed on August 13, 2014, the warrant liability was recorded at fair value using Level 1 inputs for the three and six months ended June 30, 2014. It is expected that Level 1 inputs will be used going forward to value the warrant liability.

As of June 30, 2014 and December 31, 2013, the fair value of the GES Warrant was approximately $1.8 million and $3.2 million, respectively. We recorded a non-cash gain (loss) on warrant derivative associated with changes in fair value of and $1.4 million and $1.4 million for the three and six months ended June 30, 2014, respectively and $0.4 million and $(0.1) million for the three and six months ended and June 30, 2013, respectively.

The following provides a reconciliation of financial liabilities measured at fair value on a recurring basis:

(in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Beginning balance	$	3,186		$	4,657		$	3,189		$	4,224
(Gain) loss on warrant derivative	(1,377		)	(355		)	(1,380		)	78
Ending balance	$	1,809		$	4,302		$	1,809		$	4,302

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, or on the amount of future cash flows associated with the debt, discounted using our current borrowing rate for comparable debt instruments. The estimated fair value of our long-term debt totaled $64.5 million and $18.6 million as of June 30, 2014 and December 31, 2013, respectively, compared to carrying amounts of $64.2 million and $19.8 million as of June 30, 2014 and December 31, 2013, respectively.

Fair value measurements were applied with respect to our non-financial assets and liabilities measured on a non-recurring basis, which would consist of measurements primarily related to goodwill, intangible assets and other long-lived assets, and assets acquired and liabilities assumed in the contribution transactions, completed March 2, 2012 pursuant to an asset contribution and share subscription agreement that involved the Company acquiring certain assets and liabilities of Global Energy Services Operating, LLC and Independence Contract Drilling LLC.

XML

Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Payables and Accruals [Abstract]
Accrued salaries and other compensation	$ 1,057	$ 1,868
Insurance	1,287	485
Deferred mobilization revenues	965	684
Property, sales and other tax	1,623	787
Other	309	343
Accrued liabilities	$ 5,241	$ 4,167

XML

Inventory (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Inventory Disclosure [Abstract]
Rig components and supplies	$ 1,826	$ 1,128

XML

Long-Term Debt (Details) (USD $)			6 Months Ended		0 Months Ended	6 Months Ended			6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Minimum	Jun. 30, 2014 Maximum	May 12, 2014 Revolving credit facility	Jun. 30, 2014 Revolving credit facility	May 12, 2014 Revolving credit facility	Jun. 30, 2014 Revolving credit facility Line of credit	Jun. 30, 2014 Revolving credit facility Line of credit LIBOR	Jun. 30, 2014 Revolving credit facility Line of credit Three-month LIBOR	May 12, 2014 Revolving credit facility Line of credit CIT Finance, LLC syndicate	Feb. 21, 2014 Revolving credit facility Line of credit CIT Finance, LLC syndicate	May 10, 2013 Revolving credit facility Line of credit CIT Finance, LLC syndicate	Feb. 21, 2014 Revolving credit facility Line of credit CIT Finance, LLC syndicate Accordion feature	May 10, 2013 Revolving credit facility Line of credit CIT Finance, LLC syndicate Accordion feature	Feb. 21, 2014 Revolving credit facility Junior subordinated debt CIT Finance, LLC syndicate	Feb. 21, 2015 Scenario, forecast Revolving credit facility
Debt Instrument [Line Items]
Revolving credit facility, maximum borrowing capacity												$ 125,000,000.0	$ 60,000,000.0
Debt instrument, face amount														25,000,000.0	20,000,000.0
Contingent commitments																25,000,000.0
Junior event																40,000,000.0
Maximum borrowing capacity not subject to restrictions											110,000,000.0	100,000,000.0
Borrowing limit based on eligible trade accounts							85.00%
Eligible trade accounts receivable days outstanding limit					90 days
Borrowing limit based on appraised forced liquidation of eligible completed and owned drilling rigs							75.00%										75.00%
Decrease borrowing limit																	1.25%
Interest rate, basis spread									4.50%	1.00%
Interest rate, basis spread based on availability			3.00%	3.50%
Commitment fee on unused capacity (as a percentage)						0.50%
Long-term debt	64,210,000	19,780,000
Weighted average interest rate								4.79%
Remaining availability								$ 25,000,000

XML

Stock-Based Compensation (Compensation Cost) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation	$ 682	$ 556	$ 1,236	$ 1,068
Stock options
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation	420	266	692	535
Restricted stock
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation	$ 262	$ 290	$ 544	$ 533

XML

Interim Financial Information

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Interim Financial Information

Interim Financial Information

These unaudited financial statements include all the accounts of ICD, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These financial statements should be read along with our audited financial statements for the year ended December 31, 2013 as certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted. 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 equity for all periods presented.

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

Interim results for the three and six months ended June 30, 2014 may not be indicative of results that will be realized for the full year ending December 31, 2014.

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

In April 2014, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the reporting of discontinued operations and the disclosures related to disposals of components of an entity. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. This guidance is effective for interim and annual periods that begin after December 15, 2014. Early application is permitted. We are currently evaluating the impact this will have on our consolidated financial statements.

In May 2014, the FASB issued an accounting standards update to provide guidance on the recognition of revenue from customers. Under this guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. This guidance also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty, if any, of revenue and cash flows arising from contracts with customers. This guidance is effective for interim and annual periods beginning after December 15, 2016. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In June 2014, the FASB issued an accounting standards update to provide guidance on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. This guidance is effective for interim and annual periods beginning after December 15, 2015. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

XML

Stock-Based Compensation (Fair Value Assumptions) (Details) (Stock options, USD $)	6 Months Ended
	Jun. 30, 2013
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	0.88%
Expected volatility	40.00%
Dividend yield	$ 0
Expected term	5 years

XML

Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets
Cash and cash equivalents	$ 2,873	$ 2,730
Accounts receivable, net	10,134	9,089
Inventory	1,826	1,128
Vendor advances	7,736	6,168
Prepaid expenses and other current assets	3,983	2,042
Total current assets	26,552	21,157
Property, plant and equipment, net	173,808	129,488
Intangible assets, net	20,988	22,357
Goodwill	11,007	11,007
Other long-term assets	1,871	959
Total assets	234,226	184,968
Liabilities
Accounts payable	16,483	9,061
Accrued liabilities	5,241	4,167
Deferred taxes	149	149
Income taxes payable	0	157
Total current liabilities	21,873	13,534
Long-term debt	64,210	19,780
Warrant derivative liability	1,809	3,189
Deferred taxes	2,375	3,593
Total liabilities	90,267	40,096
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, 100,000,000 shares authorized; 12,464,625 and 12,464,625 issued; 12,397,900 and 12,397,900 outstanding	124	124
Additional paid-in capital	153,851	152,615
Accumulated deficit	(9,270)	(7,121)
Treasury shares, at cost, 66,725 shares	(746)	(746)
Total stockholders’ equity	143,959	144,872
Total liabilities and stockholders’ equity	$ 234,226	$ 184,968

XML

Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities
Net loss	$ (2,149)	$ (2,365)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	7,317	4,491
Asset impairment, net	2,612	0
Stock-based compensation	1,022	872
(Gain) loss on warrant derivative	(1,380)	78
Gain on disposition of assets	(191)	(41)
Deferred taxes	(1,218)	(1,120)
Amortization of deferred financing costs	329	49
Bad debt expense	0	144
Changes in assets and liabilities
Accounts receivable	(1,045)	(3,896)
Inventory	(958)	(36)
Vendor advances	(1,568)	(764)
Prepaid expenses and other assets	(1,945)	(793)
Accounts payable and accrued liabilities	2,486	2,653
Income taxes payable	(160)	84
Related party receivable	0	442
Net cash provided by (used in) operating activities	3,152	(202)
Cash flows from investing activities
Purchases of property, plant and equipment	(48,731)	(29,833)
Proceeds from insurance claim	2,038	0
Proceeds from the sale of property, plant and equipment	488	275
Net cash used in investing activities	(46,205)	(29,558)
Cash flows from financing activities
Borrowings under of credit facility	80,306	0
Repayments under credit facility	(35,875)	0
Deferred financing costs	(1,235)	(1,102)
Net cash provided by (used for) financing activities	43,196	(1,102)
Net increase (decrease) in cash and cash equivalents	143	(30,862)
Beginning of period	2,730	37,407
End of period	2,873	6,545
Supplemental disclosure of cash flow information
Cash paid during the period for taxes	160	0
Cash paid during the period for interest	1,079	0
Supplemental disclosure of non-cash investing and financing activity
Stock-based compensation capitalized as property, plant and equipment	214	196
Purchases of property plant and equipment in accounts payable	$ 7,985	$ 8,023

XML

Stock-Based Compensation (Restricted Stock Activity) (Details) (Restricted stock, USD $)	6 Months Ended
	Jun. 30, 2014
Restricted stock
Shares
Beginning balance	147,451
Granted	0
Vested	(22,766)
Forfeited/expired	0
Ending balance	124,685
Weighted Average Grant-Date Fair Value Per Share
Beginning balance	$ 12.48
Granted	$ 0.00
Vested	$ 12.24
Forfeited/expired	$ 0.00
Ending balance	$ 12.53

XML

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

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Reconciliation of Numerators and Denominators of Basic and Diluted Losses Per Share

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

(in thousands, except per share data)	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
Net income (loss) (numerator):	$	1,556	$	(669	)	$	(2,149	)	$	(2,365	)
Earnings (loss) per share:
Basic	$	0.13	$	(0.05	)	$	(0.18	)	$	(0.19	)
Diluted	$	0.13	$	(0.05	)	$	(0.18	)	$	(0.19	)
Shares (denominator):
Weighted-average number of shares outstanding - basic	12,263		12,179			12,257			12,177
Net effect of dilutive stock options and restricted stock	43		—			—			—
Weighted-average number of shares outstanding - diluted	12,306		12,179			12,257			12,177

XML

Stock-Based Compensation (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted			0
Stock-based compensation capitalized as property, plant and equipment	$ 100,000	$ 100,000	$ 214,000	$ 196,000
Exercisable	541,389		541,389
Granted			$ 0.00	$ 4.27
Remaining contractual life			7 years 8 months 23 days
Weighted-average exercise price	$ 12.74		$ 12.74
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation costs	1,300,000		1,300,000
Weighted average recognition period			1 year
Restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity instruments, other than options granted			0
Unrecognized compensation costs	$ 1,000,000		$ 1,000,000
Weighted average recognition period			9 months 18 days
Restricted stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Restricted stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
2012 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted			0
2012 Plan | Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option expiration period			10 years

XML

Nature of Operations (Details) (USD $)	3 Months Ended		0 Months Ended							3 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jul. 14, 2014 Subsequent event	Jul. 24, 2014 Subsequent event	Aug. 13, 2014 IPO Subsequent event	Aug. 07, 2014 IPO Subsequent event	Aug. 13, 2014 Over-allotment option Subsequent event	Aug. 07, 2014 Over-allotment option Subsequent event	Jun. 30, 2014 Operating Rig drilling_rig	Mar. 31, 2014 Under Repair Rig	Jun. 30, 2014 Under Repair Rig drilling_rig	Mar. 09, 2014 Under Repair Rig	Jun. 30, 2014 Construction in Progress Rig drilling_rig
Property, Plant and Equipment [Line Items]
Number of rigs									8		1		2
Operating equipment insurance deductible												$ 250,000
Impairment charge										4,700,000
Insurance proceeds related to damaged rig	2,300,000
Cost of rig repairs	2,000,000
Out of pocket expense, rig repair	$ 300,000
Stock split conversion ratio			1.57
Shares outstanding	12,397,900	12,397,900		12,397,900
Shares issued	12,464,625	12,464,625			10,000,000	11,500,000	1,500,000	1,500,000
Share price						$ 11.00

XML

Nature of Operations

6 Months Ended

Jun. 30, 2014

Nature of operations [Abstract]

Nature of Operations

Nature of Operations

Independence Contract Drilling, Inc. (“we”, “us”, “our”, the “Company” or “ICD”) was 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 construct, own and operate a premium rig fleet comprised entirely of newly constructed, technologically advanced, custom designed ShaleDriller™ rigs that are specifically engineered and designed to optimize the development of our customers’ most technically demanding oil and gas properties. As of June 30, 2014, we had eight rigs operating, one rig being repaired and fitted with a multi-directional walking system and two additional rigs under construction.

Damage Sustained on Rig 102

On March 9, 2014, one of our non-walking drilling rigs (Rig 102) suspended drilling operations due to damage to the rig’s mast and other operating equipment. We believe the cost to repair and replace this equipment is covered by insurance, subject to a $250,000 deductible. During the period that this rig is under repair, we intend to upgrade this rig by adding a substructure and other equipment that includes a multi-directional walking system. The cost of the upgrades will not be covered by insurance. The repairs and upgrades are expected to be completed in October 2014. We recorded an asset impairment charge of $4.7 million during the three months ended March 31, 2014, representing a preliminary estimate of the damage sustained to the rig. During the three months ended June 30, 2014, we recorded approximately $2.3 million in insurance proceeds related to repairs to the damaged rig ($2.0 million) and out-of-pocket expenses ($0.3 million), for which we had received a partial proof of loss from the insurance company. We expect to record additional insurance recoveries during the second half of 2014 when additional proofs of loss are obtained or proceeds are received. We are currently unable to accurately estimate the total amount of the insurance recoveries related to this matter.

Stock Split

On July 14, 2014, our board of directors approved a resolution to effect a 1.57-for-1 stock split of our common stock in the form of a stock dividend. The dividend was distributed on July 24, 2014 to holders of record as of July 21, 2014. Following the stock dividend, we had 12,397,900 shares of common stock outstanding. The earnings per share information and all common stock information in these financial statements have been retroactively restated for all periods presented to reflect this stock split.

Initial Public Offering

On August 7, 2014, our registration statement on Form S-1 (File No. 333-196914) was declared effective by the Securities and Exchange Commission for our initial public offering pursuant to which we sold an aggregate of 11,500,000 shares of our common stock at a price to the public of $11.00 per share, including 1,500,000 share of our common stock pursuant to the exercise by the underwriters in full of their option to purchase additional shares of common stock to cover over-allotments. Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and Tudor, Pickering, Holt & Co. Securities, Inc. acted as book runners. We completed our initial public offering of 10,000,000 shares of our common stock on August 13, 2014 and subsequently closed the issuance and sale of the additional 1,500,000 shares of our common stock pursuant to the underwriters’ option to purchase additional shares of common stock on August 29, 2014. Our common stock trades on the New York Stock Exchange under the ticker symbol "ICD".

XML

Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Shares authorized	100,000,000	100,000,000
Shares issued	12,464,625	12,464,625
Shares outstanding	12,397,900	12,397,900
Treasury stock	66,725	66,725

XML

Interim Financial Information (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

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 April 2014, the Financial Accounting Standards Board (FASB) issued an accounting standards update to provide guidance on the reporting of discontinued operations and the disclosures related to disposals of components of an entity. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. This guidance is effective for interim and annual periods that begin after December 15, 2014. Early application is permitted. We are currently evaluating the impact this will have on our consolidated financial statements.

In May 2014, the FASB issued an accounting standards update to provide guidance on the recognition of revenue from customers. Under this guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. This guidance also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty, if any, of revenue and cash flows arising from contracts with customers. This guidance is effective for interim and annual periods beginning after December 15, 2016. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In June 2014, the FASB issued an accounting standards update to provide guidance on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. This guidance is effective for interim and annual periods beginning after December 15, 2015. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

XML

Document and Entity Information Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Sep. 15, 2014
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	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		24,355,155

XML

Financial Instruments and Fair Value (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Reconciliation of Financial Liabilities

The following provides a reconciliation of financial liabilities measured at fair value on a recurring basis:

(in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Beginning balance	$	3,186		$	4,657		$	3,189		$	4,224
(Gain) loss on warrant derivative	(1,377		)	(355		)	(1,380		)	78
Ending balance	$	1,809		$	4,302		$	1,809		$	4,302

XML

Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Statement [Abstract]
Revenues	$ 14,661	$ 9,784	$ 28,210	$ 18,041
Costs and expenses
Operating costs	9,283	6,787	18,060	12,724
Selling, general and administrative	2,073	1,990	4,167	4,088
Depreciation and amortization	3,901	2,366	7,317	4,491
Asset impairment, net	(2,038)	0	2,612	0
Gain on disposition of assets	(2)	0	(191)	(41)
Total cost and expenses	13,217	11,143	31,965	21,262
Operating income (loss)	1,444	(1,359)	(3,755)	(3,221)
Interest expense, net	(598)	(97)	(992)	(97)
Gain (loss) on warrant derivative	1,377	355	1,380	(78)
Income (loss) before income taxes	2,223	(1,101)	(3,367)	(3,396)
Income tax expense (benefit)	667	(432)	(1,218)	(1,031)
Net income (loss)	$ 1,556	$ (669)	$ (2,149)	$ (2,365)
Earnings (loss) per share:
Basic	$ 0.13	$ (0.05)	$ (0.18)	$ (0.19)
Diluted	$ 0.13	$ (0.05)	$ (0.18)	$ (0.19)
Weighted-average number of shares outstanding - basic	12,263	12,179	12,257	12,177
Weighted-average number of shares outstanding - diluted	12,306	12,179	12,257	12,177

XML

Long-Term Debt

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

On May 10, 2013, we entered into a credit agreement (the “Credit Facility”) with asyndicate of financial institutions led by CIT Finance, LLC, that provided for a committed $60.0 million revolving credit facility and an additional uncommitted $20.0 million accordion feature that allowed for future increases in the facility.

On February 21, 2014 we amended our Credit Facility in order to increase the aggregate commitments from $60.0 million to $125.0 million. The final $25.0 million of commitments under the amended Credit Facility is subject to us obtaining additional equity or indebtedness, subordinated to the Credit Facility, of at least $40.0 million (“Junior Event”). The Credit Facility, as amended, also provided for an additional uncommitted $25.0 million accordion feature that allows for future increases in the facility. On May 12, 2014 we amended our Credit Facility again, to expand the commitments not subject to the Junior Event from $100.0 million to $110.0 million. The amendment also adjusted the minimum EBITDA covenants contained in the Credit Facility to reflect the removal of Rig 102 from service during the pendency of its upgrade.

Borrowings under the Credit Facility are subject to a borrowing base formula that allows for borrowings of up to 85% of eligible trade accounts receivable not more than 90 days outstanding, plus up to 75% of the appraised forced liquidation value of our eligible, completed and owned drilling rigs. Beginning on February 21, 2015, the 75% advance rate on our eligible completed and owned drilling rigs decreases by 1.25% per quarter. The amended Credit Facility matures on February 21, 2017.

At our election, interest under the Credit Facility is determined by reference at our option to either (i) the London Interbank Offered Rate (“LIBOR”), plus 4.5% based upon availability under the Credit Facility or (ii) a “base rate” equal to the higher of the prime rate published by JP Morgan Chase Bank or three-month LIBOR plus 1%, plus in each case, an amount ranging from 3.0% to 3.5% based upon availability under the Credit Facility. We also pay, on a quarterly basis, a commitment fee of 0.50% per annum on the unused portion of the Credit Facility commitment. The obligations under the Credit Facility are secured by first priority liens on all shares of capital stock of each of our material present and future subsidiaries and substantially all of our assets, including all of our drilling rigs and equipment.

The amended Credit Facility contains various financial covenants including minimum EBITDA, fixed charge coverage ratio, rig utilization ratio and limitations on maintenance capital expenditures. Additionally, there are restrictive covenants that limit our ability to, among other things: incur or guarantee additional indebtedness or issue disqualified capital stock; transfer or sell assets; pay dividends or distributions, redeem subordinated indebtedness, make certain types of investments or make other restricted payments; create or incur liens; consummate a merger, consolidation or sale of all or substantially all assets; and engage in business other than a business that is the same or similar to the current business and reasonably related businesses.

Outstanding borrowings under the Credit Facility totaled $64.2 million at June 30, 2014, at a weighted average interest rate of 4.79%. Remaining availability under the Credit Facility is $25.0 million at June 30, 2014 and we are currently in compliance with all covenants under the Credit Facility.

XML

Accrued Liabilities

6 Months Ended

Jun. 30, 2014

Payables and Accruals [Abstract]

Accrued Liabilities

Accrued Liabilities

Accrued liabilities consisted of the following:

(in thousands)
	June 30, 2014		December 31, 2013
Accrued salaries and other compensation	$	1,057	$	1,868
Insurance	1,287		485
Deferred mobilization revenues	965		684
Property, sales and other tax	1,623		787
Other	309		343
	$	5,241	$	4,167

XML

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Minimum Rental Commitments Under Non-Cancelable Operating Leases

The minimum rental commitments under non-cancelable operating leases, with lease terms in excess of one year subsequent to June 30, 2014, were as follows:

(in thousands)
2014	$	286
2015	329
2016	210
2017	47
	$	872

XML

Inventory (Tables)

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consisted of the following:

(in thousands)	June 30, 2014		December 31, 2013
Rig components and supplies	$	1,826	$	1,128

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Purchase Commitments

As of June 30, 2014 we had outstanding purchase commitments to a number of suppliers totaling $7.6 million related primarily to the construction of drilling rigs.

Lease Commitments

We lease certain buildings, equipment and vehicles under non-cancelable operating leases. The minimum rental commitments under non-cancelable operating leases, with lease terms in excess of one year subsequent to June 30, 2014, were as follows:

(in thousands)
2014	$	286
2015	329
2016	210
2017	47
	$	872

Contingencies

Our operations inherently expose us to various liabilities and exposures that could result in third party lawsuits, claims and other causes of action. While we insure against the risk of these proceedings to the extent deemed prudent by our management, we can offer no assurance that the type or value of this insurance will meet the liabilities that may arise from any pending or future legal proceedings related to our business activities.

XML

Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

In March 2012, we adopted the 2012 Omnibus Long-Term Incentive Plan (the “2012 Plan”) providing for common stock-based awards to employees and to non-employee Directors. The 2012 Plan permits the granting of various types of awards, including stock options and restricted stock awards. Restricted stock 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. Stock options expire 10 years after the grant date. We have the right to satisfy option exercises from treasury shares and from authorized but unissued shares.There were no stock options or restricted stock granted during the six months ended June 30, 2014.

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

(in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Compensation cost recognized:
Stock options	$	420	$	266	$	692	$	535
Restricted stock	262		290		544		533
Total stock-based compensation	$	682	$	556	$	1,236	$	1,068

Approximately $0.1 million and $0.2 million in stock-based compensation was capitalized in connection with rig construction activity during the three and six months ended June 30, 2014, respectively. Approximately $0.1 million and $0.2 million in stock-based compensation was capitalized for the three and six months ended June 30, 2013, respectively.

Stock Options

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

There were no stock options granted during the six month period ended June 30, 2014. The fair value calculations for options granted during the six months ended June 30, 2013 are based on the following weighted-average assumptions:

	2013
Risk-free interest rate	0.88	%
Expected volatility	40	%
Dividend yield	—
Expected term	5.0 years

Risk-Free Interest Rate

The risk-free interest rate is based on U.S. Treasury securities for the expected term of the option.

Expected Volatility Rate

Expected volatilities are based on an analysis of volatilities for publicly traded companies engaged in the contract drilling business.

Expected Dividend Yield

We have no plans to pay dividends in the foreseeable future.

Expected Term

The expected term of the options granted represents the period of time that they are expected to be outstanding. We do not have any operating history with which to estimate the expected term, and have based our estimate upon the data available for other contract drilling companies and management estimates.

Based on these calculations, the weighted-average fair value per option granted during the six months ended June 30, 2013 was $4.27.

A summary of stock option activity and related information for the six months ended June 30, 2014 is as follows:

	Six Months Ended June 30, 2014
	Options	Weighted Average Exercise Price
Outstanding at January 1, 2014	963,196	$	12.74
Granted	—	—
Exercised	—	—
Forfeited/expired	—	—
Outstanding at June 30, 2014	963,196	$	12.74
Exercisable at June 30, 2014	541,389	$	12.74

A summary of our unvested stock options as of June 30, 2014, and the changes during the six months then ended is presented below:

	Six Months Ended June 30, 2014
	Outstanding		Weighted Average Grant-Date Fair Value
Unvested as of January 1, 2014	620,412		$	4.42
Granted	—		—
Vested	(198,605	)	4.83
Forfeited/expired	—		—
Unvested as of June 30, 2014	421,807		$	4.22

The number of options vested at June 30, 2014 was 541,389 with a weighted average remaining contractual life of 7.73 years and a weighted-average exercise price of $12.74 per share.

As of June 30, 2014, the unrecognized compensation cost related to outstanding stock options was $1.3 million. This cost is expected to be recognized over a weighted-average period of 1.0 year.

Restricted Stock

Restricted stock awards consist of our common stock and vest over three to four 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 fair market value of our shares on the grant date. As of June 30, 2014, there was $1.0 million of total unrecognized compensation cost related to unvested restricted stock awards. This cost is expected to be recognized over a weighted-average period of 0.8 years.

A summary of the status of our restricted stock awards as of June 30, 2014, and of changes in restricted stock outstanding during the six months ended June 30, 2014, is as follows:

	Six Months Ended June 30, 2014
	Shares		Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2014	147,451		$	12.48
Granted	—		—
Vested	(22,766	)	12.24
Forfeited/expired	—		—
Outstanding at June 30, 2014	124,685		$	12.53

XML

Stockholders’ Equity and Earnings (loss) per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Stockholders' Equity and Earnings (loss) per Share

Stockholders’ Equity and Earnings (loss) per Share

As of June 30, 2014, we have a total of 12,397,900 shares of common stock, $0.01 par value, issued and outstanding including 124,685 shares of restricted stock and 66,725 shares held as treasury stock. Total authorized common stock is 100,000,000 shares.

Basic earnings (loss) per common share (“EPS”) is 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:

(in thousands, except per share data)	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
Net income (loss) (numerator):	$	1,556	$	(669	)	$	(2,149	)	$	(2,365	)
Earnings (loss) per share:
Basic	$	0.13	$	(0.05	)	$	(0.18	)	$	(0.19	)
Diluted	$	0.13	$	(0.05	)	$	(0.18	)	$	(0.19	)
Shares (denominator):
Weighted-average number of shares outstanding - basic	12,263		12,179			12,257			12,177
Net effect of dilutive stock options and restricted stock	43		—			—			—
Weighted-average number of shares outstanding - diluted	12,306		12,179			12,257			12,177

For all periods presented, the computation of diluted earnings (loss) per share excludes certain outstanding stock options and warrants because their inclusion would be anti-dilutive. The number of options and warrants that were excluded from diluted earnings (loss) per share were 2,992,420 and 3,205,548 during the three months ended June 30,2014 and 2013 respectively, and 3,161,196 and 3,205,548 during the six months ended June 30,2014 and 2013 respectively. Restricted stock, which are not participating securities, excluded from our basic and diluted earnings (loss) per share, because they are anti-dilutive, were zero and 218,230 for the three months ended June 30,2014 and 2013, respectively and 124,685 and 218,230 for the six months ended June 30,2014 and 2013, respectively.

XML

Related Parties

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Related Parties

Related Parties

During 2011, we entered into the Contribution Agreement with GES. Two of our directors as of June 30, 2014, also were directors of the parent company of GES.

We purchased certain items used in the construction of our drilling rigs from an affiliate of GES. Total purchases from this vendor during the six months ended June 30, 2014 amounted to $0.6 million and we had outstanding payables totaling $0.4 million with this vendor as of June 30, 2014. We did not transact any business with this vendor in the prior year periods.

One of our directors is also a director of Axon Pressure Products. Total purchases from this vendor were $2.6 million and $0.4 million during the six months ended June 30, 2014 and the twelve months ended December 31, 2013, respectively. We did not have any outstanding payables with this vendor as of June 30, 2014 and December 31, 2013 respectively.

One of our directors is also a director of one of our customers. We recorded $1.4 million in revenues with this customer for the six months ended June 30, 2014 and had outstanding trade receivables totaling $0.0 million and $0.9 million as of June 30, 2014 and December 31, 2013, respectively. We did not transact any business with this customer for the three and six months ended June 30, 2013.

XML

Stock-Based Compensation (Unvested Stock Option Activity) (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Outstanding
Beginning balance	620,412
Granted	0
Vested	(198,605)
Forfeited/expired	0
Ending balance	421,807
Weighted Average Grant-Date Fair Value
Beginning balance	$ 4.42
Granted	$ 0.00	$ 4.27
Vested	$ 4.83
Forfeited/expired	$ 0.00
Ending balance	$ 4.22

XML

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Compensation Cost

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

(in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Compensation cost recognized:
Stock options	$	420	$	266	$	692	$	535
Restricted stock	262		290		544		533
Total stock-based compensation	$	682	$	556	$	1,236	$	1,068

Schedule of Options, Valuation Assumptions

The fair value calculations for options granted during the six months ended June 30, 2013 are based on the following weighted-average assumptions:

	2013
Risk-free interest rate	0.88	%
Expected volatility	40	%
Dividend yield	—
Expected term	5.0 years

Schedule of Stock Options Activity

A summary of stock option activity and related information for the six months ended June 30, 2014 is as follows:

	Six Months Ended June 30, 2014
	Options	Weighted Average Exercise Price
Outstanding at January 1, 2014	963,196	$	12.74
Granted	—	—
Exercised	—	—
Forfeited/expired	—	—
Outstanding at June 30, 2014	963,196	$	12.74
Exercisable at June 30, 2014	541,389	$	12.74

A summary of our unvested stock options as of June 30, 2014, and the changes during the six months then ended is presented below:

	Six Months Ended June 30, 2014
	Outstanding		Weighted Average Grant-Date Fair Value
Unvested as of January 1, 2014	620,412		$	4.42
Granted	—		—
Vested	(198,605	)	4.83
Forfeited/expired	—		—
Unvested as of June 30, 2014	421,807		$	4.22

Schedule of Restricted Stock Activity

A summary of the status of our restricted stock awards as of June 30, 2014, and of changes in restricted stock outstanding during the six months ended June 30, 2014, is as follows:

	Six Months Ended June 30, 2014
	Shares		Weighted Average Grant-Date Fair Value Per Share
Outstanding at January 1, 2014	147,451		$	12.48
Granted	—		—
Vested	(22,766	)	12.24
Forfeited/expired	—		—
Outstanding at June 30, 2014	124,685		$	12.53

XML

Financial Instruments and Fair Value (Reconciliation of Financial Liabilities) (Details) (Derivative warrant, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Level 1
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Ending balance	$ 1,809		$ 1,809
Level 3
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	3,186	4,657	3,189	4,224
(Gain) loss on warrant derivative	(1,377)	(355)	(1,380)	78
Ending balance		$ 4,302		$ 4,302

XML

Statements of Stockholders’ Equity (USD $) In Thousands, except Share data	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock
Beginning balance at Dec. 31, 2013	$ 144,872	$ 124	$ 152,615	$ (7,121)	$ (746)
Beginning balance (in shares) at Dec. 31, 2013		12,397,900
Stock-based compensation	1,236	0	1,236	0	0
Net loss	(2,149)	0	0	(2,149)	0
Ending balance at Jun. 30, 2014	$ 143,959	$ 124	$ 153,851	$ (9,270)	$ (746)
Ending balance (in shares) at Jun. 30, 2014		12,397,900

XML

Inventory

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Inventory

Inventory

Inventory consisted of the following:

(in thousands)	June 30, 2014		December 31, 2013
Rig components and supplies	$	1,826	$	1,128

We determined that no reserve for obsolescence was needed at June 30, 2014 or December 31, 2013. No inventory obsolescence expense was recognized during the three and six months ended June 30, 2014 and 2013.

XML

Financial Instruments and Fair Value (Narrative) (Details) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Gain (loss) on warrant derivative	$ 1,377,000	$ 355,000	$ 1,380,000	$ (78,000)
Long-term debt, fair value	64,500,000		64,500,000		18,600,000
Long-term debt	$ 64,210,000		$ 64,210,000		$ 19,780,000
GES warrant
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Class of warrant or right, outstanding	2.2		2.2

XML

Commitments and Contingencies (Details) (USD $)	0 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Commitments and Contingencies Disclosure [Abstract]
Purchase commitments	$ 7,600,000
2014		286,000
2015		329,000
2016		210,000
2017		47,000
Total future lease payments		$ 872,000

XML

Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following:

(in thousands)
	June 30, 2014		December 31, 2013
Accrued salaries and other compensation	$	1,057	$	1,868
Insurance	1,287		485
Deferred mobilization revenues	965		684
Property, sales and other tax	1,623		787
Other	309		343
	$	5,241	$	4,167