Earnings call transcript Q2 2023

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Operator

Good morning, and thank you for joining us for RPC Inc.'s Second Quarter 2023 Financial Earnings Conference Call. Today's call will be hosted by Ben Palmer, President and CEO; and Mike Schmit, Chief Financial Officer. Also hosting is Jim Landers, Vice President of Corporate Services. At this time, all participants are in listen-only mode.

Following the presentation, we will conduct a question-and-answer session. Instructions]. [Operator

to will this reading get disclaimer. like being call the everyone Jim recorded. us advise would conference that is forward-looking I started by

Jim Landers

you, Thank morning. good and

you today, Before our going historical to things about I facts. that few we're in a are want our we company, order call to that begin mention talk to remind not

unknown reflect Some be forward-looking could on this a of of number call the statements that will risks. known and nature made and be in

measures per to EBITDA. those our at In profit, we'll our be you release today's of I issued operating other with referring would adjusted refer RPC's call, are rpc.net. earnings share, like EBITDA can along income, and to non-GAAP press XXXX be public adjusted diluted adjusted adjusted today and to website which measures on found net several filings operating earnings release risks, and XX-K that outline conference non-GAAP These of performance. all

measures allow today We're using because compare these us performance over periods. they non-GAAP various consistently to

to is credit with revolving compliance covenants addition, financial RPC report to our use EBITDA under facility. In required

Our comparable non-GAAP to are income, press website income and morning share, net per diluted GAAP directly measures measures. and earnings the operating of reconciliations most release which this contain from these our

in Please interested these review disclosures are if seeing calculated. they how you're

President rpc.net our not received to copy. a for I at CEO, please reason, call will website over you've If turn our our press any Ben release visit now the Palmer. for and

Ben Palmer

our for Jim, Thanks, and you call this joining morning. thank

Permian and of acquired a provider the cementing weeks oilfield services RPC ago, As Basins. in several Spinnaker, we announced Mid-Continent leading

continue and with with quality of bring some operations. integration of should begin Spinnaker's relationships we we the into impressed yet employees synergies can Spinnaker as the improve that our us additional efforts provide. as our They us marketing operating enable from management, customers be can As a Spinnaker lines. to runs and other we great well existing of buying deepen and power service they relationships business, benefit to our operations, some

much Turning to year. customers resulted to dedicated work, very first a percentage deferring in discussion finished forward quarter, activity lower of were This partially by challenging began ended spot in June of a a our and carried is the RPC's but quarter. impacted Since utilization large June. like the some Business hydraulic fracturing planned or second third into the part first later quarter. during we has of with the

signs year. of calendar However, our improvement the in we later seen have already frac on

predominantly gassy business While expecting in our seen activity are have other to too basins, recent improve. they lines weakness, of pockets some

entire profile in Our our fracturing suite balances provides us participation customers in the business. with of that and of number customer concentrated heavily exposure diversity more completion the services of both a

the efficiencies. office designed the way manage improve I well would as like out to company's back and has digital This functions. equipment that initiated the multiyear RPC we and aims maintenance, as operating undertaking to and extensive cost our transformation point to change personnel

We and a improve timely basis. providing extensive more expect will our by effort data decision-making on better access this more greatly to

quarter's the I some after comments. discuss closing financial will Schmit, Our CFO, results, will Mike which provide

Mike Schmit

the second financial I'll quarter Ben. with sequential Thanks, start overview. XXXX

combined customers as Second Ben prior directive drilling the levels service the in driven in This in with decrease basins lines. from natural revenues $XXX.X quarter to activity their of The pressure other by completion activities, was $XXX.X revenues gas weaker and decreased quarter. many million pumping largely or impacting million mentioned. RPC's postponing was curtailing

to from decreased during second quarter Cost million quarter. million the the $XXX.X in $XXX.X of prior also revenues

prior the relatively quarter. in As a the revenues, of the was XX% percentage XX.X%, same the was of as in quarter cost second revenues which

of This increase a expenses quarter vendor to the a a settlement compared second $XX.X $XX.X costs offset in partially the first the cost increased costs. by payroll million Selling, in tax-related and to reduction Spinnaker general dispute in associated quarter. with and of administrative acquisition, million included

the compared in do to prior plan, in associated remaining $XX.X termination. the a pension with $XXX,XXX termination not a million In charge quarter connection We of the RPC future with our anticipate quarter. charges quarters the pension recorded noncash charge second settlement any significant the in pension of plan

$XXX Operating second profit the the Adjusted in million from quarter to decreased quarter. quarter, Adjusted EBITDA prior decreased compared $XX.X from million also second a million million quarter. prior by during profit XX.X% in the million the XX.X% in $XX.X $XXX.X $XXX.X the $XX.X operating quarter. X.X% was decrease by prior to to million in

Technical by profit operating increased $XXX million segment generated revenues quarter. million quarter. in Services by Support Operating X.X% XX.X% segment $XX the Our second prior to the $X.X revenues compared prior compared to $XXX.X of This quarter. during was million. million profit $X.X in to Services decreased million the

customer diluted by million. results current of to improving same improved $XXX.X per year. million to activity million $XXX.X were earnings an Now the quarter compared These the from million. Results million. from EBITDA EBITDA pricing, Adjusted $XX.X million increased share I'll profit of to compared quarter $X.XX operating increased resulting year. $XXX.X operating discuss the our and higher to from quarter Adjusted increased to profit $X.XX levels in increases in $XX.X in last to prior $XX.X driven same our adjusted

our from segment Services million revenues $XX increased segment increased million. operating to million $XX.X to profit Technical and Our $XXX X.X%

Support $X.X $XX.X segment Our million. revenues million $X.X operating Services eased million profit to from and to increased segment XX.X%

was fuel while count. our discuss in fleet service sent new equipment equipment older refurbishment. similar into amount Now a and second includes Capital pumping the were expenditures horizontal of expenditures that the X was quarter. This for million $XX.X quarter, pressure placed capital I'll out during Tier dual

we remain other frac significantly staffed and This needs, is impact between estimate $XXX to layoff million cost horizontal of latter measures. reductions, a quarter, our expected to operate purchase including second to currently and we capital layoff be In the and expenditures full-year million respond XX the small-scale to of part XXXX excluding $XXX We the cost customer not Spinnaker. implemented ability control fleets. to

During this structure. monitor and activity, intend we cost to period manage of reduced closely our

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

Ben Palmer

Mike. Thanks,

optimistic a pocket, encountered for future we remain are oil prices air we've if near-term Although firm. the

We year sales and activity observing are capitalization teams our cash our maintain lines, practices. we This point resurgence as service of a progresses. the capital quarterly a $X.XX both frac as both and other of from indications calendar morning, encouraging a return per already regular share continue shareholder-friendly to towards dividend announced conservative and we

transaction. returns will repurchases, Spinnaker, invested not well our the building dividends, we several with RPC assess expenditures as second to quarters. alternatives, self-imposed Notwithstanding our acquisition and allocation of cash, to for reward as capital which the did sheet this shareholders financed maximize because we as of the continue Spinnaker their our our blackout including During balance pending repurchase methods capital stock for investment trading the RPC. quarter, capital closing We acquisition of on been on share in has our any acquisitions

happy any Thanks us this time, for joining morning. to this are address And questions. at we

Operator

go [Operator John Daniel first you. Partners. Instructions] to Thank Energy Daniel at We'll

John Daniel

half you then activity guys. year? just say for would the fleets morning many good the back calendar, many be Hey fleets possible. today? the Thank how running off I'll you're how you -- of expect to if based running where And including start you Can me. with

Ben Palmer

later I we're is expect a we specific impact customers staff We've our of have for we we number quarters, were want not where staffed by deferred the guidance, last year. pushing the fully the some terms current some require that of In had -- completion Ben. -- of some in the staffed customers their don't -- the activities have in are Relative equipment reasons. various all for where acquisitions -- have to until year some later and have that this but in back of now, year. able again, the provide and we of to their half in are later plans couple their reassessing year, had John, we our we have -- of as in again, of right activity the we're to to

calendar the -- feel about feel we frac do So the in year. we later good

resume there discussions delays, of We've had are that from the reasons to that us activity. our feel for going and their a customers they are lot but

John Daniel

sure Fair significant various people But in service the will hear question, spot those you market to And out of broadly recover pricing lines? probably those as speaking, pressures. thoughts. enough. talk And are my question been concessions across is I'm how made, concessions? is your some which just the have you can granularity, if field, broad-based you Just quickly And how on fine. the this you avoid fairly next

Ben Palmer

little Let me There within service who concessions fracturing have here let are two other to been than I'll teammates concessions. respond and significant lines. lines elaborate. given my the has The no more service other some then

have but back it, move maybe that, reasonably to terms remaining type we had hope the and will been that has that hopeful, counting of fracturing on term. And have minor here that's given to strengthening a I the as in with up, impacted we'll similar indicated, firm 'XX in say mid-'XX. strengthening concessions. regaining in perhaps very And of part we're prices oil early short as But but we -- hard into not it may firm I'm significantly Some more quickly maybe of 'XX.

John Daniel

in then Okay. one ahead. squeeze I go Thank if could yes, And final you. one --

Jim Landers

a actors more going Anytime to John, there's very to any is bias are pocket reducing is weakness, We've been towards or idle, seen that our are price going But little recently. being bit an very of for always Jim. aggressively. Hey air this bad there be who us, pricing...

John Daniel

then me, And over. for turn enough. it one last fair and the Okay, I'll

be or terms that #X for start you us to segment? when there acquisition, that? of the just it Spinnaker the you #X revenues, in or your out going is With #X reporting throw Can

Ben Palmer

four. It we'll that in a will Yes, give second. be

Operator

Gengaro Stephen take our at question next We'll Stifel. from

Stephen Gengaro

Maybe give slot segment a in there us start, then the Can question. and just to some on you breakdown Spinnaker manner? maybe John's in follow-up

Jim Landers

the for you question. Thank Stephen. Sure,

start going I'm to quarter. second So with actual

of that top what the as actual. is percentage percentage total RPC comprise consolidated service So describe to lines about a of Yes, revenue our revenues. I'm

XX.X% number of X pressure pumping So was revenue. at

coiled segment, but X.X% RPC revenue. revenue X.X% of and consolidated X Solutions Number cementing was revenue. of downhole of X is snubbing X revenue. at X tools, at tools, which it X.X% of is is is line X was of X Number of Number our at service which in X X% Services is XX.X% was revenue. rental Support Number Number revenue. our that is Tubing is X.X% Number tubing nitrogen,

Now that quarter, been did have owned during second we we the X cementing include Number of it during service not does at revenues. Spinnaker second X.X% quarter. not our If had consolidated because the own would Spinnaker line

Stephen Gengaro

feels Thank downturn. some color. at least seen, bad we think actors have might We've on I like a in When business, pumping there's have behavior the equipment lot a of you prior lot That's mentioned, than biggest Great. just about indicated pressure Jim, It you. that and of others great better a generally the cycles. side, of think, been the players. been hands the in has consolidation,

seeing not the about been you trying actors? there's you product that? to smaller where talking some maybe lines I'm Are Or triangulate some just are bad commentary?

Jim Landers

the structure time, that has pricing in pumpers fleets related pressure we We as -- past over No. again, I this idle agree then and are during of anecdotes Not would pricing larger we companies some or private maintaining comment opinion are very market to improving so. else as again, we'd is -- rather aggressively my discipline everybody think share small just take the pressure month concessions. pumping the

concessions current And pricing just at this back. fight We back that try pocket and believe and temporary. bring and that it's do we'd air take fleets is then rather to

Stephen Gengaro

margin in company And think the The were Thank just wise. quarter, around Great. the final front. then I for on one XX% you. decrementals

touch I they do profile do from think -- that? right. we versus about costs. I for yes, there think -- Should higher the short headwinds and How normal think that's be that's right. they were the about Should decrementals outsized think quarter the a how going term? we some How like about historical about I think levels? in But more know forward? we margin do be some Maybe

Ben Palmer

suddenly. are come s. I these reasonable has say, Well, this upon us very would pretty all too,

a kind was began lot it June said, of to unfold. mid-to-late I As of when this

and it's out, know. half. to to lay are where to the we're comments in exactly going that don't all we again, the comfortable discussions better about do quite activity going referring So have latter But customer have back we specific

quarter. be working could still filling for but white space on, we fourth preparing more do, on working difficult. the Third the and out always busy as quarter We're

not didn't out. decrementals That an some tend insignificant -- the schedule So did to schedule We we were large. out. was We that of settlement that referred We have of we SG&A pretty some dispute. costs, -- amount. our that vendor's to when

But that that And Even that for use of if have and the that's though the the would that think just Spinnaker didn't decrementals schedule would a of EBITDA so SG&A was relatively but sequential expect cost things. not like basis, for we certainly, flat That's the I acquisition, down cost something don't -- significant. it the more way headwind, we if on do -- not purposes. been third that not in we quarter. be as there, out

any I'm not a have answering directly, you when have you're and nice nice by question when enjoy time decrementals revenue impacted but -- the bounce, decline. you large incrementals you a revenue you

be will a to to stable little more and on forward this getting looking challenge, we're little it air a but So times. through pocket

Stephen Gengaro

but color. I thanks for moving the Thanks. understand of a there's pieces, lot

Ben Palmer

Yes, thanks Steve.

Mike Schmit

Thanks.

Operator

We'll Crist next question Johnson Rice. Don take our from at

Don Crist

you give question options how from -- you just you second fleets was to revenue quarter. had how give in But Spinnaker you're modeling of you I'll second XX per good the in, fleets model a ask it Spinnaker in the to can And running second fleet to in had adding obviously, we wanted cementing just that I where of gentlemen. Spinnaker, quarter? X.X% the running coming many the acquisition. to quarter be kind for properly about impact what two the want as revenue cementing morning, us. the Either would of Good or

Mike Schmit

the is Yes. this We We four -- quarter. Mike. running had in

after increase And their so that will Spinnaker's next in pretty quarter. significantly

Ben Palmer

cementing comparable. existing business reasonably our And performed

have created we little of the dissimilar size, and I for bit -- think but the leverage, disclosed the a at time more They've they spreads revenue purchase. their Spinnaker, the were results given was that larger not XX spread.

Don Crist

Okay. those assuming the majority XX today? And that I'm of are running

Mike Schmit

Yes.

Don Crist

you. Okay. That's Thank all had. I

Mike Schmit

Thanks.

Ben Palmer

to Cementing many any with know, yet -- business, little probably point degree. there might be not I than it seen tends less any of significant to impact to a out to fracking. be Yes. tends we've cementing respect you volatile the not

little remaining So that's the that opportunity next another benefit them growth we see several for that strong months. of having pretty

Operator

to We'll next go Don [ph] Pinnacle. at Dasher

Unidentified Analyst

Hi, morning. good

on the following-up Just Spinnaker deal.

like is Is it looks Just perhaps math, a the to that working that million business. million fair? $XX through business $XXX year a

Ben Palmer

guess. good a That's

Unidentified Analyst

Okay. Fair enough.

Ben Palmer

Good calculation.

Unidentified Analyst

margin there's on be basis? of cyclicality basis, And of realize an that but Good. Okay. the a what's EBIT go-forward on for margin I involved, what EBIT a reasonable profile would kind that?

Ben Palmer

we say we've talked EBITDA it's thinly business. they appropriately Well, margin. It don't -- is to me do were EBITDA I a let to staff, -- great talk staffed. about, staffed. as were but It -- they want appropriately

cost operational some So have some we We really don't any bring of opportunities can to level can trucking, think some leverage of think benefit. that we some of procurement provide any out. kind incremental activity efficiencies, take our we that

perspective. similar margins that It's were and But margins cementing And good. in Certainly, it a say a business, a our require CapEx, the I say nothing the EBITDA CapEx maintenance like second like very from cash would has pretty CapEx some profile. Services, quite free business if are we within that fracturing, nice from flow quarter. we this maintenance experiencing it, it for had existing what bit Technical will that but perspective, we overall CapEx lower to the fact some requirements the particular grow

Unidentified Analyst

helpful. Okay. EBITDA Great. second for Services What were margins in quarter? That's Technical the the

Jim Landers

Give second here, John. us a

Unidentified Analyst

fine. that's Yes,

Ben Palmer

XX% of to end that upper range. XX%, probably the

Unidentified Analyst

finally, And who Great. was Spinnaker? of the seller Okay.

Ben Palmer

have, parent, with exactly all the that's are don't Natural the glad years that did was to We're a work to were entities the or familiar the last job in grown you have. or Gas way great They've if the especially creating so. not I owner. the and company direct three it lucky know it not, to established with. if over They right describe great XXXX. but Partners was Both Catapult to ultimate Catapult. will. structure, nicely, They

Unidentified Analyst

Okay. auction it process? Great. an Was

Ben Palmer

yes. was, It was. It

Unidentified Analyst

It auction was an process.

help. the Okay, great. Very good. appreciate I

Ben Palmer

Thank you.

Mike Schmit

Thanks, John.

Operator

[Operator Daniel John Instructions]. Energy go We'll at Partners. to next Daniel

John Daniel

are guys very you. putting for back gracious me You Thank in.

Ben Palmer

Absolutely, John.

John Daniel

you Well, morning. early know in the it's

CapEx budget higher of budget, sense. $XXX make haven't the would million do. you or spend ballpark? on down which the as think original to brought million, to same for understand and $XXX to done Hey, your looks in $XXX what envision you a the gives expectations, today 'XX you million guidance lower guidance, million $XXX from like would fully some to it the current So it it but based your being you see off I XXXX yet, 'XX I

Jim Landers

looking we're John, think that trying out. at each to other here, one

John Daniel

Fine. And now, curious. know XXx I'm just it I can change like but

Jim Landers

and know, you refurbishing similar, should of schedule probably that frac on continue XXXX. we're in because Yes, fleets, as the

So that's cat. the junk of

Ben Palmer

expect level we wear or refurbishment, We response next depending be be of our swing I to factor the fleet completely pumps for should usage when year, it pressure have the right, of a similar. pumping require the that Jim's the road it, of upon out map think

swing delivery I be fleet true. is in The overall going basis, think, of an were probably new we if that's to on take factor to XXXX. a

As we suspect XXXX, about range more appropriate, probably think year now at sit happen think what in we expect XXXX. probably fleet right we new of and hope is would end to this the be that later upper the I acquire sometime I here will may into current going a and

John Daniel

most that quickly. the those seem during whom of to pricing spot legacy going -- were equipment get into when created frac recover one of companies, you Got me it. look think are out viability pressures the spot about type equipment, coming say of with my if called prices last the pricing some fleet down question, the market, are of at And is to two where would which the are. then people downturn. And gut some is businesses the I that the suspect, pronounced most for is used three of the bringing the would doesn't competitive you small because landscape, It

several a knife in for would the something participate -- which bit of would here, And willing quarters got you opportunity fight consolidation. a to you Is that that? seeing set you be for envision then happening? raises you So

Ben Palmer

certainly lots There's players. of equipment, and of we more burn kind opportunities of consolidation buying typically consolidation had terms a a in part condition question for lot me, -- something would over. the obviously the the the of we've discussion helpful. that's have of smaller thought That's that The all up becomes I some about of over be years. excuse that

a and to one beginning together then Obviously, ago, month we announced put two that think know the we've was work announcement, that even right, will together. big and the two or the got one to help, companies I

beneficial I net think be frac that a should for the industry.

we encourage certainly opportunities whether that's from. position hard and can looking ourselves it So and participate, know. we to for would looking But we ways such that to for benefit

begin go to had the -- type worked Let pricing fleets disciplined were we and committed before new for the we trying very very 'XX to we just the coming do were in to from about there and of didn't back. and just contribution to about we me want didn't 'XX, how we put as were them coming we our we disciplined do and fleets, whatever pricing fleets out jobs staff be that perspective to the that staff mention And those from receiving downturn try fleets working. a jobs We So well very to market to from were out of understand we new us. right? get

of if going at right staffing Obviously, future. we to our stacking the sufficient return. based going implemented pricing right? have fleets of have way, very we not a activity are minimum the the we not -- in think you on point do the to level now, discipline make are other should for level problem done judgments some going too But to And to we we if we about similar be the low, us pricing have to able where it's this is We If a generate opportunities have be that. maintain current what opportunities, think level. a

a whatever we working if fleets stack price, are fleets, enough busy pricing. We of certain right? level remaining there's our those at opportunity any to we at not disciplined. fleets not But foresee keep We're will

process they're we like So the upside. remain going that did to during

John Daniel

having That's and of Yes. no benefit cash. debt the enough

Some people that. have don't

you. Thank guys. Okay

Ben Palmer

Thank you, John.

Mike Schmit

Thanks John.

Operator

our We'll Barclays. at Podhaizer from take next question Derek

Derek Podhaizer

being your Hey, confidence on seeing I was examples some or fleets wondering will give you conversations customers? the it activity as us that if committed you recover the with just Is year give rigs progresses? calendar? you Or that are can actually

Ben Palmer

than Good we've to the Certainly, reasons had specific had at you us conversations. for firm point, that I will not that. customers reassess now. were have their recover you about I'm not three we're conversations to question. prices to scheduled, more We've we've had up. and don't -- they're out work tell change. If out that their comfortable -- why things tell is customer going and that." what oil with going this they firm, to is are from I'm "Hey, months nicely Nobody not given months advance, they right. plans. work. plans could back three conversations to if us. remain It's firm, delayed that going start we We're going in will But remain comfortable things do So they

Derek Podhaizer

helpful it. Got color. That's

of know So XXXX? year, for into diesel fuel, how the So your has fleets refurbing. end changed you're and heading of the that I dual by between mix

has towards diesel. of on I'd this end XXXX? dedicated as to XXXX. away the fleet XXXX the start fuel shift by lend mix increased into itself fleet from of your that more we versus move of assume your So And spot versus put the with dual next-gen market

Ben Palmer

question. Good

to when there. of don't We're to the We'll age We We're to get accordance a on get has point. ourselves, It race there looking continue X us more We're with beginning map. at We're spectrum than was our is returns. are fleet. the the increasing it changed going there. at of DGB equipment. ahead a condition at at in significantly that process not Tier not right? year. looking road of the our to We get ESG-friendly to little get in economics our going the bit of It want and this tell

customers, talk point. think are many important, people at more actually is somewhat like we will as way analyze that experience customer actually our become four five fuel who but more XX have think this have we not call for that mix. I our amount running little activity. think the demand. our market, less, a at that are we substitution And the we to people they're We important not or impressed fuel or as least many customers dedicated partially of -- XX, influenced is reasonable rigs, We -- less We by group they will our or Our it it We maybe a customers in of about, running with XX think change. with or less substitution.

efficiency we much fuel-efficient the tend They equipment benefits. that like. ESG to pretty they they like like the So have as some as

So that well, continue will market, have 'XX think more end 'XX. we'll and along serve that ESG-friendly mid that to pathway we has that and the I we as served will but of we continue us approach equipment

Derek Podhaizer

it. Got

new in you then Or e-frac? know And me. for Would your you expect new acquire be would DGB? be you fleet mentioned that would that I just build a Tier X a that helpful. That's XXXX. to last Okay. entry into --

Ben Palmer

would Good as to is DGB. E-frac are for market, Ben. And of would to importance would less next be the at to that e-fleets the year, expect point, market. I say said it I we're is this question. But them. not even staying This substitution certainly another fuel our that important. customers, evaluating close us, I great

customer is technology convinced into. there point, eventually that and proven something we in it's at get have a still for Once it, will we're mode. demand that we're wait-and-see we this that we'll make But sufficient commitment. So

Operator

to we turn Instructions] at have no questions like Landers. conference I to the back over would further time. [Operator this And Jim

Jim Landers

who to questions. day, soon. and and everybody Hope enjoy see listen we'll everybody the you We has the called for Thanks Thank in good a to you, thanks in. conversation.

Operator

today's concludes on participation. your for call. would like within www.rpc.net to of I remind a will you following there completion that two hours this call. everyone replay Thank the conference This be

now You disconnect. may

RPC (RES) 26 Jul 232023 Q2 Earnings call transcript