Q1 2022 RPC Inc Earnings Call

Yeah.

Good morning, and thank you for joining us for RPC, Inc. First quarter 2022 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.

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At this time all participants are in a listen only mode. Following the presentation. We will conduct a question and answer session 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 alright, they'd be reading the forward looking disclaimer.

Thank you operator, 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 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 2021 10-K and other public filings that outline those risks all of which can be found on rpc's website at www dot RPC that debt.

In today's earnings release and conference call, we'll be referring to EBITDA, which is a non-GAAP measure of operating performance.

RPC uses EBITDA as a measure of operating performance because it allows us to compare performance consistently.

For various periods without regard to changes in our capital structure. We're also required to use EBITDA to report compliance with financial covenants under our credit facility.

Our press release today today, and our website provide a reconciliation of EBITDA to net income the nearest GAAP financial measure. Please review that disclosure if you're interested in seeing how it's calculated.

If you've not received our press release for any reason please visit our website at RPC Dot net per account.

I'll now turn the call over to our President and CEO Rick Hubbell.

Jim.

This quarter was marked by unexpected changes in Rpc's business, we began the year in a moderately improving market as healthy commodity prices encourage our customers to go back to work after the holidays.

In response to the U S rig count and well completions improved moderately.

During the quarter, we encountered various operational challenges, resulting from many years of oilfield underinvestment and several years of Covid related supply disruptions. However.

However, our industry's outlook changed tremendously in February .

When Russia's invasion of Ukraine, well, its oil and natural gas prices to increase and more importantly of course, the international community to immediately rethink the strategic importance of reliable hydrocarbon fuel sources.

During the past few months the price of oil increased to more than $100 a barrel for the first time since 2014.

Our customers responded by increasing their planned activities as it became clear higher commodity prices would endure.

And the appeal of the politically stable U S oilfield group.

We finished the first quarter in the beginning stages of strongest oilfield service environment, we've experienced in many years.

Our CFO , Ben Palmer will discuss our financial results in detail after which I will provide some closing comments okay. Thank you Rick.

For the first quarter of 2022 revenues increased to $294 6 million compared to $182 6 million in the same quarter of the prior year.

Revenues increased due to higher customer activity levels pricing improved months, and a larger fleet pressure pumping equipment and service.

Operating profit for the first quarter was $23 million compared to an operating loss of $10 5 million in the same quarter of the prior year.

EBITDA for the first quarter was $43 million compared to EBITDA of $7 8 million in the same quarter last year, our diluted earnings per share were <unk> seven cents compared to five cents loss per share in the same quarter last year.

Cost of revenues during the first quarter of 2022 was 208 8 million or <unk> 73, 4% of revenues compared to $146 2 million or 81% of revenues during the first quarter of 2021.

Cost of revenues increased primarily due to increases in expenses consistent with higher activity levels, such as materials and supplies expenses.

Since the repairs expenses employment costs and fuel costs.

In addition, these costs increased due to higher market prices for materials and supplies fuel and other raw materials.

Cost of revenues as a percentage of revenues decreased due to the leverage of higher revenues over direct employment costs improved pricing for RPC services, and a favorable job mix within pressure pumping.

Selling general and administrative expenses increased to $36 2 million in the first quarter of 2022 from $30 6 million in the first quarter of the prior year due to increases in employee related costs, selling general and administrative expenses decreased to 12, 7% of revenues in the first quarter of 2022.

<unk> to 16, 8% of revenues in the first quarter of 'twenty one.

Due to the leverage of higher revenues over costs that are relatively fixed during the short term.

Depreciation and amortization was $19 5 million in the current quarter compared to $17 8 million in the same quarter prior year.

Our technical services segment revenues for the first quarter were $266 3 million or 54, 3% increase compared to $172 6 million in the same quarter of the prior year.

Segment operating profit was $21 8 million compared to $5 8 million operating loss in the first quarter of the prior year.

The improvements in tactical services operating results were driven by higher customer activity levels result, resulting in higher utilization of our existing equipment and some pricing improvements.

Our sports services segment revenues for the first quarter were $18 3 million and 83, 3% increase compared to $10 million in the same quarter of the prior year.

Segment operating profit.

In the first quarter was $2 8 million compared to an operating loss of $2 9 million in the first quarter last year.

On a sequential basis first quarter revenues increased by six 1%.

Yes, $284 6 million from $268 3 million. This was due to improved pricing in all of our service lines as well as higher customer activity levels early in the first quarter. Our pressure pumping service line was impacted by customer provided sand supply issues.

For those customers, we have assumed responsibility.

For the supply of sand and those issues have subsided.

We expect this to further demonstrate the value we add to these customers.

Cost of revenues during the first quarter increased by four 1% to $208 8 million from $200 6 million in the prior quarter.

As a percentage of revenues cost of revenues decreased slightly to 73, 4% from 74, 8% in the prior quarter.

Was due to pricing improvements and an improved job mix and Rpc's technical services segment.

Selling general and administrative expenses increased by 12, 8% to $36 2 million from $32 1 million in the prior quarter and this was primarily due to employment related costs, including variable incentive compensation consistent with improved operating performance opera.

<unk> profit during the first quarter was $23 million compared to $20 1 million in the prior quarter, our EBITDA was $43 million compared to $39 4 million in the prior quarter.

Our technical services segment revenues increased by 11 9 million or four 7% again due to customer higher higher customer activity levels in many of our service lines and pricing improvements.

Technical services segment generated a $21 8 million profit operating profit compared to 25 million operating profit in the prior quarter.

Our support services segment revenues increased by 32, 4% to $18 3 million support services operating profit was $2 8 million compared to an operating loss of 373000 in the prior quarter.

During the first quarter of 2022, RPC continued to operate eight horizontal pressure pumping fleets. This was unchanged from the previous quarter.

First quarter 2022 capital expenditures were $19 1 million. We currently estimate full year 2022 capital expenditures to be approximately $115 million. This is roughly split between capitalized maintenance and bore or existing equipment and selected growth opportunities.

In addition, RPC will make $24 million of finance lease payments for our pressure pumping fleet acquired in 2021. This includes the 20 million final payment in Q3 of 2022.

I'll turn it back over to Greg for some closing remarks.

Ben Thank you as I mentioned earlier unanticipated geopolitical events have changed or environment tremendously over the past two months we.

We believe their impact will allow us to plan, our operations and investments with more certainty and generate improved financial results as the cycle unfolds. However.

However, our approach towards capital expenditures remains disciplined.

We recognize that some of our older pressure pumping equipment is approaching the end of its productive life and anticipate any new fleets will ultimately replace an older fleet.

This improved environment, we're focusing on.

Working capital management.

Making appropriate investments in the business to maintain our capacity and capturing cash flow improvements RPC.

RPC has a history of returning capital to shareholders, but tradition, we anticipate resuming in the near future.

For joining us this morning and at this time, we are happy to address any questions that you may have.

Everyone. If you would like to ask a question you will need to press star one and nice telephony.

Draw your question just passed it bounce.

Please stand by while we compile the Q&A roster.

Your first question comes from the line of John Daniel from Danielle Energy. Your line is open.

Good morning, gentlemen, thanks for putting me in.

Oh sure John .

Just a couple quick ones for me.

You mentioned eight fleet as an average in Q1.

Okay.

All right.

It's got to be.

Getting into the summer months.

John I think this has been kind of went out and in out there just a little bit I think you were asking how we see that maybe changing are progressing over the summer.

Yeah, just any color would be helpful.

Yeah Yeah.

Again currently have eight we are working to put.

Another existing fleet out and we expect that could happen as soon as the second quarter.

Or maybe more likely early early third quarter.

But that's that's all.

The existing planned right now that we that we have definitive plans.

But just in terms of any capex. That's a critical oriented can you speak to where you might deploy that.

When you would receive whatever you might order.

A good question and it's a variety of small items that it doesn't it's not any sort of it doesn't encompass any particular.

Spansion within pressure pumping.

Yes.

A few miscellaneous divestments.

On the fringes and.

I wouldn't expect that the delivery of those particular items to have any immediate significant impact right. We certainly see.

Our results improving.

And building with the trends of higher prices and more utilization and things like that so it's a good.

Good question, an appropriate question, but I don't see anything there that's really noteworthy.

It will have a dramatic impact on our results.

Fair enough. Thank you for putting then I'll turn it over.

Yes, Thanks, Sean.

Yes.

Again, everyone to ask a question just press is Taiwan.

Phone keypad.

Okay.

We're saying no questions over the phone please continue.

Okay.

John Thank you for calling in for your question.

This is Jim Landers, my closing remark will be to give the revenue percentages of our major service lines. Each quarter were asked for that so I'm going to go ahead and give it.

So for the first quarter of 2022 as a percentage of RPC consolidated revenue.

Here are the percentages of revenue for our major service lines pressure pumping was 42, 1% of revenue.

Our thru tubing service.

Services Service line was 28, 5% of revenue coil.

Coiled tubing was nine 4% of revenue.

Nitrogen was 2.7% revenue.

Rental tools, which is in our support services segment was four 6% consolidated RPC revenues and snubbing was two 2% of revenues again, we appreciate people who called in to listen we hope everybody has a good day, we'll talk to you soon.

This concludes today's conference call.

<unk> remain reminded that.

For the replay you may be see at Www Dot RPC dot net within two hours following the completion of the call.

Thank you and have in rate base.

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