Q2 2024 RPC Inc Earnings Call
Good morning and thank you for joining us for RPC-INC's second quarter 2024 conference call.
Speaker Change: Today's call will be hosted by Ben Palmer, President and CEO , and Mike Schmit, Chief Financial Officer.
Speaker Change: At this time, all participants are in a listen-only mode.
Speaker Change: 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. If you would like to advise everyone that this conference is being recorded. I will now turn the call over to Mr. Schmit.
Operator: Today's call will be hosted by Ben Palmer, President and CEO, and Mike Schmit, Chief Financial Officer. 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. If you'd like to advise everyone that this conference is being recorded, I will now turn the call over to Mr. Schmit.
Michael L. Schmit: Thank you and good morning. Before we begin, I want to remind you that 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. Please refer to our press release issued today, along with our 2023 10-K and other public filings that outline those risks, all of which can be found on RPC's website at rpc.net. In today's earnings release and conference call, we'll be referring to several non-GAAP measures of operating performance and liquidity.
Michael L. Schmit: Thank you, and good morning.
Michael L. Schmit: Before we begin, I want to remind you that 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.
Michael L. Schmit: Please refer to our press release issued today, along with our 2023 10-K and other public filings that outline those risks, all of which can be found on RPC's website at rpc.net.
Michael L. Schmit: In today's earnings release and conference call, we'll be referring to several non-GAAP measures of operating performance and liquidity.
Michael L. Schmit: We believe these non- GAAP measures allow us to compare performance consistently over various periods.
Michael L. Schmit: Our press release issued today and our website contained reconciliations of these non-GAAP measures to the most directly comparable GAAP measures.
Michael L. Schmit: We believe these non-gap measures allow us to compare performance consistently over various periods. Our press release issued today and our website contained reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. I will now turn the call over to our President and CEO, Ben Palmer.
Ben M. Palmer: Thanks, Mike, and thank you for joining our call. This morning, we reported second quarter results that reflected resilient performance across many of our service lines, while pressure pumping results remained challenging. Though we understand that pressure pumping is our largest service line and sometimes used as the barometer for the health of our business, we want to emphasize the diversity of our operations and customer base. Our non-pressure pumping areas perform solidly in the core, balancing out our results.
Michael L. Schmit: I will now turn the call over to our President and CEO , Ben Palmer. Thanks, Mike, and thank you for joining our call.
Ben M. Palmer: This morning we reported second quarter results that reflected resilient performance across many of our service lines while pressure pumping results remains challenged.
Ben M. Palmer: Though we understand that pressure pumping is our largest service line and sometimes used as the barometer for the health of our business, we want to underscore the diversity of our operations and customer base.
Michael L. Schmit: Our non-pressure pumping areas performed solidly in the quarter, balancing out our results.
Ben M. Palmer: Due to sequential growth in many service lines, our overall sales were only down modestly. (Inaudible) We are not satisfied with these results and will continue to push further on efficiencies and cost controls, but we are certainly encouraged by profit growth in a difficult environment. Our total revenues declined 4%, with pressure pumping down 17% and other service lines in aggregate up 8%.
Michael L. Schmit: Due to sequential growth in many service lines, our overall sales were only down modestly, with EBITDA growing sequentially.
Michael L. Schmit: We are not satisfied with these results and will continue to push further on efficiencies and cost controls, but we are certainly encouraged by profit growth in a difficult environment.
Michael L. Schmit: Our total revenues declined 4% with pressure pumping down 17% and other service lines in aggregate up 8%.
Ben M. Palmer: The crack market remains highly competitive, and while our pricing is stabilizing, general activity in the spot and semi-dedicated market has been slow. Our utilization is below ideal operating levels with white space arising in the county, sometimes on short notice. While attempting to quickly redeploy assets at lower price points to drive utilization, we remain disciplined in our approach and continue to idle certain crews rather than chase economically unattractive ones. With respect to our FRAC assets, our Tier 4 DGV fleets have been highly utilized with strong demand from semi-dedicated customers. As anticipated, we have deployed a new Tier 4 DGB fleet, bringing us to three in total.
Michael L. Schmit: The frack market remains highly competitive, and while our pricing is stabilizing, general activity in the spot and semi-dedicated market has been solved.
Michael L. Schmit: Our utilization is below ideal operating levels with white space arising in the counter.
Speaker Change: sometimes on short notes.
Michael L. Schmit: While attempting to quickly redeploy assets at lower price points to drive utilization, we remain disciplined in our approach and continue to idle certain crews rather than chase economically unattractive business.
Michael L. Schmit: With respect to our FRAC assets, our Tier 4 DGV fleets have been highly utilized with strong demand from semi-dedicated customers.
Michael L. Schmit: As anticipated, we have deployed a new Tier 4 DGB fleet, bringing us to three in total.
Ben M. Palmer: Our crews are delivering gas substitution rates that we believe are among the best in the industry, and our customers are pleased with our efficiency and performance on site with these assets. Our intention is to continue upgrading our fleet without adding to our fleet count. To summarize the pressure pumping outlook, we continue to feel the competitive impact of frack crews in the Permian that were previously in gassy basins. This fracked supply, coupled with ongoing operating efficiency gains, continues to keep pump power capacity in the Permian ahead of demand. Ultimately, we believe these challenging conditions could force less well-capitalized smaller players out of the market.
Michael L. Schmit: Our crews are delivering gas substitution rates that we believe are among the best in the industry, and our customers are pleased with our efficiency and performance on-site with these assets.
Michael L. Schmit: Our intention is to continue upgrading our fleet without adding to our fleet count.
Michael L. Schmit: To summarize the pressure pumping outlook, we continue to feel the competitive impact of frack crews in the Permian that were previously in gassy basins.
Michael L. Schmit: This frac supply, coupled with ongoing operating efficiency gains, continue to keep pump-hour capacity in the Permian ahead of demand.
Michael L. Schmit: Ultimately, we believe these challenging conditions could force less well-capitalized, smaller players out of the market.
Ben M. Palmer: But it may take some time to reduce supply in that fashion. On the demand side, the rig count remains soft with hopes of stabilizing in the near term and rig count growth potentially not coming until next year. In this environment, we are working diligently to control costs, evaluating additional efficiency actions, and will maintain a disciplined operating and financial approach. The health of our balance sheet and diversity of our service lines should serve us well in the near term to navigate these pressures, while giving us the flexibility to invest in high-quality, in-demand equipment.
Michael L. Schmit: On the demand side, the rig count remains soft with hopes of stabilizing near term and rig count growth potentially not coming until next year.
Michael L. Schmit: In this environment we are working diligently to control costs, evaluating additional efficiency actions, and will maintain a disciplined operating and financial approach.
Michael L. Schmit: The health of our balance sheet and diversity of our service lines should serve us well in the near term Navigate these pressures while giving us the flexibility to invest in high quality and demand equipment
Ben M. Palmer: Pivoting to our non-pressure pumping service lines, we were very pleased with top-line performance. We saw our best quarter over the past year in downhole tools, with solid 7% growth, putting that unit back in the range of $100 million in quarterly revenue. This is our second largest service line, and we continue to be an innovation leader in this area. We recently have been testing a new product with initial success, a larger downhole motor, which is delivering high performance in plug drill outs with lower pressure drop, improved M&R efficiency, and is especially effective in increasingly longer laterals.
Michael L. Schmit: Pivoting to our non-pressure pumping service lines, we were very pleased with top-line performance. We saw our best quarter over the past year in downhole tools, with solid 7% growth, putting that unit back in the range of $100 million in quarterly revenues.
Michael L. Schmit: This is our second largest service line, and we continue to be an innovation leader in this area.
Michael L. Schmit: We recently have been testing a new product with initial success, a larger downhole motor, which is delivering high performance in plug drill outs with lower pressure drop, improved M&R efficiency, and is especially effective in increasingly longer laterals.
Ben M. Palmer: Customer interest is high, and we look forward to continued rollout of this product in the coming quarters and are optimistic we can build off of this early positive momentum. Full tubing, our next largest service line, also grew nicely in the quarter by 18%, picking up traction in some specialized plug and abandonment work using proprietary directional drilling and magnetic ranging. While regulatory processes and administrative tasks in California have been timing obstacles, our technology and execution on this P&A work have created an opportunity to expand this business with a large E&P, likely next year.
Michael L. Schmit: Customer interest is high and we look forward to continued rollout of this product in the coming quarters and are optimistic we can build off of this early positive momentum.
Michael L. Schmit: Full tubing, our next largest service line, also grew nicely in the quarter of 18%.
Michael L. Schmit: We're picking up traction in some specialized plug and abandonment work using proprietary directional drilling and magnetic ranging.
Michael L. Schmit: While regulatory processes and administrative tasks in California have been timing obstacles,
Michael L. Schmit: Our technology and execution on this P&A work has created an opportunity to expand this business with a large E&P, likely next year.
Ben M. Palmer: In the meantime, we are doing similar work for other customers in other regions with positive results. Lastly, both cementing and rental tools delivered solid quarters, with cementing up 1% sequentially, and rental tools up about 9%. The key takeaway is that our non-pumping activities performed well in the quarter, demonstrating the strength of our total portfolio of services and diversity of our customers, even in a landscape marked by customer consolidation. Mike will now discuss the quarter's financial results.
Michael L. Schmit: In the meantime, we are doing similar work for other customers in other regions with positive results.
Michael L. Schmit: Lastly, both cementing and rental tools delivered solid quarters with cementing up 1% sequentially and rental tools up about 9%.
Michael L. Schmit: Each of these four service lines we highlighted also showed margin improvement during the quarter.
Michael L. Schmit: The key takeaway is that our non-pumping activities performed well in the quarter, demonstrating the strength of our total portfolio of services and diversity of our customers, even in a landscape marked by customer consolidation.
Michael L. Schmit: The second quarter results with sequential comparisons to the first quarter of 2024 are as follows. Revenues decreased 4% to $364 million, driven primarily by lower pressure pumping activity, as all of our other key service lines were up in the second quarter. Breaking down our operating segments, technical services, which represented 94% of our total second quarter revenues, decreased 4%, also driven by pressure pumping; support services were up 6%, and represented 6% of our total second quarter revenues. The following is a breakdown of our second quarter revenues for our top five services. Pressure pumping was 40.4 percent of the total. Downhole tools, 27.6%. Foiled tubing, 10.7%
Michael L. Schmit: Support services were up 6% and represented 6% of our total second quarter revenues.
Michael L. Schmit: Cementing 7.7%. Rental tools 4.8%. Together, these top five service lines accounted for 91% of our total revenue. However, cost of revenues, excluding depreciation and amortization during the second quarter, decreased by $14.3 million. 262.3 million dollars, or a 5% decrease, a point higher than the revenue decline. The lower cost of revenues stem primarily from lower fuel costs, which are essentially a function of activity and pass-throughs to our customers, and lower material and supplies, such as sand. SG&A expenses were $37.4 million, down from $40.1 million. This decrease was due to lower employment costs, including incentive companies.
Michael L. Schmit: Pressure pumping was 40.4%. Downhole tools 27.6%. Foiled tubing 10.7%. Cementing 7.7%.
Michael L. Schmit: Together these top five service lines accounted for 91% of our total revenues.
Michael L. Schmit: Cost of revenues, excluding depreciation and amortization during the second quarter, decreased by $14.3 million to $262.3 million, or a 5% decrease, a point higher than the revenue decline.
Michael L. Schmit: SG&A expenses were $37.4 million, down from $40.1 million.
Michael L. Schmit: This decrease was due to lower employment costs, including incentive compensation.
Michael L. Schmit: Diluted EPS was $0.15 in the second quarter, up from $0.13 in the first quarter. There were no non-GAAP adjustments to our EPS. EBITDA was $68.5 million, up 9% from $63.1 million, with EBITDA margins increasing 210 basis points sequentially to 18.8%. Again, there were no adjustments made to these measures for unusual items either.
Michael L. Schmit: Diluted EPS was $0.15 in the second quarter, up from $0.13 in the first quarter.
Michael L. Schmit: EBITDA was $68.5 million, up 9% from $63.1 million, with EBITDA margins increasing 210 basis points sequentially to 18.8%.
Michael L. Schmit: Again, there were no adjustments made to these measures for unusual items either.
Michael L. Schmit: For the quarter, operating cash flow was $127.9 million, and after CapEx of $75 million, pre-cash flow was $52.9 million. We note that the second quarter had a large CapEx spend as we made final payments and accepted delivery of our new Tier 4 DGB fleet. Our year-to-date CapEx was $128 million, and our expected full-year CapEx range of $200 million to $250 million remains unchanged. During the quarter, we paid $8.6 million in dividends.
Michael L. Schmit: For the quarter, operating cash flow was $127.9 million and after CapEx of $75 million, free cash flow was $52.9 million.
Michael L. Schmit: We note that the second quarter had a large CapEx spend as we made final payments and accepted delivery of our new Tier 4 DGB fleet.
Michael L. Schmit: Our year-to-date CapEx was $128 million, and our expected full-year CapEx range of $200 million to $250 million remains unchanged.
Michael L. Schmit: During the quarter, we paid $8.6 million in dividends.
Michael L. Schmit: We maintain a strong balance, including a cash position of $261.5 million at quarter end. As we mentioned on our last call, early in the second quarter, we received a $53 million tax refund related to past tax years. As a result of this refund, we trued up the related tax accruals. These one-time true-ups, in conjunction with our normal quarterly tax adjustments, resulted in a 17.8% effective tax rate for the quarter, which is lower than our usual tax rate. We do not expect our rate to be this low in future quarters. I will now turn it back over to Ben for some closing remarks.
Michael L. Schmit: We maintained a strong balance sheet, including a cash position of $261.5 million at quarter end.
Michael L. Schmit: As we mentioned on our last call, early in the second quarter, we received a $53 million tax refund related to past tax years.
Michael L. Schmit: As a result of this refund, we trued up the related tax accruals. These one-time true-ups, in conjunction with our normal quarterly tax adjustments, resulted in a 17.8% effective tax rate for the quarter, which is lower than our usual tax rate.
Michael L. Schmit: We do not expect our rate to be this low in future quarters.
Michael L. Schmit: I will now turn it back over to Ben for some closing remarks. Thank you, Mike.
Ben M. Palmer: So as we wrap things up, I just want to share our views on capital allocation and potential investments in the business. For starters, our discipline and strong cash generation have given us the flexibility and ample liquidity to make strategic investments in the business. Two of our most likely areas of potential future investment to deploy significant capital are upgrades to our frack fleet and acquisition. We have invested in Tier 4 DGB equipment given the growing preference for dual fuel fleets from certain customers.
Ben M. Palmer: So as we wrap things up, I just want to share our views on capital allocation and potential investments in the business. For starters, our discipline and strong cash generation has given us the flexibility and ample liquidity to make strategic investments in the business.
Ben M. Palmer: And you have heard us say before that we will be patient with respect to electric fleets as technology and customer preferences evolve. While some of our competitors are already offering electric fleets, we are confident that, over time, we can acquire similar assets and capabilities and that we will be able to compete successfully. The other area of potential investment is M&A, including businesses in our non-pressure pumping service lines, such as coal tubing, downhole tools, wireline, and cementing.
Ben M. Palmer: Two of our most likely areas of potential future investment to deploy significant capital are upgrades to our frack fleet and acquisitions.
Ben M. Palmer: We have and will likely continue to invest in Tier 4 DGB equipment given the growing preference for dual fuel fleets from certain customers.
Michael L. Schmit: And you have heard us say before that we will be patient with respect to electric fleets as technology and customer preferences evolve.
Michael L. Schmit: While some of our competitors are already offering electric fleets, we are confident that over time we can acquire similar assets and capabilities and that we will be able to compete successfully.
Michael L. Schmit: The other area of potential investment is M&A, including businesses in our non-pressure pumping service lines, such as Coal Tubing, Downhole Tools, Wireline, and so many.
Ben M. Palmer: We are very pleased with our purchase of Spinnaker a year ago, which brought scale and new customers and regions to our cementing operation. With integration complete, we have been increasingly seeking out other opportunities. Our thesis that a challenging market might present attractive opportunities for patient buyers such as ourselves could prove out and allow us to make another meaningful investment in the business. As usual, I'll close by reiterating that in an often volatile market, our discipline remains consistent, with a focus on financial stability and long-term shareholder returns.
Michael L. Schmit: We are very pleased with our purchase of Spinnaker a year ago, which brought scale and new customers and regions to our cementing operations.
Michael L. Schmit: With integration complete, we have been increasingly seeking out other opportunities.
Michael L. Schmit: Our thesis that a challenging market might present attractive opportunities for patient buyers such as ourselves could prove out and allow us to make another meaningful investment in the business.
Michael L. Schmit: As usual, I'll close by reiterating that in an often volatile market, our discipline remains consistent.
Ben M. Palmer: I also want to thank all our employees who work tirelessly to deliver high levels of service and value to our customers. Thank you for joining us this morning, and at this time, we are happy to answer any questions.
Michael L. Schmit: with a focus on financial stability and long-term shareholder returns.
Michael L. Schmit: I also want to thank all our employees who work tirelessly to deliver high levels of service and value to our customers.
Speaker Change: Thanks for joining us this morning and at this time we are happy to address any questions.
Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you're called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. And again, press star 1 to join the queue. Your first question comes from the line of Stephen Gengaro of Stiefel. Your line is open.
Speaker Change: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
Michael L. Schmit: If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question.
Speaker Change: And again, press star 1 to join the queue. Your first question comes from the line of Stephen Gengaro of Stiefel. Your line is open.
Stephen David Gengaro: Good morning, gentlemen. Thanks for taking the question. So, a couple of things for me. I think the first is... And I'm not sure how to ask this exactly, but when you think about M&A in the US market, what are kind of the key are either products or even just financial parameters that you're looking for when you're kind of considering M&A versus buying your own stock, for example.
Stephen David Gengaro: Thanks. Good morning, gentlemen.
Stephen David Gengaro: Well, thanks for taking the question. So a couple of things for me, I think the first is...
Speaker Change: I'm not sure how to ask this exactly, but when you think about M&A in the U.S. market, what are kind of the key...
Speaker Change: either products and or even just financial parameters that you're looking for when you're kind of considering M&A versus buying your own stock, for example.
Ben M. Palmer: Well, certainly identifying areas, and there are a few, some of which we're already in, service lines that we're already in, that have nice free cash flow fundamentals. We're looking for acquisitions that are accretive from a cash flow perspective, and also from an earnings valuation perspective. And we think, we've talked over time, that valuations seem to be getting a little more reasonable than they had been in previous years, and we think that creates opportunities for people like us that are well capitalized and are attractive in attracting companies that, you know, want to become part of our company.
Speaker Change: Well certainly identifying areas and there are a few, some of which we're already in, service lines that we're already in, that could have nice
Speaker Change: Free Cash Flow Fundamentals. We're looking for...
Speaker Change: acquisitions that are accretive from a cash flow perspective and also from a earnings valuation perspective and we think we've talked over time that
Speaker Change: Evaluations seem to be getting a little more reasonable than they had been in previous years, and we think that
Speaker Change: Creates opportunities for stuff for people like us that are well capitalized and are attractive in attracting companies that
Ben M. Palmer: I think another key aspect, of course, is the people that can come along with a good M&A transaction that could come in and become a part of our company and help us move forward. So it's really, it's looking for a balance; it's not necessarily one versus the other. You didn't say it was, but we're looking for an appropriate balance, and, you know, there are some that we're looking at that are quite appealing. We'll see whether they happen, but again, we're going to continue to be patient and expect we'll be successful.
Speaker Change: You know, want to become part of our company. I think another key aspect, of course, is the people that can come along with a good M&A transaction that could...
Speaker Change: come in and become, you know, a part of our company and help us.
Speaker Change: move forward so it's really it's looking for a balance you know it's not
Speaker Change: balance. And, you know, there are some that we're looking at that are quite appealing. We'll see whether they happen. But again, we're going to continue to be patient and expect we'll be successful.
Ben M. Palmer: Okay, thank you. And the other one, you mentioned in the press release about the pressure pumping business and the competitiveness of it, and I missed a little bit of the beginning of the call. So I apologize if I'm asking something you talked about. But when you think about the market dynamics, and it feels to us like the pressure pumping business has gotten better, more consolidated over the last five, seven years, yet in periods where activity is low, there's going to be competitiveness. What have you seen in this current down draft in activity that's different or similar to prior markets from just a customer conversation and pricing discussion?
Anne: Okay, thank you. And the other one, Anne, that you mentioned in that...
Anne: Press release about the pressure pumping business
Anne: and the competitiveness of it, and I missed a little bit of the beginning of the call, so I apologize if I'm asking something you talked about.
Anne: When you think about...
Speaker Change: the market dynamics. And it feels to us like the pressure pumping business has gotten.
Anne: Better.
Anne: more consolidated over the last...
Anne: five, seven years.
Speaker Change: Yet, I'm in periods where activity is low, there's going to be competitiveness. What have you seen kind of in this current, you know, kind of downdraft in activity that's different or similar to prior markets from just a customer conversation and pricing discussion?
Ben M. Palmer: reasonable question. I don't know that You know, customer conversations are any different, right? They're putting out bids and quotes and looking for the right combination of quality services and price. You know, it's very competitive. There is frac capacity that's being added to the market, the markets in which we compete. Be that in moving in from gassy basins into more oily basins where we have large operations or people bringing on additional EFLE capacity.
Speaker Change: It's a reasonable question. I don't know that...
Speaker Change: You know, customer conversations are any different, right? They're putting out bids and quotes and looking for the right combination of quality services and price. You know, it's very competitive.
Speaker Change: There is frac capacity that's being added to the market, the markets in which we compete.
Anne: be that in, you know, people moving in from gassy basins into more oily basins where we have large operations or people bringing on, you know, additional ethylene capacity.
Ben M. Palmer: Many of our peers, but smaller peers and even larger peers are fiercely competing for, you know, business for their incrementally larger equipment. You know, as we've said, our intention is not to add capacity to the market, but net-net, at least in the short term, with, again, some of this eFleet capacity coming on board, it is creating more capacity in the market, so it makes it more challenging.
Anne: Many of our, you know, our peers, but smaller peers and and even larger peers are fiercely competing for
Anne: business for their incrementally larger equipment. As we've said, our intention is not to add capacity to the market, but net-net, at least in the short term.
Ben M. Palmer: Again, with some of this eFleet capacity coming on board, it is creating more capacity in the market, so it makes it more challenging. We try to be very disciplined. We don't like to work just to be busy.
Ben M. Palmer: We try to be very disciplined. We don't like to work just to be busy. We have lost some bidding opportunities, as I've indicated, to both smaller players that are always very competitive on price, but even we've had some... peers that have come in and offered what we believe are lower prices than we're willing to work at. We'll continue to be disciplined, make appropriate adjustments to the business to try to position us to do as well as we can and figure out how to continue to compete successfully in that segment of the market.
Anne: We have lost some bidding opportunities, as I've indicated, to those smaller players that are always very competitive on price, but even we've had some
Anne: Some peers that have come in and offered what we believe are lower prices than we're willing to work at so
Anne: We'll, you know, continue to be disciplined, make appropriate adjustments to the business to try to position this to do as well as we can and figure out how to
Ben M. Palmer: And then one final one for me, and I know this is a little bit tough, but when we think about, you know, 2025, one of the things that we've been, honestly, a bit surprised by is that oil activity has been weaker than we thought, and clearly M&A is part of that. When you think about going into next year, what do you think your customers need to see to maybe restart or at least get some momentum in drilling completion activity in the U.S. market?
Anne: continue to compete successfully in that segment of the market.
Speaker Change: Thanks, and then one final one for me, and I know this is a little bit tough, but when we think about, you know, 2025, like one of the things that we've been...
Speaker Change: Honestly, I'm a bit surprised by it is that the oil activity has been weaker than we thought and clearly M&A is part of that. When you think about going into next year, what do you think?
Ben M. Palmer: that the your customers need to see to maybe restart or at least get some momentum in drilling completion activity in the U.S. market.
Ben M. Palmer: Well, with respect to, well, let me speak, I guess in terms of the gassy basins, we are I'm happy that we have basin diversity, so if the gas market were to pick up, we'll even more directly benefit from that, so that's one thing about the gas market. With respect to oil, I guess just like always, they want to look and believe that they've got a fair way of oil prices that they can make money at, they're looking at their production and they certainly are continuing to remain disciplined, they've got a choice of service providers, so they're continuing to press us on pricing and press us to be ever more efficient, and that can be a good thing, we're all learning to become more efficient, but in the short term that can create even additional capacity, obviously without adding equipment, so I think if there's not enough completion activity, certainly production will begin to come down, so if demand remains sufficiently high, things should begin to balance out and I would expect activity to pick up some at that point, but you know as well as I do that, Thank you for watching.
Ben M. Palmer: Well, with respect to, well, let me speak, I guess in terms of the gassy basins, we are
Speaker Change: [inaudible]
Ben M. Palmer: Happy that we have space and diversity, so if the gas market were to pick up, you know, we'll
Speaker Change: even more directly benefit from that. So that's one thing about the gas market. With respect to oil, I guess just like always, right, that they want to look and believe that they've got a fair way of
Speaker Change: Oil prices that they can make money at. They're looking at their production and They certainly are continuing to remain disciplined. They've got a choice of
Ben M. Palmer: service providers so they're continuing to you know press us on pricing and press us to be ever more efficient yeah and that can be a good thing I mean we're all learning to become more efficient but
Ben M. Palmer: In the short term, that can create even additional capacity, obviously without adding equipment.
Ben M. Palmer: You know, I think, you know, if there's not enough completion activity, certainly production will begin to come down. So if demand remains sufficiently high, things should begin to balance out and I would expect activity to pick up.
Ben M. Palmer: Some at that point, but you know as well as I do that
Ben M. Palmer: Please subscribe to my channel. See you next time. Higher oil prices are difficult, and, of course, with the new discipline of the EMPs, you know, higher oil prices do not necessarily directly translate into more activity. So, I guess they've got to see both, an industry-wide balance of supply and demand or increase or decrease in one or the other that spurs additional activity, and they're watching it, and at some point, with activity, we'll have to pick up, but the timing of that Great
Ben M. Palmer: Dicting
Ben M. Palmer: Oil prices is difficult and and of course with the new discipline of the EMPs, you know higher oil prices Not necessarily directly translate into more activity. So I guess they've got to see both
Ben M. Palmer: industry-wide, you know, balance of supply and demand or, you know,
Ben M. Palmer: increase or decrease in one or the other that spurs additional activity and and they're watching it and at some point with activity we'll we'll have to pick up but the timing of that of course is difficult to predict.
Stephen David Gengaro: Great. Thank you for all the color.
Speaker Change: Great. Thank you for all the color.
Operator: Your next question comes from the line of John Daniel of Daniel Energy Partners. Your line is open.
John Daniel: Thank you, Steve.
Operator: Your next question comes from the line of John Daniel of Daniel Energy Partners. Your line is open.
John Daniel: Hey guys, just a couple for me this morning. Thanks for including me.
Ben M. Palmer: When you look around at the market, a lot of your competitors have sort of... ceased reinvesting in their fleets. I mean, at least if you talk to the OEMs and the fabricators, there's not a lot of rebuild activity. Sounds like some of the component parts like engines, et cetera, are stocking up. I'm just curious, given your balance sheet and ability to be opportunistic, does it make sense to stock up on things like Tier 4 BGB engines? And could you get them at an attractive price given the market softness?
Ben M. Palmer: Hey guys, just a couple for me this morning. Thanks for including me. When you look around at the market, a lot of your competitors have sort of ceased reinvesting in their fleets. I mean, at least if you talk to the OEMs and the fabricators, there's not a lot of rebuild activity.
Ben M. Palmer: Sounds like some of the component parts like engines, etc. are stocking up.
Ben M. Palmer: I'm just curious, given your balance sheet and ability to be opportunistic, does it make sense to stock up on things like Tier 4 BGB engines, and could you get them at an attractive price given the market softness?
Ben M. Palmer: Good question. Yes, that is an opportunity. We actually were proactive back when there were supply chain disruptions, and so we had more engines than we would otherwise have, but no, certainly that is an opportunity. I wouldn't say we're playing the... The market for, uh... Frack engines, right? trying to build up on those. But certainly, there is an opportunity to take advantage of that. We're hearing the same thing from fabricators. And fortunately, you know, we don't see pricing, fabricator pricing, coming down significantly. But, you know, incrementally on the margin, it should help us.
Ben M. Palmer: Good question.
Ben M. Palmer: Yes, that is an opportunity. We actually had been proactive back when there were supply chain disruptions and so we had more engines than we would otherwise have but no certainly that that is an opportunity I wouldn't say we're
Ben M. Palmer: [inaudible]
Ben M. Palmer: The market on
Ben M. Palmer: Crack engines, right, trying to build up on those, but certainly there is an opportunity to take advantage of that. We're hearing the same thing from
Ben M. Palmer: from Fabricators, and fortunately, you know, we don't see pricing, fabrication pricings coming down significantly, but you know, incrementally on the margin, it should help us out.
Ben M. Palmer: Okay. And then you touched briefly on M&A. I'm just curious, to the extent you're willing to answer, do you see any actionable opportunities in the second half? And if you can't answer that, as you look at opportunities, do you see them as more tuck-in opportunities or transformative, if you could elaborate on what the desires are.
Ben M. Palmer: Okay, and then you touched briefly on M&A. I'm just curious, to the extent you're willing to answer, do you see any actionable opportunities in the second half?
Ben M. Palmer: And if you can't answer that, as you look at opportunities, do you see them as more tuck-in opportunities or transformative? Just if you could elaborate what the desires are, that'd be great.
Ben M. Palmer: Well, both. I mean, we're open to both, you know, it takes some time to close on a transaction. I mean, there are some that we've been looking at, and we've constantly been looking, you know, even over the last year since we closed Spinnaker. So there are a few that we are looking at. We're hopeful that there is, you know, at least one that could be actionable this year, but, you know, that's hard to know. We certainly don't count on it, but we're expecting that. And we don't emphasize, you know, suck-ins versus transformational, right?
Ben M. Palmer: Yeah.
Ben M. Palmer: Well, both. I mean, we're open to both.
Ben M. Palmer: close on a transaction I mean there are some that are that we've been looking at and we've constantly been
Ben M. Palmer: looking, you know, even over the last year since we closed Spinnaker, so there are a few that we are looking at. We're hopeful that there's, you know, at least one that could be actionable this year, but, you know, that's hard to know. You know, we certainly don't count on it, but...
Ben M. Palmer: But expecting that, and we don't emphasize, you know, tuck-ins versus transformational, right? I mean, we're certainly open to both. That's a good one.
Ben M. Palmer: I mean, we're certainly open to both. But it does sound like this is a bit more of a priority. Would I be wrong to think of it that way? Well, a priority, always a priority.
Speaker Change: But it does sound like this is a bit more of a priority. Would I be wrong to think of it that way?
Ben M. Palmer: But I think just the timing may be right. I mean, we are an attractive company with our balance sheet. I think people, some people are naturally drawn to us in part because of that. Right, that we can execute, we do have the funding available to do that with a good balance sheet. Certainly there would not be one if there were another, call it, transformational... transaction to come along.
Ben M. Palmer: Well, priority, always a priority, but I think just the timing, the timing may be right. I mean with, I think we are an attractive company with our balance sheet, I think people
Ben M. Palmer: Some people are naturally drawn to us in part because of that, right, that we we can execute. We do have the funding available to do that with a good balance sheet. Certainly there's not with a
Ben M. Palmer: If there were another, call it transformational...
Ben M. Palmer: Our clean balance sheet doesn't present an opportunity for leverage, you know, a problematic leverage situation. Yeah, that's right. So I think we're all positioned to be able to, you know, we would be good to merge with a partner either way.
Speaker Change: Eh, yeah.
Ben M. Palmer: Transaction to come along. Our clean balance sheet doesn't present an opportunity of leverage.
Ben M. Palmer: problematic leverage situation. We're in a position we would be a good, merger partner either way
John Daniel: Okay, I appreciate you letting me ask some questions. Thanks guys. Sure. Thank you, John. Appreciate it. Your next question comes from the line Chuck.
Speaker Change: Okay, I appreciate you letting me ask some questions. Thanks, guys. Sure. Thank you, John . Appreciate it. Your next question comes from the line of Chuck Minervino of Susquehanna. Your line is open.
Operator: Your next question comes from the line of Chuck Minervino of Susquehanna. Your line is open.
Charles P. Minervino: Hey, I was just wondering if you could provide some of your thoughts on kind of the technical services outlook for 3Q and 4Q. I know it declined in the second quarter, and yet, a pretty stable margin there, pretty, you know, flattish, but just kind of curious if you kind of see 3Q being fairly similar to 2Q levels or if there's anything there we should be aware of.
Speaker Change: Good morning.
Charles P. Minervino: Hey, I was just wondering if you could provide some of your thoughts on kind of the technical services outlook here in 3Q and 4Q.
Speaker Change: I know it declined there in the second quarter.
Charles P. Minervino: You've got a pretty stable margin there, pretty, you know, flattish, but just kind of curious if you kind of see 3Q being fairly similar to 2Q levels, or if there's anything there we should be aware of.
Ben M. Palmer: Yeah, I mean, I think it is, we haven't typically given guidance, but I mean, we're looking at Q3 not to be significantly different. As we mentioned, we've had a little bit of disappointment in pressure pumping, but all, all of our other service lines have done really well and continue to do well. So, you know, I think we don't see any significant shift. Obviously, we're, we're hoping pressure pumping returns a little bit, but what we're seeing right now is, in the near term, anyway, it looks very similar.
Ben M. Palmer: Yeah, I mean, I think it is we haven't typically given guidance, but I mean, we're we're looking at
Ben M. Palmer: Q3 not to be significantly different, you know, we, as we mentioned, we've had
Ben M. Palmer: A little bit of disappointment in pressure pumping, but all of our other service lines have done really well and continue to do well. So you know, I think we don't see any significant shift, obviously we're hoping.
Ben M. Palmer: pressure pumping returns a little bit but you know what we're seeing right now is in the near term anyway it looks very similar.
Ben M. Palmer: Gotcha. And then also in the support services segment, you know, kind of the non-pressure pumping business lines, really good margin expansion there in the second quarter and growth kind of despite a weaker rig count. Can you just kind of put that into context for us for the third quarter or the remainder of the year? Is that margin level kind of a level that you feel like you could hold? in the second quarter? And do you still think you can kind of outgrow that recount? I know that's kind of tough to do over the long haul, but I'm just kind of curious what your thoughts are there.
Speaker: And then also in the support services segment, you know, kind of the non-pressure pumping business lines, really good margin expansion there in the second quarter and growth, kind of despite a weaker rig count.
Ben M. Palmer: Gotcha. And then also in the support services segment, you know, kind of the non-pressure pumping business lines, really good margin expansion there in the second quarter and growth, kind of despite a weaker rig count.
Stephen Gengaro: Can you just kind of put that into context for us for third quarter or the remainder of the year?
Stephen Gengaro: Is that margin level kind of a level that you feel like you could hold in the second quarter, and do you still think you can kind of outgrow that rig count? I know that's kind of tough to do over the long haul, but just kind of curious what your thoughts are there.
Ben M. Palmer: Can you just kind of put that into context for us for third quarter or the remainder of the year? Is that margin level kind of a level that you feel like you could hold?
Ben M. Palmer: in the second quarter, and do you still think you can kind of outgrow that recount? I know that's kind of tough to do over the long haul, but just kind of curious what your thoughts are there.
Ben M. Palmer: This is Ben, Chuck. We don't see any particular thing that would translate directly into continued significant outperformance, but it's well positioned. It's a relatively more steady business. We did have, you know, a couple of good things happen during the quarter there, but I see sort of more steady, steady activity there as well.
Speaker: We don't see any particular thing that will translate directly into continued significant outperformance, but it's well positioned. It's a relatively more steady business. We did have a couple of good things, half a year in the quarter there, but I see sort of more steady, steady activity there as well.
Chuck: This has been Chuck.
Ben M. Palmer: We don't see any particular thing that would translate directly into...
Ben M. Palmer: continued significant outperformance, but it's well-positioned.
Ben M. Palmer: relatively more steady business. We did have, you know, a couple of good things happen during the quarter there, but I'd see sort of more steady, steady activity there as well.
Charles P. Minervino: All right, that's it for me. Thank you. Thank you. Again, if you would like to ask...
Speaker: All right, that's it for me. Thank you.
Charles P. Minervino: Gotcha. All right, that's it for me. Thank you.
Operator: Again, if you would like to ask a question, press star, then the number 1 on your telephone keypad. With no further questions at this time, this concludes the Q&A session. I will now turn the conference over to Mr. Ben Palmer for closing remarks.
Operator: Again, if you would like to ask a question, press star, then the number one in your telephone. Keep bad.
Ben M. Palmer: Thank you.
Operator: Again, if you would like to ask a question, press star, then the number 1 on your telephone keypad.
Operator: With no further questions at this time, this concludes the Q&A session.
Ben Palmer: I will now turn the conference over to Mr. Ben Palmer for closing remarks. All right. Thank you very much, Operator. Appreciate everybody listening in.
Operator: With no further questions at this time, this concludes the Q&A session. I will now turn the conference over to Mr. Ben Palmer for closing remarks.
Ben M. Palmer: Thank you very much, operator. I appreciate everybody listening in. I understand, or I think I was informed, that there was a large acquisition announced this morning, and a call got moved to this time slot. So we appreciate those of you who called in to listen to the call this morning and ask some questions. We appreciate it and look forward to catching up with you, and we hope you have a good rest of the day.
Ben Palmer: I understand, or I think I was informed that there was a large acquisition announced this morning, and a call got moved to this time slot. So we appreciate those of you who have called in to listen to the call this morning and ask questions. We appreciate it and look forward to catching up with you and hope you have a good rest of the day.
Ben M. Palmer: All right. Thank you very much, operator. Appreciate everybody listening in.
Ben M. Palmer: understand or I think I was informed that there was a large acquisition announced this morning and a call got moved to this time slot. So we appreciate those of you who, you know, called in to listen to the call this morning and asked some questions.
Ben M. Palmer: We appreciate it and look forward to catching up with you and hope you have a good rest of the day.
Operator: This concludes today's conference call. Replay of the conference call will be available on rpc.net within two hours following the completion of this call.
Operator: This concludes today's conference call. A replay of the conference call will be available on RPC.net within two hours following the completion of this call. You may now disconnect.
Operator: This concludes today's conference call. A replay of the conference call will be available on rpc.net within two hours following the completion of this call. You may now disconnect.
Operator: You may now disconnect.