Q4 2020 RPC Inc Earnings Call
Good morning, and thank you for joining us for RPC, Inc. 's fourth quarter, 'twenty and 'twenty Financial earnings Conference call today's call will be hosted by Rick Hubbell, President and CEO and Ben Palmer Chief Financial Officer also present is Jim Landers, Vice President of corporate services.
At this time all participants are in a listen only mode. Following the presentation. We will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions.
We'd like to advise everyone that this conference call is being recorded Jim will get us started by reading the forward looking disclaimer.
Thank you and good morning, before we begin our call today I want to remind you that in order to talk about our company, we're going to mention a few things that are not historical facts and some of the statements that will be made on this call could be forward looking and nature and reflect a number of known and unknown risks I'd like to refer you to our press release issued.
A day, along with our 2019 10-K and other public filings that outline those risks all of which can be found on rpc's website at www.
W Dot RPC dot net.
In today's earnings release and conference call, we'll be referring to several non-GAAP measures of operating performance.
These non-GAAP measures or adjusted net loss adjusted loss per share adjusted operating loss EBITDA and adjusted EBITDA and we're using these non-GAAP measures today, because they allow us to compare performance consistently over various periods without regard to non recurring items.
In addition, RPC is required to use EBITDA to report compliance with financial covenants under our credit facility.
Our press release and press release on our website contain reconciliations of these non-GAAP financial measures to operating loss net loss and loss per share which are the nearest GAAP financial measures. Please review these disclosures if you're interested in seeing how they are calculated.
You haven't received our press release, yet and would like one please see our website once again at www Dot RPC that net for a copy I will now turn the call over to our CEO and President Rick Hubbell.
Thank you Jim.
This morning, we issued our earnings press release from Rpc's fourth quarter of 2020.
And we will discuss the cash.
And a moment before we start though I'd like to thank our employees for working through this incredibly challenging year of 'twenty and 'twenty.
Through their efforts on our company is positioned to benefit from improving business conditions.
We appreciate your dedication.
Unfortunately, several COVID-19 vaccines have been approved.
And are now on the early stages of distribution.
This development paves the way for a worldwide recovery and hydrocarbon debated.
On the supply side, we have experienced there.
A lack of investment and drilling the past several years.
Declining production base and have OPEC plus on flu.
Disciplined.
This would appear.
Supply and demand and are heading in opposite directions.
This confluence of events could potentially lead to an up cycle and our industry.
Rpc's fourth quarter activity levels and improved sequentially for the first time since 2016, consistent with several oil field key metrics, our CFO Ben Palmer will discuss this and other financial results in more detail, which I will provide some closing comments.
Thank you Rick.
For the fourth quarter of 2020 revenues decreased to $148 6 million compared to $236 million and the fourth quarter of the prior year.
Revenues decreased due to lower activity levels and pricing compared to the fourth quarter of the prior year.
Our adjusted loss for the fourth quarter was $11 3 million compared to an adjusted operating loss of $17 3 million and the fourth quarter of the prior year.
Adjusted EBITDA for the fourth quarter was $7 8 million compared to adjusted EBITDA of $23 2 million and the same period of the prior year.
For the fourth quarter of 2020, RPC reported a <unk> <unk> adjusted loss per share compared to a seven cents adjusted loss per share and the fourth quarter and the prior year.
Cost of revenues during the fourth quarter of 2020 was $117 9 million or 79, 3% of revenues compared to $176 9 million or <unk> 75 per cent of revenues during the fourth quarter of 2019.
Cost of revenues declined primarily due to decreases in expenses consistent with lower activity levels and RPC as cost reduction initiatives.
Cost of revenues as a percentage of revenue up revenues increased primarily due to lower pricing for our services and labor inefficiencies, resulting from lower activity levels and the fourth quarter as compared to the prior year.
Selling general and administrative expenses decreased to $26 million and the fourth quarter of 2020 compared to $36 8 million and the fourth quarter of the prior year.
These expenses decreased due to lower employment costs, primarily the result of cost reduction initiatives during previous quarters.
Depreciation and amortization decreased to $18 million from the fourth quarter of 2020 compared to $40 3 million and the fourth quarter of the prior year.
Depreciation and amortization decreased significantly primarily due to asset impairment charges recorded in previous quarters, which reduced rpc's depreciable property plant and equipment.
Coupled with lower capital expenditures.
Technical services segment revenues for the quarter decreased 36, 5% compared to the same quarter and the prior year segment operating loss and the fourth quarter of this year was $11 3 million compared to $17 2 million operating loss and the fourth quarter of the prior year.
Our support services segment revenues for the for the quarter decreased 43, 6% compared to the same quarter and the prior year.
Segment operating loss and the fourth quarter of 2020 was $2 6 million compared to an operating profit of $1 2 million and the fourth quarter and the prior year.
And on a sequential basis Rpc's fourth quarter revenues increased 27, 5% again to $148 6 million from $116 6 million and the prior quarter and <unk>.
This was due to activity increases.
And most of the segment service lines as a result of higher completion activity.
Cost of revenues during the fourth quarter of 2020 increased by $17 million or 16, 9% to $117 9 billion.
Due to expenses, which inquiries with higher activity levels, such as materials and supplies and maintenance expenses.
As a percentage of revenues cost of revenues decreased from 86, 5% and the third quarter of 2020.
And to 79, 3% and the fourth quarter due to the leverage of higher revenues over certain costs, including more efficient labor utilization.
Selling general and administrative expenses during the fourth quarter of 2020 decreased 19, 6% to $26 million from $32 4 million and the prior quarter.
This was primarily due to the accelerated vesting of stock recorded and the prior quarter related to the death of RPC share.
Rpc's recorded impairment and other charges of $10 3 million during the quarter.
Yeah.
These charges included a noncash pension pension settlement loss of $4 6 million.
And the cost to finalize the disposal of our former sand facility.
RPC incurred an operating loss of $11 $3 million during the fourth quarter of 2020 and compared to an adjusted operating loss of 31 8 million and the prior quarter.
Rpc's adjusted EBITDA was $7 8 million and the current quarter compared to adjusted EBITDA negative $12 3 million and the prior quarter.
Technical services segment revenues increased by $29 7 million or 27, 2% to $139 million and the fourth quarter.
Due to increased activity levels and several service lines.
Rpc's Technical service segment incurred an $11 $3 million operating loss and the current quarter compared to an operating loss of $24 9 million and the prior quarter.
Port services segment revenues increased by $2 3 million or 32, 1% to $9 $7 million and the fourth quarter.
Operating loss narrowed slightly from $3 8 million from the prior quarter to $2 6 million and the current quarter.
So during the fourth quarter RPC operated five horizontal pressure pumping fleets, the same as third quarter, but with improved utilization.
At the end of the fourth quarter Rpc's pressure pumping capacity remained at approximately 728000 hydraulic horsepower.
Fourth quarter 2020 capital expenditures were $12 8 million. We currently estimate 2021 capital expenditures to be approximately $55 million.
This will be comprised primarily of capital and capitalized maintenance of our existing equipment and selected growth opportunities and with that I'll now turn it back over to Rick for some closing remarks, Ben Thank you.
As 2021 begins we have greater visibility into the near term near term activity levels, then and recently and the recent past.
Commodity prices have improved and our customers have a more constructive outlook.
However, while we expect activity levels to continue to improve as the year progresses, we remain committed to capital discipline.
And we'll remain disciplined and.
And we will not increase our equipment fleet until we have clarity and to economic returns justify investing.
Currently our operating plans for 'twenty and 'twenty, one and include low capital spending continued expense management and.
And scrutiny of customer relationships for acceptable profitability.
And in the fourth quarter RPC as cash balance was $84 5 million and we remain debt free.
I'd like to thank you and joining us for Rpc's Conference call. This morning, and at this time, we will open up from the lines for your questions.
As a reminder to ask a question you will need to press star one on your telephone.
And with J. Your question press, the pound or hash key please standby, while we compile the Q&A roster.
Your first question comes from Chris Ferrara with Wells Fargo. Your line is open.
Thanks, Good morning.
Hey, Chris.
First question I guess on the fourth quarter.
Client cash is pretty strong obviously, a big build and working capital is there anything unusual in there and given that build or do you expect working capital to be a source over the course of 'twenty, one or a headwind as revenues growth. Just curious if you get a little color on that.
Yes, good question during the fourth quarter.
And we talked about the sand mine facility that we sold there was a lot of benefits to executing on that and that did cost us a little bit of cash, but it did generate a lot of tax benefits you'll notice on the balance sheet that we have $80 million and income tax receivables.
Some of that is being generated from the cares act, but also because of the closing of the Chippewa mine and we were able to.
Finalize that and generate.
A large amount of tax benefits the collection of those receivables were expecting that the vast majority of that will come in over the next nine months fairly steadily and it'll come in chunks, but we think it will be kind of over that nine month timeframe. So so that's a good thing also cash.
<unk> was absorbed some degree because of the increase and the revenues, obviously and the increase on our trade AR.
So we're expecting to continue to maintain a very strong cash balance and with our.
And our focus on expense management on and capital expenditures.
We expect the cash balance to even despite growth in working capital we expect the cash balance will remain at.
Yes.
At the same levels or even even higher going forward.
Okay. Thanks for that and then my second question and the release, you mentioned and visibility for growth as 2021 progresses. Just curious if you could explain a little bit more and whether you expect that to be from private companies or public e&ps.
And where where the growth is coming from maybe regionally as well and whether theres been any pricing improvement coming with that growth.
Well, it's the growth will come from a variety of different customers.
We have both the public e&ps and the privates that we have strong relationships with.
We obviously have a large and presence and.
And West, Texas, We think that'll continue to be and area of improvement and.
I'll comment briefly on pricing and Jim can add some more to it but but we are seeing ourselves and hearing anecdotes of of pricing improvements, we're going to remain disciplined.
We certainly don't feel that any or many people and industry are and are positioned to.
Aggressively increase pricing, but certainly we hear that there is discussion to make that happen. So we're very pleased with that.
And we're trying to play along we're trying to be.
And someone who has viewed us as assisting in and.
And maintaining and having a and <unk>.
Afterward pricing move.
So.
Thus one of the reasons our fleet count has remained steady.
One of them deploy anymore until until we were able to get sufficient work at sufficient contribution so.
Again, so it's all about the discipline, we do we do think we do have some good even better visibility here early in 2020, especially given that.
The fourth quarter, we didn't see the normal slowdown so we didn't have the slow ramp up and the first quarter. So we're pleased that we're off to a.
And a reasonable start so we're expecting the first quarter to be.
And.
The first quarter should should be continue to be strong.
Uh huh.
And be able to generate some strong results. So.
But we're going to we expect it's going to be more slow and steady than other upturns. So we're going to react to what we see and and not get ahead of ourselves. So.
Jim and is there anything you'd pass or momentum.
Chris It's Jim.
Not a whole lot except that our frac calendar has much less white space and it has and the past and much more visibility. It's a it's a mix of customers tend to be more private companies and small publix.
We have not.
And the financials, you see today and don't have any pricing improvement and them, but we.
And we do have a lot of cases, where.
We're on.
Other service providers have gone to customers for.
Price increases and now and now they are testing they are doing price checks.
That doesn't yet translate into.
Pricing improvement on the P&L, but it's a it's an early good sign and so that's that's where we think we're on right now.
Okay. Thank you very helpful.
Your next question comes from Stephens, Inc. Garrow with Stifel. Your line is open.
Hi, Thanks, good morning, gentlemen.
Hey, Steven.
Two things one one administrative if you don't mind, giving us the segment revenue breakdowns that would be helpful. But and then the second question kind of from bi.
From a bigger picture perspective, if we assume that youre not going to see a whole lot of pricing over the next three or four quarters.
Any guidance on how we should think about incremental margin performance.
Steven This is Jim let me answer the first one for you so I'm going to from about to give.
Percentages of revenue by our service lines for RPC consolidated for the fourth quarter. So pressure pumping is our largest service line at 39.0% consolidated revenues.
Our downhole tools and Motors service business with second largest at 31, 5% of revenues.
On coiled tubing was the third at nine 4%.
On of revenues following that you have nitrogen, which was four 3% of revenues.
Rental tools, which is and support as a percentage of consolidated revenue was four 1% of fourth quarter revenue.
And then it kind of drops off from there, but nothing was one 8% of revenues and the fourth quarter.
Great and second question about it.
And yes.
And then on the incremental margin standpoint.
Wait.
And with.
What we're hearing and the market and some of the things that we've experienced directly.
We expect there will be some price improvement.
I think absent that and who knows what the strength and timing of that will be but.
Yes, I think typically now and looking back historically.
And normal sort of increasing and revenue environment and the incremental <unk>.
EBITDA margin improvements.
20% to 40% are normal.
We are not at this point and time expecting.
Maybe repeating myself, but being and we don't expect this is a straight.
Uphill shot with with revenues were.
We're planning to close to the vest and again, we want to remain disciplined and we don't want to get ahead of ourselves. We don't want to we don't want to.
Get busy to get busy and hopefully and hope we get price improvements later, we're trying to make sure that we have.
We're winning work that.
Is helping us move forward and not wait not just working hard to wait for pricing improvement sometime down the road.
And of our objective currently.
Very good thank you gentlemen.
Thanks Terry.
Your next question comes from Connor Lynagh with Morgan Stanley. Your line is open.
Yeah. Thanks I.
I was wondering if you could just dial and the first quarter expectations, a little bit I. Appreciate there's a lot of moving pieces and you don't want to get ahead of yourselves, but you've had two quarters of.
Ballpark, 30% revenue growth sequentially.
Can you maybe help us understand should we be thinking about sequential single digit revenue growth double digit.
And can it be anywhere close to what you've seen over the past couple of quarters I'm just trying to make sure. We think about that the activity run rate, leaving the year versus and.
And during the quarter.
Yes, so it's about it's a valid question.
We think that first quarter will be a little bit better than fourth quarter seasonally adjusted so as you know the.
The seasonal impact from fourth quarter was was less pronounced this year than a year and 2020 than it usually is we see a bit of continued improvement in Q1, but.
Revenue growth might be and the high single digits and keep in mind that we've got a couple of things going on and one is as we've discussed we don't see a lot of pricing improvement right. Now. Another one is that we've got five pressure pumping fleets in the field and they are fairly highly utilized at this point.
We can.
We can eliminate more white space on the calendar, but we've already done a lot of them. So we are.
Fairly utilized and pressure pumping as well some of the other businesses can.
And improved some can grow some.
Weather is a little bit iffy at this point it wasn't really an impact on fourth quarter, but we still have a couple of months of winter left so put all that together and maybe high single digit revenue growth would be a way to think about it.
Yes, that's very helpful. Maybe just a higher level one here. So generally speaking the perception of RPC as you, maybe a bit a bit of a bias towards smaller private customers.
I guess, I guess holding that to be true and you can correct.
And me if that's wrong, but.
One thing that we've been wondering is certainly a lot and made it.
And the capital discipline argument on on the larger public E&ps.
But the wildcard is of course, how much price will choose to grow versus maybe theres. Some balance sheet repair required and I. Appreciate we are talking about a large swath here so maybe.
Theres a couple of groups you want to discuss but how would you characterize the desire.
Private or a smaller public e&ps to increased capital spending this year.
Well.
I can tell you that whether it's private or large or small e&ps. We're certainly here and from our customer is also that they have ESG and mine and they want.
On the right amount of equipment, they want equipment that they can.
Feel that.
They need to have or want to have or be able to say that they have out and location. So.
We have we responded to that to that.
Whether it was directly to that or in anticipation of that with some of the equipment that we added back in 2019 some of the tier four equipment. So that's that's been.
Desirable to our customers and that is working at a very high utilization level, we have converted some of our earlier to your equipment too.
Dual fuel capacity and that effort continues its not significant investment but.
But we're implementing those plans and that that also.
<unk> is desirable to.
All of our customers big and small and.
So that is benefiting us and we think it will continue to give us additional capacity to meet those requirements going forward. So so we are responding we clearly get not on.
Announced or talked about that we're adding complete new fleets with.
Newer technology.
Believe it's for US it's too early to make that decision.
We're hopeful that things will improve and the.
The environment and again, the pricing and commitments from from.
Customers will will improve to the point, where that's an easy decision, but right now.
We are.
We are return focused and it's going to take some time to get back there. So so as we said we're going to remain.
We remain disciplined in that regard.
Yes. Thanks.
I guess wanted to point to the question. If you could just expand on a little bit is just.
Expectations for activity growth sort of building on your on Chris's question, but maybe less and the near.
And just sort of customer sentiment.
We hear a lot obviously from the public e&ps, but but if you look and sort of smaller side of your customer book do you think there'll be growing activity a lot over the next couple of quarters or year or two here, what's your sort of thinking on the risk appetite from that group.
And so and so clearly that's a hard one we do think that oil being over 50 was.
It's a nice psychological barrier to breakthrough.
On.
Not speaking and financial returns, but we think that a sustained level above 50 has improved some activity.
If you think back on it and not too long ago. The strip showed us not getting to $50 oil through 2030. So I think that's a nice surprise that maybe.
Spring on some of the animal spirits.
And the smaller company, but really great questions. We don't have much more visibility and so I guess the read through in terms of our comments otherwise or that we're not seeing things headed straight up we don't have people knocking down on our doors, saying please come out and.
And we want to get you on our calendar and.
May and June or whatever I think everybody's trying to figure out COVID-19 and recovery and.
Modesty prices going forward I think across the sector clearly there is more.
More capital discipline on the e&ps be it private or public so place anecdote.
And solving the equation and that's what we're seeing because we are not expecting.
Now at this point to definitively have a significant.
The addition to our fleet count until until work comes to fruition right that it comes to us, but it is a sufficient level than that.
That will.
Quote unquote pay us back for putting that additional equipment out to work so far.
I would say that everybody across the industry is similarly.
<unk>.
Got it that's helpful. Thank you.
Sure. Thanks.
Your next question comes from Taylor Zurcher with Tudor Pickering Holt Your line is open.
Hey, Thank you Ben I wanted to try to explain a little bit on your last response, there you talked about not reactivating any additional equipment seem to suggest you wouldn't reactivate any additional equipment until pricing improved your fleet count stayed at five.
Sounds like last quarter, and that's where it's at today. So could you just help us understand.
And to get into six or seven fleets out in the field and what Youre looking for or is it just pricing is it something else just help us understand that a little bit more.
Yes, I would say it's.
Obviously with with with the work that we have across all of our service lines and some is better than others.
Trying to.
Go after obviously the best work that we can get again, it's not all about getting busy it's about generating sufficient returns. So that's what we're focused on and so to get more fleets working we will have to have the the average.
And the average of our work needs to be moving up right. There are opportunities to drop out and any any customers that we may have.
And we'll work that we may have taken on a few months ago that was marginal we can theres always the opportunity to.
Try to be try to be selective thats very difficult to do at many levels, but but but.
There are examples where we have done that.
And.
And and we'll continue to do that so we will have to have a sufficient portfolio of work before we put additional.
Amounts of equipment to work that will whenever you want to call it on stack or staff or whatever you want to call. It.
We have to have better call it pricing call. It <unk>.
Job characteristics.
We will have to feel that the work we're doing.
And as is contributing sufficiently to our financial results that were moving forward right that we're not just getting more busy and staying steady we want to be we want them. We want to make we want to make progress with respect to our results.
Okay fair enough from a cash flow perspective.
Last call you talked about the goal of positive free cash flow for 2021 on and the Q&A section of this call it sounded like maintained.
And maintaining the cash balance and and around 80 million, where it's at now is the goal for 2021. So should we read that to mean that the positive free cash flow target for 2021 is still on Tac absence, and some working capital.
Build that may happen as activity continues to trend higher.
Yes, yes, and my and my comment was we would stay at least at the level of abating.
Okay got it thanks, guys. That's it from me.
Thank you thanks.
And your next question comes from John Daniel with Daniel Energy Partners. Your line is open.
Yes, thank you for the detail.
Sort of us.
So a question here, but if you envision where and stable to slightly improving scenario from an activity standpoint, where.
First pricing gains are a bit elusive is this the year, we finally see the.
The industry come together and consolidate within the <unk> sector.
Whether you choose to participate or not just your thoughts on that.
And this is Ben.
And certainly there was a lot of discussion about that last year when everyone was.
Highly uncertain about whether we would get back to the point that where we are right now.
I think there is.
And clearly thats always a possibility.
The ability to take out costs will.
And it can help the industry can help individual companies.
But.
I wouldn't doubt that there could be might be some consolidation, but that but today I would say, it's less critical than it was six months ago.
So.
Aye.
Wouldnt be surprised if it happened, but but not shocked if it continued to be sort of a slow grind and it takes some additional time for.
Those types of transactions to happen.
Okay.
Total steps loans increase and deals being pitched you are now.
And so I recently, probably not not as many.
And yes, I think people many people have either gone bankrupt or gone quiet or.
Whatever I think it's a little quieter now it was certainly.
Mid and.
From from June.
Remember last year was certainly quite active but right, but not as much right now.
No I guess the question is and you see companies get their restructuring and creditors become owners do they really want to sit there and run the thing.
Or not and that's.
And I will say.
And can you from Macquarie.
And John this is Jim valuations would not be compelling.
Straightened around book on him.
And just keep it.
Yes.
On the flip side is no ones really making any money and you're on.
Earlier point, you need to take cost out of the business and it's too fragmented and such.
Don't get pricing.
Just sort of flow.
Kind of state and the August something needs to happen.
And input costs, Jim you know as we talked it's on sale.
It seems like asset cost trucking costs are all moving up fairly sharply recently.
Are you able to pass that through right now to customers or are you going on.
Can you just walk us through what youre seeing from and input costs.
Yes, so we are seeing.
We've started to see or know abele, no about what's coming and that would.
The price increases for some of the.
And some grades of sand.
And on.
And that type of thing.
Increased increased utilization and brings with it increased.
Maintenance expense.
And is it is possible.
On a component cost will increase a little bit.
So.
As a management issue, we have to go to the customer and say our costs are increasing and.
And it's a management issue you have to do that we historically pretty good at doing it but we also think that supply and demand are in a position right now where we can do that back to my earlier comment that people or at least testing yes.
Yes, you can to be able to go to customers and they look like.
Input costs are increasing and and you can see that because you are buying sand too.
Customers now now know a lot more because of what they've been doing with logistics.
No.
We think we can and certainly our goal.
Got it okay. Thank you and then just on housekeeping I missed the comment on 'twenty and 'twenty Capex can you tell us what that work.
And 2021, and 2000, Twenty's and I've got 2021, and this time.
It was $12 8 million and belief per quarter for the quarter.
And for the year.
And my truck.
65.
Okay, Alright, guys. Thanks for letting me on.
Thanks, Tom and thank you. Thank you.
And as a reminder, if you would like to ask a question you will need to press star one on your telephone. Your next question comes from Blake Gendron with Wolfe Research. Your line is open.
Yes, thanks, good morning, guys.
On the dig into the blades that you mentioned I. Appreciate your you are approaching 2021, the capital conservatism here, but can you just walk us through the economics of the dual fuel upgrade and on the context of one of your Permian peers, having announced a newbuild or DGB new build it.
Meaningfully lower pricing and we had thought and maybe for new builds is there a way that we should think about newbuild costs today versus what we thought about it say a year and a half or two years ago and.
And is it a pretty low threshold to upgrade this equipment from a capital perspective.
Hey, Blake this is Jim we can't really speak to Newbuild cost because we aren't doing any.
So we can't tell you whether.
Component costs or equipment costs are are lower or higher where that is so sorry.
Regarding dual fuel fleets.
Have completed and upgraded with dual fuel fleet and we're planning to do another one during the first quarter.
We think the economics on that one on that.
Our position on a pretty good because upgrading and existing diesel fleet to dual fuel doesn't cost all that much and it allows you to win work that you might not have won otherwise and so it is a it is and increased capital cost for let's just say for the sake of argument.
The same pricing and utilization, but it does get that utilization.
And for you and.
And it's a good idea, it's a development and the industry. So we want to do it.
In terms of the fleets it just seems too expensive.
We just don't like being in the situation where.
We give our customers all the efficiencies that we spend money to gain for them. So that would have to change before we did something like that.
And on our team Thats been our team is looking at the <unk>.
The various alternatives that are available and the industry. So we're.
I can't say, we're actively running the numbers right because who knows what the future is going on kind of hold but we know kind of what the.
And the contribution margins are now and when we have an idea about what it would take.
Based on the.
Based on the technology and how it runs and with some assumed cost but as.
And as we indicated earlier, we're a ways from making a commitment for expanding our work because we do have other equipment that's available and we do have some other equipment that we think is.
And also convertible to two dual fuel.
And would further expand our capacity of equipment that is.
Xyrem about many of our customers.
Yes, that's totally fair I appreciate that detail on wanted to dig into the sand commentary.
Is this transitory or do you think that.
Found a structural bottom and sand pricing and then could you maybe fine tune and with respect to northern white versus and base and I would assume and basin supply is fairly elastic. So if there was any tightness there perhaps its not us.
Not as structural and not as longer term a theme here over the coming quarters.
Blake Jim again, we don't know of any price increases for in basin sand.
Let's remember that.
Drilling and completion activity remains historically low and so.
There's plenty of supply there.
And I can't quote any grades for Ya.
Of northern white that might be increasing in price, but a lot of sand mines are shut down up there and.
So any increase in demand.
And would result and price increases there we don't think we've talked to our operations people, we don't see a.
Any sort of secular shift back to northern white from in basin.
And its customer preference and it depends on.
Which customer wants what et cetera, So we don't see any.
Real shifts and the market just probably a a momentary.
Sure.
On.
Price increase based on interest bearing tactical supply demand issues.
Got it that makes that makes sense and one more if I could sneak it in a lot's been made of what's going on with the buy and administration and the federal lands.
And <unk> and it's probably an overreaction, that's playing out and the equities right now and there are certainly plenty of inventory through over the coming years, but just high level conceptual question for you. If you saw the mix of activity, maybe move away from the Permian and specifically, the Delaware, New Mexico side, and so some of the other basins as the.
E&ps, maybe rationalize the balance would.
Would you say that that would be directionally positive.
Neutral or negative for your operations, not necessarily just frac, but kind of everything and technical services.
Like it's hard to it's a great question and it's hard to say.
There would probably be some short term friction as.
As operators move away from the federal lands and New Mexico, and that's what we're talking about here.
And there are certainly some I won't see fear, but concern and some vigilance over what this might actually mean, we want to emphasize though that for the short term.
And.
And at this point.
A drilling permit moratorium so.
And so wells, which had been drilled which we were going to complete in February we will still we will still complete but certainly there is concern at least on our part of the world.
Being being new Mexico.
But as we always say our equipment has wheels wheels on it and from.
On.
Activities and is in.
On the eastern part of the Permian and the Midland and instead of in the Delaware.
And we can certainly work there too or in other areas. So.
Probably probably and non event.
Unless you just think about any short term pressure and quite yet.
Yes, that's totally fair I appreciate the time guys. Thanks.
Yeah Blake thanks.
Your next question comes from Waqar Sayed with ATB capital markets. Your line is open.
And thank you for taking my question and good morning.
And let's see.
Maintenance capex running per active fleet or where do you expect it to be in 'twenty and 'twenty one.
And require this is Jim we have that.
<unk>.
It's.
<unk>.
At this point less than $1 million per fleet, it's somewhere in the 700000 to 800000 range per fleet.
Is that that's an annual number on a quarterly number.
That would be annualized.
Okay.
And do you think thats sustainable or is that.
This is a fun what active fleet right.
Yes.
Yes is it sustainable.
We don't know it depends a lot on activity and job intensity.
On.
So on.
It's pretty it's probably going to move up from there I would say is it low because.
You're taking off some of the stacked equipment or is it because of something else structure of this going on and industry.
This is this would be and <unk> specific answer.
As you know we.
We've disposed of a lot of our fleet. The average age of our equipment is a lot lower today than it was a year and a half ago. So other things equal we've got newer equipment.
And operate more efficiently and doesn't need that much that much maintenance also we have our.
Our 3000 horsepower pumps, which certainly when they need something.
And it's expensive, but they werent they run pretty well so maintenance capex on that equipment is lower is lower also and.
Fourth quarter had some nice utilization, but let's not forget that previous to that utilization was a good bit lower so it's a bump from utilization and newer equipment for us, but understand that there are a lot of variables and that maintenance capex number and it can really move around.
Fair enough.
Now what's the average age of the five fleets that are working versus.
The 19th and believed that and not working right now.
I would say without giving a specific number obviously the larger pumps, we bought in 2019, so and they are heavily utilized so the average age of the ones that are working on slightly lower.
But theres not a signet.
The equipment that we.
Disposed off back in the third quarter of 19.
All of the equipment and at that point in time.
Other than the three thousands were of similar vintage.
We're not prioritize will not use and the newer non 3000 horsepower pumps, so they're all reasonably comparable and that point.
Fair enough.
And then.
What would be the incremental cost.
<unk> will you to reactivate and.
Additional fleet.
Obviously, the well maybe firstly.
Firstly, if it comes back will be will be lower.
Got.
It could be.
It's not significant and we.
If the question is how much capex would be needed.
It would not it should not be significant.
And there may be obviously there.
And costs and training costs and things like that of new employees and things like that does put the cost should be minimal.
And after what number of fleets active and would it be like after you have eight fleets active.
Cost start to go up or how many you could place and without.
And a significant incremental capital.
Yes.
Recall.
We have a total of total 12 or 13 fleets, we can put and the field.
And we've done a lot over the past year and a half so.
On the.
Lastly, we put in the field will cost a lot more than the first fleet, but.
Overall, it's not.
It doesn't make a big economic impact difference I am sorry, Thats, probably the best I can give you.
Fair enough and then just one last question.
<unk> seven and when he 8000 hydraulic horsepower.
What you know what.
And Dave would be kind of run by these tier four engines.
So.
The tier four equipment, we have two tier four fleets right now.
Okay.
Out of five working fleets.
And how many would be dual fuel total.
Dual fuel we will have at the end of the first quarter and this is a separate answer a total of 50 dual fuel pumps at the end of first quarter.
Okay great.
Thank you and Mike that's very helpful. Appreciate it.
Thank you alright, thanks Waqar.
And your next question comes from Stephens, Inc. Carroll with Stifel. Your line is open.
Thanks for taking a follow up.
<unk> asked a lot of what I was going to hit on but just one quick one when you are.
And conversations with customers and you're talking about the dual fuel capabilities and you mentioned it a little bit earlier as far as the value.
Drive and.
Ability for people to get paid ultimately for each waits et cetera, but when you bring a dual fuel fleet to the to the negotiations how does that impact the <unk>.
Pricing discussions it seems like it clearly helps utilization right now but is there anything on price yet or do you think that will evolve as we go.
Goes through 2021.
Yeah.
Steven This is Jim it doesn't get you better pricing and just gets you the job. So if I may employ a gambling term. It's just the table stakes increased a little bit and it's having the dual fuel capability.
And I think there are a couple of different.
To the extent that when and if and when things began to tightened.
I think it will have more of a pronounced difference I think I think the.
At this point are up to this point I think as Jim said I think it has had little impact on pricing you really need it for the most part to be and the game.
But as as.
The fleet across the industry Titans, it'll become more and.
More important and it will I think youll have some pricing power at that point.
Okay, great. Thanks, I appreciate all the color on the call today. Thanks, Jim.
Thanks Steven.
Got it.
<unk>.
As a reminder to ask a question you will need to press star one on your telephone.
Okay.
There are no further questions at this time I will now turn the call back to Jim Landers for closing remarks.
Thank you and thanks, everybody for listening today and for the questions as well could you talk to everyone, who will give a good day and we will talk to you soon thanks.
Ladies and gentlemen. This concludes today's conference call a replay of this conference call will be available at Www Dot RPC dot net within two hours. Following the completion of the call. Thank you for participating you may now disconnect.
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