Q1 2021 RPC Inc Earnings Call
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Good morning, and thank you for joining us for RPC, Inc. First quarter 2021 financial earnings Conference call today's call will be hosted by Rick Hubbell, President and CEO and Ben Palmer Chief mine.
Natural officer also present is Jim Landers, Vice President of corporate services at.
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 I would like to advise everyone that this conference call is being recorded.
Jim will get us started by reading the forward looking disclaimer.
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Okay. So thank you everybody sorry for that break thank you and good morning, before we begin our call today I need to remind you that in order to talk about our company, we're going to mention 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 a number of known and unknown.
Risks I'd like to refer you to our press release issued today, along with our 2020 10-K and other public filings that outline those risks all of which can be found on rpc's website at www Dot RPC dot net.
In today's earnings release, we referred to in our conference call. We also will refer 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. We're using these non-GAAP measures today, because they allow us to <unk>.
Peer performance consistently over various periods without regard to nonrecurring items. In addition, RPC is required to use EBITDA to report compliance with 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 net loss and loss per share, which are the nearest GAAP financial measures.
These review these disclosures if you're interested in seeing how they're calculated.
If you'd like to see our press release and everyone received a copy. Please go to RPC dot net again to see a copy.
I'll now turn the call over to our President and CEO Rick Hubbell.
Jim Thank you.
This morning, we issued our earnings press release for Rpc's first quarter of 2021.
'twenty 'twenty was a very challenging year on many levels. Fortunately the world was coming to terms with the COVID-19 pandemic.
And hydrocarbon demand is slowly but surely recovery.
This has led to a reduction in oil inventory to near its five year average.
Aided by support and OPEC plus actions to date.
As a result, the outlook for the oil and gas prices is encouraging which should support modest growth in industry activities.
The first quarter played out largely as we expected except for the unusually severe cold weather during February.
Our estimate is that this event negatively impacted our EBITDA by approximately $5 million.
Notwithstanding that event, we see encouraging trends in most of our service lines, which gives us confidence in our 2021 outlook for <unk>.
CFO, Ben Palmer will discuss this and other financial results in more detail after which I will provide some closing comments. Thank you Rick for.
For the first quarter of 2021 revenues decreased to $182 6 million compared to $243 8 million in the first quarter of the prior year revenues decreased due primarily to significantly lower activity levels, including the February adverse weather conditions, and lower pricing compared to the first quarter of the prior year.
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Operating loss for the first quarter was $10 5 million compared to an adjusted operating loss of $13 2 million in the first quarter for prior years.
EBITDA for the first quarter was seven 8 million compared to adjusted EBITDA of $25 8 million in the same period of the prior year.
Loss per share was five cents for the first quarter of this year compared to adjusted loss per share for cents in the first quarter of 2020.
Cost of revenues during the first quarter of 2021 was $146 2 million for 80.1% of revenues compared to 181 9 million or 74, 6% of revenues during the first quarter of 2020 cost of revenues declined primarily due to decreases in expenses.
System with lower activity levels, and Rpc's cost reduction initiatives.
Cost of revenues as a percentage of revenues increased primarily due to lower pricing for our services increased maintenance and repair and fuel costs as well as labor and the other cost inefficiencies, resulting from several challenges during the quarter. These challenges included lower activity levels, COVID-19 compliance costs and adverse weather.
Events in the first quarter as compared to the same period in the prior year.
Selling general and administrative expenses decreased to $30 6 million in the first quarter of 2021 compared to $36 5 million in the first quarter of the prior year. These expenses decreased due to lower employment costs, primarily primarily the result of cost reduction initiatives during previous quarters.
Depreciation and amortization decreased to $17 8 million in the first quarter of 2021 compared to $39 3 million in the first quarter of the prior year dip.
Depreciation and amortization decreased significantly primarily due to asset impairment charges recorded in previous quarters.
Which decreased RPC depreciable property plant and equipment as well as lower capital expenditures.
Our technical services segment revenues for the quarter decreased 24, 2% compared at the same quarter in the prior year. This was due to significantly lower activity and pricing.
Significant operating segment operating loss in the first quarter of 2021 was $5 8 million.
Payer to a $12 2 million operating loss in the first quarter for prior year.
Our support services segment revenues for the quarter decreased 38% compared to the same quarter in the prior year segment operating loss in the first quarter of 2021 was 2.9 million compared to an operating profit of $1 5 million in the first quarter of the prior year.
On a sequential basis Rpc's first quarter revenues increased 22, 9%.
$282 6 million from $148 6 million in the prior quarter. This was due to activity increases in most of our service lines.
Cost of revenues during the first quarter of 'twenty, one 2021 increased by $28 3 million or 24% to $146 2 million due.
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Such as materials and supplies and employment expenses.
As a percentage of revenues cost of revenues increased slightly from 79, 3% in the fourth quarter of 2020% to 81% in the first quarter of 2021. This was due to increases in them and our expenses and fuel costs, coupled with labor and other cost inefficiencies due to the advair adverse weather.
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Selling general and administrative expenses during the first quarter of 2021 increased 17, 6% to $30 6 million from 26 million in the prior quarter. This was primarily due to a beneficial forfeiture rate adjustment to stock compensation that we recorded in the prior quarter.
RPC incurred an operating loss of $10 5 million during the first quarter of 2021 compared to an adjusted operating loss of $11 3 million in the prior quarter on.
Rpc's EBITDA was seven 8 million in the first quarter of 2021 2021 which was the same as adjusted EBITDA of seven 8 million in the fourth quarter of 2020.
Our technical services segment revenues increased by $33 7 million or 24, 2% to $172 6 million in the first quarter due to increased activity levels in most of the segments service lines.
Technical services segment incurred a $5 8 million operating loss in the current quarter compared to an operating loss of $11 3 million in the prior quarter.
Our support services segment revenues increased by 310000, or three 2% to $10 million in the first quarter.
Operating loss was $2 9 million in the current quarter compared to an operating loss of $2 6 million in the prior quarter.
During the first quarter of 2021, RPC operated five horizontal pressure pumping fleets the same as in the fourth quarter, but with improved utilization.
Due to high utilization of these existing fleets. We recently added one additional horizontal fleet to meet expected incremental demand.
First quarter 2021 capital expenditures were $11 8 million and we currently estimate full year 2021 capital expenditures to be approximately $55 million comprised primarily of capitalized maintenance of our existing equipment and selected growth opportunities.
With that I'll turn it back over to Rick for some closing remarks.
Thank you Ben.
We are encouraged by how 2021 historically.
Activity levels in price and pricing have largely tracked our expectations coming into the year and all signs point to a continued modest recovery as the year progresses.
We remain committed to capital discipline and do not plan to add incremental capacity until we have greater confidence that economic returns will justify the investment.
ESG has continued to grow as a topic of interest among many of our customers.
RPC aspires to be an environmentally friendly company, we are adapting our operations to reduce emissions.
Wherever possible we.
We are in the final stages of upgrading another of our fleets to dual fuel capability, which two thirds of our deployed brand capacity will be ESG friendly.
However for RPC and most of our competitors. The easy conversions are largely done further ESP adaptation requires economics to improve before additional capital investments make financial sense.
Well economics are not currently supported book of adding net capacity. The continued transition to ESG friendly equipment is more likely to come from the replacement of older equipment than gross capital expenditures.
At the end of the first quarter's Rpc's cash balance was $85 4 million and we remain debt free.
I'd like to thank you all for joining us for Rpc's Conference call. This morning, and at this time, we'll open up the lines for your questions.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Again to ask a question. Please press Star then the number one.
Your first question comes from the line of Stephens, Inc. Good girl with Stifel.
Thanks, Good morning, gentlemen.
Thanks, David.
Two things if you don't mind one is <unk>.
Would you mind, giving just the revenue breakdown for for the different segments and then you just just as a follow on to that you talked about the five fleets that are.
Well utilized in the first quarter at a high level in the six deployed fleet.
And you made some commentary on on pricing are you on.
Are you thinking that we're starting to get some pricing I mean, you mentioned additional capex needed to upgrade assets at a pretty high level I'm, just trying to get a sense for.
The pricing trajectory, we could see as we go through the year, assuming this kind of gradual activity.
Growth in the U S market.
Yeah sure Stephen Hey, this is Jim I'll start with the revenue breakdown for the first quarter of.
2021.
Our service lines generated the following percentage of revenue percentage of consolidated revenue. So pressure pumping is our largest that was 41.0% of revenue.
Thru tubing solutions, our downhole tools and motors business was number two at 39% of consolidated revenue.
Tubing was number three at eight 1% of consolidated revenue.
Nitrogen was number for at six 1% of consolidated revenue and our rental tool service line Rusin support.
3.3% of consolidated revenues for the first quarter.
And with respect to price them, yes.
Yes with respect to pricing.
Great question.
Obviously appropriate question I would say that.
During the first quarter, we saw.
We had the opportunity and we were able to pass along some of the cost increases that we were incurring.
So from a net pricing improvement perspective, I would say that that's still.
We're still waiting to see that weighted is still very competitive.
We obviously were able to get our fleet tile utilized we have a process in place within pressure pumping and the company overall too we we want to remain very pricing disciplined. So the fact that we had high utilization indicates that we were achieving.
The pricing minimum pricing that we were targeting so that's a good thing.
Some of the increase in revenue again, though was due to price increases army to two pricing increases to cover cost increases so all of that didn't didn't ball completely into.
Our.
Incrementals, but we're very pleased with the level of activity and the improvements and what that tends to portend from this point forward, but I will continue to emphasize that it is still.
Very competitive and.
But our our operational folks and everybody are working really hard to <unk>.
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Tools and techniques to.
To generate some incremental demand and I think our revenue increases reflect that and we are hope.
Hopeful we pointed out a couple of items and the.
Press release here that explain some of the sequential differences there were a few other items that impacted the quarter that we haven't called out specifically, we don't typically try to do that we try to explain obvious.
Obvious differences from period to period, but but there are a number of other things that negatively impacted the quarter that may or may not happen in the following quarter. So like I said, we're not calling those out specifically, but we're pleased with.
The trajectory and the improvement that we saw overall from the fourth quarter to the first.
Thanks, if I could slide one other wanting that connected when you think about and I know, it's been hard because the day movements had been had been violent and net utilization has been on the lower side.
Part of 2020, but how do you think about Incrementals going forward do you think they'll normalize back toward historical levels now or do you think theres still kind of choppy as things unfold here.
Steven This is Jim we actually.
I'll go on record, saying that incrementals on to normalize.
We don't have anything that we know on thats going to be on.
Noisy in the quarters.
And are you on those.
One offset to that would be that some revenue increase may come from just passing along cost increases for things like proppant is like that but other than that we think income incrementals should.
Should go back to us on a more traditional set of metrics for RPC.
Let me add on that on that score I think.
To emphasize I think the pricing discipline.
Is what will.
We will be required to generate those.
Normal incrementals simple someone could go out and just try to be busy.
Rice aggressively and maybe generate some more utilization and revenue increase but theyre not going to generate the incremental so we're going to try to remain we are very focused on trying to remain pricing disciplined we're much more interested in and profitable revenue growth not on.
Growth for growth sake.
Great No that's very helpful color. Thank you gentlemen.
Thanks Steven.
Again to ask a question. Please press Star then the number one on your telephone keypad.
And at this time there are no further questions I would like to turn the call back to Mr. Jim Landers for any closing remarks.
Thank you Phyllis.
Thanks for everybody who called in to listen this morning. We appreciate it we'll talk to you soon and hope you have a good day. Thank you.
Thank you.
I would like to remind callers.
Today's conference will be replayed on www Dot RPC dot net within two hours. Following the completion of the call. This concludes today's conference call you may now disconnect.
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