Q4 2019 Earnings Call
Good morning, and thank you for joining us for RPC Inc.'s fourth quarter 2019 financial earnings Conference call.
Today's call will be hosted by Rick Hubbell, President and CEO and Ben Palmer, Chief Financial Officer also present, as Jim Landers, Vice President of corporate Finance.
It's telling all participants Oh, I named listen only mode.
Willing to presentation, we will conduct a question and answer session and instructions will be provided at that time for you to keep up for questions I would like to advise everyone that this conference call is being recorded.
Jim will get started by reading the forward looking disclaimer.
Thank you and good morning, everyone before we begin our call today I want to remind you that in order to talk about our company. We're gonna mentioned a few things that are not historical facts. Some of the statements that will be made on this call could be forward looking in nature and reflect the number of known and unknown risks I'd like to refer you to our press release.
This issue today, along with our 2018 10-K and other public filings that outlines interests.
You can be found on Rpcs website, www dot RPC done that.
[noise] in today's earnings release enter conference call, we'll be referring to several non-GAAP measures of operating performance. These non-GAAP measures. Our adjusted net loss adjusted net income adjusted loss per share adjusted earnings per share adjusted operating loss adjusted operating profit.
EBITDA and adjusted EBITDA.
Or using these non-GAAP measures today, because they allow us to compare performance consistently over various periods without regard to nonrecurring items.
In addition, RPC is required to use EBITDA to report compliance with the financial covenants under our revolving credit facility.
Our press release issued today and our website contain reconciliations of these non-GAAP financial measures to operating loss or income net loss or income and losses or diluted earnings per share, which are the nearest GAAP financial measures.
Please review these disclosures if you're interested in seeing how they are calculated.
If you're not received our press release for any reason please visit our website again www dot RPC dot net for a copy [laughter] I'll now turn the call over to our President and CEO Rick.
Thank you Jim.
This morning, we see the earnings press release for Rpcs fourth quarter of 2019.
During the fourth quarter, we continue to execute or downsize plans first to close disclosed in October .
Polluting closing various facilities and scrapping equipment.
In addition, we reduced headcount by approximately 21% since the end of the second quarter.
Our CFO been vulnerable will discuss this and other financial results in more detail after which I will have a few closing comments like you're right [laughter] during the fourth quarter. We recorded additional one paramount other charges of 10 point Sixmillion.
Related primarily to severance and underutilized assets, bringing the total of impairment and other charges to 82.3 million in 2019.
We do not currently expect any additional significant charges based on this review.
For the fourth quarter of 2019 revenues decreased to 236 million compared to 376.8 million in the prior year.
Revenues decreased due to lower activity levels, resulting from like more pronounced fourth quarter seasonal decline than in the prior year.
Lower pricing and a smaller fleet pressure pumping equipment.
Adjusted operating loss for the fourth quarter was 17.3 million compared to an operating profit of 19.7 million then the fourth quarter of the prior year.
Adjusted EBITDA for the fourth quarter was 23.2 million compared to EBITDA of 61.7 million and the same period of the prior year.
For the fourth quarter of 2019, RBC reported a seven cents adjusted loss per share.
Compared to a six cents diluted earnings per share in the prior year.
Cost of revenues during the fourth quarter of 2019 was 176.9 million or 75% of revenues.
Compared to 274.4 million or 72.8% of revenues during the fourth quarter 2018.
Cost of revenues decreased primarily due due to lower materials and supplies expenses and other expenses associated with lower activity levels.
In addition cost of revenues declined due to lower employment cost as a result of our downsizing.
Cost of revenues as a percentage of revenues increased primarily due to significantly lower activity levels and more competitive pricing for our services.
Selling general and administrative expenses decreased to 36.8 million in the fourth quarter compared to 40 million in the fourth quarter to prior year. This was due to lower employment costs.
Depreciation and amortization expense was 40.3 million during the fourth quarter of 2019, a decrease of 5.2% compared 42.6 million in the prior year.
Technical services segment revenues for the quarter decreased 38.7% compared to the same quarter at the bar here.
Excluding impairment and other charges, we incurred an operating loss of 17.2 million in the fourth quarter of 2019 compared to 19.9% operating profit in the prior year [laughter]. These results were due to lower pricing and activity and the fourth quarter 2019.
Our support services segment revenues for the quarter decreased 13.2% compared to the same quarter in the prior year.
Operating profit in fourth quarter, 2019 was 1.2 million compared to 2.5 million in the prior year.
On a sequential basis Rpcs fourth quarter revenues decreased 19.5% to 236 million.
From 293.2 million, a third quarter, due primarily to pronounced seasonally lower activity levels and slightly lower pricing.
<unk>.
Cost of revenues during the fourth quarter 2019 decreased by 48.3 million or 21.5% due to lower activity levels and our cost reduction actions.
As a percentage of revenues cost revenues decreased from 76.8% and the third quarter to 75% and the current quarter due primarily to a favorable job mix within rpcs pressure pumping service line.
Selling general and administrative expenses decreased to $36.8 million during the fourth quarter of the current year compared to 42.6 million in the prior quarter.
RPC generated an adjusted operating loss of 17.3 million during the fourth quarter of 2019 compared to an adjusted operating loss of 21 million in the prior quarter.
Our adjusted EBITDA was 23.2 million compared to adjusted EBITDA of 22.8 million in the park or.
Our technical services segment revenues decreased by 55.6% or 20.3% to 218.9 million on the fourth quarter.
The technical services segment occurred 17.2 million dollar operating loss and the current quarter compared to an operating loss of 18.2 million in the prior quarter.
Our sports services segment revenues in the fourth quarter were 17.1 million compared to 18.8 billion under par or.
Operating profit was 1.2 million in the fourth quarter compared to 1.6 million operating profit in the park.
At the end of the fourth quarter RPC operated 10 pressure pumping fleets, we will continue to adjust the number of fleets based on conditions and customer activity levels.
At year end 19, Rpcs pressure pumping fleet totaled approximately 735000 hydraulic horsepower.
Fourth quarter 2019 capital expenditures were 41.4 million and the full year total 250.6 million.
And we currently estimate 2020 capex to be approximately $80 million with that I'll turn it back over to rent for closing remarks, Ben Thank you.
As 2020 begins we are focused on improving utilization and wellsite execution.
As well as effectively managing our costs. We believe the actions taken as result of our strategic assessment better align our operations with current market conditions.
Despite the challenging environment during 2019, and approximately 250 million of capital expenditures. We ended the year with 50 million in cash and no debt.
We will continue to maintain a strong balance sheet and allocate capital to maximize long term shareholder returns.
Thank you for joining us for Rpcs conference call. This morning.
At this time, we'll open up the lines for your questions.
Thank you very much ladies and gentlemen at this time, we'd like to open the floor for questions. If you would like to ask a question. Please press star one on your telephone keypad now.
Again that is the star one to ask a question.
Well pause for just a moment.
Question your stickier with questions.
I've first question will come found that Tommy Mall Stephens, Inc.
Good morning, and thank you for taking my question.
Sure Tony.
So I think I heard that at the end of 2019, you had 10 fleets in the field for pressure pumping.
And I was curious as you look across Q1 as of today and understanding that a lot can change but as of today.
Do you feel like that's about the right number of fleets to be running.
And.
A follow on to that.
Whenever the market does improve to the extent that you might want to put more equipment to work.
Just a function of.
Hiring up for the additional fleets or will that will there be some capital.
Required to do that.
Oh this is Ben yes. It again it ended the year, we had 10 fleets and as much as the fleets.
We talk about as you know how those are our staffed oh and they're there.
Pretty fully staffed in ready to go to work we do have another three to four fleets worth of equipment standing by that would require a minimum capex to put into service.
But we think 10 fleets Oh available to work is the right number at this point in time, but will you know watching very carefully as Rick indicated you know we.
We want to be very focused on you know the calendar or the white spaces in the calendar being is utilized as we can what those 10 fleets and being very.
Careful and and thoughtful about trying to increase the number of fleets or the number of personnel on those fleets or you know given the current environment. You know there still is a lot of uncertainty and we've had some we believe some some nice success in the fourth quarter, a we are betting.
Includes what we were able to generate in the fourth quarter, but also some of the the wins we've had from a customer perspective so.
[laughter] feel a [laughter] we feel a.
Better about the first quarter, but there's still as I said theres a lot of uncertainty we're gonna have to you know watching very closely.
And again focused on the utilization of those tend fleets are getting that really really high and be really really particular about and thoughtful about whether we were to.
Increase that.
Okay. Thank you that.
Thank you that's all helpful and as a follow up or is it fair to say that were in the late innings.
Or maybe the game has ended and in terms of the downsizing initiative. It sounds like we've hit the right number of fleets.
The footprint in terms of locations, it's smaller than a quarter ago. So is that a fair.
Characterization and through that process any insight you can give it into how the customer mix may or may not have shifted or the type of work you've gone after may or may not have shifted would also be helpful to know thank you.
[laughter] in terms of downsizing steps as we'd indicated we from a PML perspective, we feel like we're done at this time with our strategic review in any.
Significant adjustments or am I commend, there's always you know well, we'll be watching will make adjustments based on how things are you know how the first quarter progresses, and how we book and think about what what so what's before us for the second quarter, but at this point in time, where we're done from a action standpoint and from a.
You know impact standpoint.
In terms of changes in the type of work, we're doing a I would I don't believe it's really been any change in the mix of work because of the change in our staffing or the.
Locations were operating out of it. So it's the same as it has been and as we described last quarter.
Okay. Thank you I will turn it back.
Thanks, Tony.
Our next question will come from Connor Lynagh Morgan Stanley .
Thanks, Good morning.
Hey, Connor.
Just wondering if you guys could could give some color on you know how you're seeing work in the first quarter shaping up.
It's better than the fourth quarter, but then maybe maybe not just.
Thoughts on the market and that trajectory of activity this year.
Yeah, I'm kind of this is Jim first thing to say the January is trending better than than December was so we're seeing we saw a pronounced seasonal slowdown as we've discussed in fourth quarter and we're certainly coming back seasonally is a little bit of a slow start in January but we're we're finishing month pretty pretty strong.
An overarching concern though continues to be.
Our customers' ability to get the capital.
To work in 2020, that's been a concern and it remains a concern and we just don't have any visibility.
You know into into how bad that part of things is going to Pan out all we can tell you again with the caveat to very little visibility is the first quarter is certainly trending up from from December as we saw it but again.
Very little visibility.
That's helpful and I mean at this point would you say that there's any further degradation in pricing would you say, there's any positive moves in pricing or we relatively stable and I guess, if you could catch that relative to fourth quarter and then just on a go forward basis.
It's it's stable at this point I don't think the pressure pumpers or are ticking anymore price concessions and he was fairly stable in fourth quarter, although that's not a good quarter to measure, but we feel stable disappoint.
Got it appreciate it.
Sure. Thanks. Thanks.
Thank you next question will come from Ian Macpherson scenario.
Hey, Thanks, good morning.
Good morning Hall, Hey, Jim last quarter, the target was going to was to end at nine fleets seven horizontal and a two vertical.
And.
You are now at 10, it sounds like your your level loaded at 10 and I presume that is based on a slightly better.
Weren't board than you anticipated.
But you said that January is trending better than December , but I guess I'm struggling with how that compares.
It's a Q4, an average because December might not be emblematic of the Q4 averages that is that the right interpretation.
ER.
Yeah, It would be hard without you know and what December was like.
But but the first quarter I mean, yeah. We went through the you know the RFP season, I think we had a lot of success, we feel better you know again about our calendar and the amount of work. We have on your question about the number of fleets and you know what good question and good observation that we talked about non before and were 10 is.
ER sorta talked about.
The number of non versus 10 really that number of people. We have for those nine and 10 is probably more important than whether it's nine or 10.
So we're not 100% staff for the 10.
But having 10 fleets kind of lined up and ready to go gives us a little bit more flexibility.
You know to respond to our customer so I wouldn't deem that to be a significant change, but certainly going from nine to 10 is better than going from nine to eight so I guess that perhaps would flex a little bit of optimism, but but I wouldn't think is significant as well as one good thing.
Bank, but but we do as Jim indicated that the first quarters crew clearly better than.
Oh.
Fourth appears to be and we feel good about that so said another way out you know have we bottomed out you know we're reading things about people, saying, it's I think that they think it has bottomed a we're certainly hopeful that it has the port for was a difficult difficult quarter. A we had some bright spots than we had some difficult spots, but overall, we're pretty pleased.
With the quarter.
But we're hopeful again that it is the bottom we're not 100% counting on it we're going to remain.
Conservative with our spending in our costs in our.
You know staffing to make sure again, we're focused on utilization, we're focused on utilization of our people and equipment.
And.
We want to make sure that gets up to an appropriate level.
And and pricing as well right, we want to be generating a appropriate.
Oh profitability and cash flow before we try to extend our quote unquote exposure into the future. So we're going to be real diligent about that obviously focused on our capex.
Oh and.
And Oh its.
So we we feel like we're in a good spot and we'll be watching things real carefully and the you know the first quarter and heading into the second quarter, we'll make adjustments as we need to.
Good. Thanks, and then also the DNA came in a little bit lower than we had a.
Maybe expected after your commentary last quarter is that 37 million of DNA.
Is there anything unusual about that her she should we project that on quarterly basis from here.
There's not too much noise in there, but but I would say that yeah kind of the the hot 30 range is kind of what we're thinking about at this point, but yet.
Going to watch all that very closely first quarter will be very telling for or for all of us.
Very good thank you.
Sure. Thanks.
Thank you I next question will come from Marc Bianchi Cowen.
Hey, Thanks, very much I <unk>, it sounds like you're saying january's better in December but still unclear. If yeah. Certainly January is not better in the fourth quarter would you anticipate at this point that that your revenue is up in the first quarter and.
If you do could you put some brackets around what kind of increase we should be looking for.
Mark This is Jim the reason, we sort of Caveated things is January had a slow start but and we can't look at this on a weekly basis, but the run rate at the end of January is pretty nice we would say at this point that first.
Quarter revenue.
Based on everything we know will be slightly higher than fourth quarter.
Once in a pretty well last year, yes, [laughter], yes, the sequential improvement from last easier sequential comps. So [laughter] [laughter] <unk> and then in terms of profitability. Yeah. There were some overhead costs that were removed from the third quarter into the fourth quarter and I think we talked about.
Kind of $5 million to $10 million at the time of the third quarter call.
It did all of that I guess first question is is that still sort of the number that that came out of the business and did all of that hit in fourth quarter or is there some.
Additional benefit we should be thinking about as we move from fourth quarter to first quarter.
Mark This is Jim again in general that's not a bad answer there is some noise. There is some noise in those numbers. There were certainly recaptured you know our or costs in the in the in the impairment charges.
But certainly there was some inefficiencies and in fourth quarter as we've worked through all of that that you know that wouldn't happen in first quarter. I'm also remember that we had a favorable job mix in the fourth quarter in pressure pumping.
And that was responsible for some improvement.
Uh Huh I have every reason to think that favorable job mix will will continue in first quarter, but we don't know so I wish we could be a little more clear with you.
But you know the the direction you're going into numbers, you're thinking about I think are good ones. We just don't have a lot of clarity.
Right Okay.
Okay, well, thanks for that and I'll turn it back.
Thanks Mark.
Thank you very much I next question about come family Steven Conoco Stifel.
Thanks, Good morning, gentlemen.
Hey, Steve.
So I guess two things I guess it start can you just do you mind, giving us the revenue breakdown in technical services and then.
As a follow on to that when you.
I think about this and we think about the margin being weighed down by pressure pumping.
In technical services, given the current environment and you did mention the favorable product mix, but I'm just curious if you had any commentary on how.
Well I think is lower pressure pumping wherever you how that impacted the margins in technical services.
Sure.
Let me emphasize the first part of your question because it's the easier answer.
Let me give some let me give some a service line revenue percentages for the quarter. So what about the give you is percentage of consolidated RPC revenue for our five largest service lines for the fourth quarter.
Our largest service line was pressure pumping, which accounted for 38.2% of revenues.
Our second largest service line was thru tubing solutions, which accounted for 33.4% of revenues.
Our third service line was coil tubing at 8.3% of revenues.
Our fourth largest service line was nitrogen, which was 5.1% of revenues and our fifth largest service line was rental tools, which was 4.8% revenues.
As you know Stephen we don't.
Disclose profitability or or profits by service line.
Weve I think we've been fairly clear that that pressure pumping has been has really had challenged profitability.
During the you know 2018 2019 down downturn.
Things are were slightly better in fourth quarter due to our cost cuts on a lot of these cost cuts have taken hold and and have started to improve things.
And also favorable job.
That's kind of.
What we're better off saying right now.
Okay.
That's fair and then.
As given that given the cost cuts.
Sounds like I know I know you youre careful to mention on Q revenues.
So thinking about it I was up modestly, but do you think margins do trend higher here I mean is gradually.
Yeah, I mean based on everything we know yeah, yes.
Okay modestly.
Okay. Thank you and then just one quick one Capex 80 million I imagine 40, 550 that is is maintenance capex around.
So pumping is is the rest also maintenance capex are those numbers.
Reasonably accurate.
Yeah, we Ah yes at this 0.0, we don't foresee any certainly significant growth capex. So majority of that would be I would think on the peppers pressure pumping side, though I think the 80 is probably on the high end I mean, we're being a little bit conservative there I believe.
You know with if we had 10 fleets at 2 million a fleet. We're looking to 2020 5 million. We do have the harvesting of some components on the equipment that were disposing of which is going to that that number down it'll be less than that so I think 80 is is certainly a.
Hi, number will get it'll become more perfected obviously as we get into the new year and toward the middle to your will have a much better idea, but but absent any you know a.
Good growth opportunity you know that that 80 million is certainly a conservative.
Number.
Great. Thank you.
Sure. Thanks Steven.
Thank you. Our next question will come from what kind of sad Altacorp capital.
[laughter] call on.
I'm sure.
Thanks.
[laughter].
19 document makes between private and public changed for you.
Uh huh.
No 170 side, how would you say.
Got entity.
But maybe you could point.
19.
Well car this is Jim customer mix [noise].
Allocated between public and private companies really has not changed since third quarter. We have several customer relationships now that are high utilization and we expect to be working for them throughout the years. That's maybe give me an answer to another question, but our customer mix divide between public and private has not changed.
Significantly over the past six months.
[laughter] how has that changed.
Crime and have to ask you to handle exposed regions basin exposure.
The Permian continues to be the center of gravity RPC, especially after some of our facility closures.
[laughter].
[laughter] EBIT margins, what do you.
We think about the incremental margins that could be a into first quarter.
Well, if you're thinking about Incrementals and just respond to your question, where we thought that revenue would be slightly up I would say that incrementals will not be [noise].
Over overly robust I'm, so I would say that.
Incrementals would would be modest on slight revenue growth again, we're we're challenged with difficult pricing in this environment.
And so that's not going to drive things any higher so I'd say incremental will be modest.
[laughter], 20% to 20% to sell more they said that a 10 high.
That is certainly lower incrementals than we've traditionally done.
Generated when revenue increase so that you know.
It's probably in the Zip code.
Okay, and <unk> needs in the fourth quarter was that nine is the number for that.
Between nine and 10 I mean, we were kind of going we were completing our [noise].
You know the plan of going from a higher number during the third quarter. Two you know down to 10 during the fourth quarter. So it was it was nine or 10 on average.
Okay and again is a is it has done completes the <unk> defined <unk>.
Yes, yes.
Okay.
It sounds to me thanks very much.
Thanks for car. Thank him I next question will come from Crystal Wells Fargo.
Thanks, Good morning.
Hey, Chris.
So first that if I did my math right. It looks like thru tubing, which has been holding in relatively well for most of the rest of the year was actually down pretty significantly in the fourth quarter. I was wondering if you could comment on the dynamics there in the fourth quarter and if you expect to rebound in the first quarter.
Well no good pick up.
Yes, our downhole tool business thru tubing was more impacted this fourth quarter than than they had been in the previous too slow fourth quarter. So.
Oh, you know pumping.
On a sequential basis.
Therefore, you know had a pretty good.
You know did well and obviously thru tubing was down there was it was a bit of a surprise. It was late in the quarter, we have a lot of mid con exposure.
Fourth downhole tools and that was particularly.
A week from a completion standpoint, so I think that's one reason we for the downhole tool business are seeing we are seeing what are going about rebound improvement here in January and that's that's good to see.
There there is the ability within that business to.
Adjust cost and so forth the as needed. So so we'll.
No our managers will be looking at that will make adjustments in in the first quarter to get the the cost aligned to if the activity doesn't bounce back up to the do whatever extent it bounces back we'll adjust cost as we need to so we do expect that to come back but again, that's one of those things as Jim was talking about earlier there.
But there still remains uncertainty and.
And.
It's very difficult to get a handle on to the degree of any bounce back or improvement in talking about incremental margins and things like that or you know, it's not clear that again that there's a strong rebound oh, we're going to <unk> World know a lot more as we get to the you know toward the end of the first quarter to assess how thing.
Things are and what further adjustments that we need to make and we're hopeful that we'll be able to.
Again, reap rewards of additional utilization and and that'll flow through the numbers, but the boards have to wait and see it so itself.
Anytime you're hopefully this is again bouncing off the bottom many times, you're you're doing that knows whether it's going to be a strong balance or not but we're gonna get remain diligent and and and focused and make sure we don't.
Get ahead of ourselves.
Okay. Thanks for that and then a follow up on pressure pumping. So you know in the fourth quarter the industry as a whole did a huge amount of stacking and on the first quarter. Some of the biggest competitors are talking about being pretty disciplined about redeploying. Obviously when you know when a lot of fleet, you're going down you see a lot of irrational bidding in some cases trying to hang onto some work.
Can you can so I I get that you know average pricing is probably flattish, but can you give a sense of whether the band of bidding is tightening. It if it seems like there are fewer rational competitors and maybe that setting the stage for improvement or just what the feel is in terms of you know the bids that are out there.
Chris This is Jim we have as always during these times scenes seen some of what you characterize as irrational bidding, but but less and less.
We've seen some people who've done it you know a rational bidding and not been able to performance. So it hasn't really stuck so we have seen that but less in fourth quarter than we did earlier in the year. It would be a real stress to say that supply and demand or imbalance in pressure pumping it would be a real stretch but.
Is there are indications that you know.
Might be over the horizon not too far from now if completion activity holds.
Thanks, I'll turn it back.
Thanks, Chris.
Thank you very much I next question will come from George O'leary, JPL 10 company.
Morning, guys.
Hey, George.
[laughter].
Yeah. They the line in our press release on kind of in improving execution between 20, and winning new customers I know, we've touched on customers a little bit on the call, but can you just kind of the run through how you strategically intend to target the new customers and then from from an improving execution standpoint.
Right.
You know, where you're kinda dotting, the i's and crossing the T's and what specifically are doing to improve that execution.
Oh, it's what we're talking about there again I think is execution is the efficiency.
You know getting more [noise].
Work units out of a day, which translates into more revenue.
It gets you know its safety. It's you know it is reporting and Digitization I mean, we're we have initiatives that are and we have a lot of that's in place already but we're we're continuing to improve on that and our ability to demonstrate a to our existing and.
Hopefully growing customer base in terms of what our capabilities are so.
That's the main thing, we're we're talking about consistency of performance.
Utilization yahr challenges going to be we you know we have oh.
Outstanding portfolio of customers, but our challenge is going to be again to keep that the calendar filled.
And as John talked about some of these anecdotes with bidding and people not being able to able to perform.
We're going to have to work real hard to coordinate with our customers on our schedule and their schedule.
And ER and you know, we just have to get those we have to get the utilization up which is efficiencies and then when we had the opportunity to work get the the volume of up work up and those things together can have as we all know dramatic positive impacts on our results. So so it's those those.
Things that that were that we're referring to there when we talk about well site huge.
Got it that's that's helpful. And then the the job next line was also interesting in a press release and you guys have commented on it a little bit but curious if we can just peel back the onion, a little bit further and the TPS coming down as a percentage of revenues that would have thought that would have been negative for margin.
And so what about the job mix within pressure pumping or semi or other businesses.
Helpful on the cost I'd have something to do with consumables costs, what what was kind of the driver if you could nail it down to one or two things of that improvement or was it really just fixed cost absorption on on that the idea that you guys got more volume done than you expected during the quarter.
Georges Jim again.
Let's see you want just one or two bullet points one is that.
In pressure pumping, we had a greater percentage of of sand use that we brought to the job sites. So as we all know that runs through your PML and it's helpful to you.
We also.
Have some have some.
So some good customers and they had high utilization during the fourth quarter.
Perhaps there were just trying to get a lot of work done before the end of year. So we had relatively now we had a pronounced seasonal slowdown, let's not forget that but we had some relatively high utilization customers also maintenance and repair expense was perhaps a little bit lower in pressure pumping.
So those were those were the drivers of of some you know modestly incremental.
Profitability in Q4.
Great. That's very helpful color guys. Thanks, good quarter.
Okay. Thanks, Jordan. Thank you.
Thank you I next question will come from then that's now.
Sure Bank.
Hey, good morning, and added quite a bit.
Thanks.
I just if I wanted to try to think about what has been set by a call just want any insight.
So how about 10 states electing for Q.
And so it's good luck in one case.
You had some makes in pressure pumping, which may or may not happen in one case.
I guess, what pricing in Fourq, you, which would have fallen back in one cute, but then maybe higher utilization Q1 just because of that the January .
And you would have flooding in backed off.
Cost savings.
Taking all that together it is it fair to think.
EBITDA fleet would be higher inland Q, such as sports book, you might I know a couple of million dollars on annualized basis.
It should be better Oh, you know, but in terms of quantifying. It you know a lot lot of.
On an arms there but.
Okay.
[noise] thru tubing again like it was down almost.
25%, <unk> 0.9 button and typically I would think skewed to being higher margin business. So more negative mix, if I think about what our technical services business.
Is that savvy and like.
Is it feels like it's safe to say activity in the U.S.
It's flat versus fourth quarter, and maybe modestly higher it'd be can have some improvement in tubing.
Vebs thru tubing.
Revenues or margins or maybe it maybe the question is boat.
Yeah.
Yeah.
You know the margins were okay. There will be some fixed cost absorption, if if thru tubing solutions revenue and improve sequentially. So yeah, there could be some some a higher profit margins there too.
Okay. Okay.
Lastly, if I can ask the <unk> cost savings do we you can help us think about how much <unk> total cost savings.
I'd expected from all the efforts that you guys have taken so far and like.
It's still to be realized in one Q.
Oh.
Not I'm an unreasonable question.
But to be honest with you. We we haven't tried to go through that exercise, that's where I'm kind of talking about we we made adjustments we feel good about.
About the opposite images, so many dynamic Swiss.
Number of fleets Q3 during Q4 and what we've done.
It's hard to quantify like said, we feel good though with the staffing where we are like I indicated we're gonna we're going to watch the first quarter very very closely.
In terms of our.
Results and look and see what if any other adjustments, we need to make either to the upside, adding adding capacity or whatever or whether we need to make adjustments otherwise, but oh, sorry, I can't really quantify that I'm not sure. There's somebody dynamics I'm not sure quantifying it would wouldn't necessarily provide a.
Or an answer we did talk about the fact that our total head count was down 21% or from the ended the second quarter.
Oh, absolutely more pronounced in certain parts of the business than others.
And.
And though was actually up first quarter goes in and yeah.
Just from there.
And I guess, maybe if I can squeeze in one last one I and I understand you do you guys don't like to specifically guide on the call.
If I think it but they actually what credit risk for me to think about the bigger risk to think about light it up.
Couldn't be any Hyatt and once you what's this book.
Pressure pumping fleet utilization yeah.
Right, that's what I'm thinking for taking my questions.
Okay. Thanks EPS.
Thank you I next question will come from kind of them enough Morgan Stanley .
Thanks for putting me back in guys I I have a similar line of questioning about your I just wanted to square to comment you made one was that incrementals.
Incremental margins would be relatively low in the first quarter. The other and maybe maybe I missed her this portion, but I thought that you were saying that there was still a full quarter impacts to be realized or some of the cost saving initiatives. So can you just help square those I would think Fred.
Relatively flat, but you're getting some cost savings you probably have higher than normal incrementals, but maybe I'm missing something.
Uh huh.
Oh no contracts it's.
They're just noise in these numbers.
It's difficult to say with.
With good precision that will allow you all to up to your models in a way to that you'd be confident with.
I know everything is leading to higher incrementals or Ingram strong incrementals in first quarter.
It's just it's just very difficult to say right now.
Yeah, That's fair that's fair I guess, one more just while I'm in here is there a significant working capital wind down to think about from from some of your basin exits or if you were sort of already realized the impact to that.
Oh car, what what period are you referring to the fourth quarter well my question to 2020 in in terms. Yeah. You know you shut down some facilities and I'm wondering if there's a big cash inflows from.
Inventories and things like that or if you've already realized the benefits you would get from that.
Yeah, I wouldn't expect any you know unusual or significant working capital changes to our structure.
Good question.
Thanks, a lot.
Thanks [noise].
Thank you I next question will come from Chris <unk>.
That saga.
Hi, Thanks for putting it back in I, just want to follow up a little bit on pressure pumping in terms of your active fleet I was wondering if you could give an update on the percentage of fleet, that's tier four versus tier two and whether you have any plans in that $80 million to think about potentially like adding dual fuel capability or any other upgrades.
That customers might demand.
Sure Chris It's Jim again, I don't have the specific number of tier four versus.
Versus something else on our fleet, but the majority of our fleet is tier four right now, but the vast majority and we have very few triplex pumps left so.
The majority of our fleet is going to be tier four compliant at this point.
Regarding dual fuel we put that in the same category that sort of next generation pressure pumping.
Equipment, we put that in the same category as may be fleets, which is.
We will we will do it at customer request, if the economics are there.
We have retrofitted pressure pumping fleets in the past for dual fuel and I've used them.
And are happy to do it and addresses SG issues and lot of things, but we would need a specific customer request and some assurance or at least competence in some regard that a dual fuel fleet would be utilized for that that new purpose.
Okay. That's helpful and then.
In January kind of slow start and visibility is fairly limited going forward I'm curious, where the fleet has gone to right. Now are you pretty happy with the amount of work that the fleet is doing in terms of hours per day, it et cetera or is there a a long way to go to the in what you would consider.
A targeted efficiency range right now.
Oh, well I mean, there are there opportunities or to be more highly utilized.
Then we were in the fourth quarter.
There's still opportunities so part out maybe to answer your question added Adam we arrive at nine or 10 fleets.
Oh, you know we the thought was I mean is imperfect science with adult was how many fleets that we think we could get sufficiently high utilization with over a period of time. So we settled down on nine or 10.
That didn't mean that we got nine or 10 was the exact right number for the fourth quarter. So to get to answer the question I think there is.
Opportunity to be.
More more utilized with those 10 fleets and we'll watch the first quarter. So yeah, we do and we'll make adjustments as we need to we yeah. We we certainly did not expect that we would go significantly lower than 10, but but you know we we're not afraid to yeah and then.
As I said to the staffing the staffing arrangement is as or more important than the 10 sleep number right. So.
But we would not be.
Opposed to we want to be appropriately staff for the level of work, we're going to have over a period of time right. So so we're we're watching that very closely in the first quarter [noise] off to a decent start calendar looks okay, and it looks like there's opportunities, but they're gonna be challenges to.
Minimize or manage.
The counter and so that's a big focus that's a big books force.
Hi, Thanks, a lot turn it back.
Sure. Thanks.
Thank you Kim next question will come from Marc Bianchi, killing.
Hey, Thanks, if if I sort of take everything I've heard here I'm coming up with a first quarter EBITDA up 20, 324 million call. It 100 million on a on a run rate basis correct me. If you if there's anything wrong with that thinking but what I'm wondering is you know it at that level assume.
Nothing you can get some better utilization, perhaps there's there's some upside.
At what level of EBITDA do you think do you start thinking about restoring the dividend and how do you think about what the right level of dividend would be maybe compared to how much EBITDA you're generating.
Oh This is Ben reasonable question you know.
Shareholder returns, including dividends in particular or something that we think about lot or thinking about even more in the current environment.
No we don't necessarily think about it as a percentage, especially in this environment again, it's very difficult knowing what 2020 holds for us.
But if we have come off the bottom we we have some cash we have no debt.
We're going to.
Do everything in our power to manage the business to where we're generating cash right.
That's that's the.
That's the intention and that's that's what we'll be striving for so I expect Wes.
Yeah additional cash being generated.
All things being equal in the coming quarters that.
Well, we'll be looking very closely at.
Our dividends in our dividend policy, and what the appropriate approaches and and.
It's a high priority for us in terms of our our capital allocation and ER and we're striving to reinstate or pay a dividend 2020, that's one way to say I mean, that's that's that's a goal. If you will have to be able to be in a position to pay or some type of dividends in 2020.
Okay. Okay. That's helpful and somewhat related to that you know, there's there's a number of companies that.
Our trying to exit the pressure pumping business or have sideline their equipment or and are looking for perhaps a dance partner for lack of a better work how does the thinking about M&A play into your decision about the dividend and then just more generally about you know how you view maybe.
Maybe combining with some other companies and what the likelihood of that could be.
HM.
And this has been Uh huh.
I would not sit here right now and say that that's a high priority for us to be thinking about.
M&A are you opened opportunities want to look at opportunities, but we'd have to be.
You'd have to be a suite, a sweet deal, where we're focused right now on.
Returning.
Shareholder returns and improving our financial position and generating some cash and.
Stabilizing the business and putting in a position to be able to.
Hopefully grow and generate some consistent cash flow. So that's our focus.
Focus today.
Okay, great. Thanks, I'll turn it back.
Thanks Mark.
Thank you very much ladies and gentlemen, once again as a quick reminder, if you would like to ask a question you May Press star one on your Touchtone phone now.
Again, so I wanted to ask a question.
Let's speak to that this time, we have no further questions in the queue somebody like attend this conference back over to Jim Landers for any closing remarks.
Thank you. Thank you to everybody who called in to listen and thanks for the questions. We enjoyed the dialogue we look forward to seeing everybody soon thanks [noise].
Thank you very much ladies and gentlemen, this now concludes <unk>. This teleconference and as a reminder, that this conference call will be replayed on www Dot RPC dot Mac within two hours. Following the completion of this conference. Thank you very much for joining US. Please disconnect.
If I mines and have a great rest a week. Thank you.