RPC Q4 2024 Earnings Report

RPC EPS Results

• Actual EPS: $0.06
• Consensus EPS: $0.06
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

RPC Revenue Results

• Actual Revenue: $337.65 million
• Expected Revenue: $329.08 million
• Beat/Miss: Beat by +$8.57 million
• YoY Revenue Growth: N/A

RPC Announcement Details

• Quarter: Q4 2024
• Date: 1/30/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 30, 2025
• Conference Call Time: 9:00AM ET

RPC (NYSE:RES) (NYSE: RES) provides essential equipment and services to companies engaged in the exploration, production and maintenance of oil and natural gas wells. The firm operates as an equity interest holding company, partnering with a network of independent service businesses to deliver a comprehensive suite of offerings for well completion and production operations.

Through its affiliated service companies, RPC offers pressure pumping and fracturing services, coiled tubing and nitrogen pumping, downhole tools and telemetry solutions, well intervention and workover services, along with rental tools and supply-chain logistics. This integrated model allows RPC to leverage specialized expertise while maintaining operational flexibility across its portfolio.

RPC’s operations span key hydrocarbon basins in North America, Latin America, Europe, West Africa and Asia, supporting both onshore and offshore projects. The company maintains a network of service centers and equipment yards in major drilling regions, enabling responsive field support and efficient mobilization of personnel and assets.

Founded in the mid-1980s and headquartered in Atlanta, Georgia, RPC has grown through strategic equity partnerships and targeted organic expansion. The company’s leadership team is headed by President and CEO David N. Mosley, under whose guidance RPC has continued to focus on operational efficiency, safety and service innovation.

RPC Q4 2024 Earnings Call Transcript

Key Takeaways

• Pressure pumping revenues rose 3% sequentially in Q4 but were down 24% for the full year, while non-pumping services declined 3% in Q4 and 2% for the year amid seasonality, ample industry capacity and pricing pressure.
• Non-pumping lines showed mixed results with coiled tubing up low-double digits and cementing growth, while downhole tools and rental tools saw modest seasonal declines, and innovation launches like the 3.5-inch downhole motor and new un-plug system are now in full commercial deployment.
• Q4 financials included $335 million in revenue (-1% QoQ), EBITDA of $46.1 million (13.7% margin), diluted EPS of $0.06, and $53.7 million in free cash flow, while full-year free cash flow was $129.5 million, supporting $34 million in dividends and $10 million in share repurchases.
• Year-end liquidity remained strong with $326 million of cash, no debt and two-year cumulative free cash flow over $340 million; 2025 capex is guided at $150–200 million (ex-fleet), and the company is targeting M&A, cost discipline and portfolio rebalance toward higher cash-flow services.

Presentation

[Operator]

Good morning, and thank you for joining us for RPC, Inc.'s Q4 and year-end 2024 earnings conference call. 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 listen-only mode. Following the presentation, we will conduct a Q&A 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. I will now turn the call over to Mr. Schmit.

[Mike Schmit, CFO at RPC Inc.]

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 www.rpc.net. In today's earnings release and conference call, we'll be referring to several non-GAAP measures of operating performance and liquidity. We believe these non-GAAP measures allow us to compare performance consistently over various periods. Our press release and our website contain reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. I'll now turn the call over to our President and CEO, Ben Palmer.

[Ben Palmer, President and CEO at RPC Inc.]

Thanks, Mike, and thank you for joining our call. This morning, we reported results that continue to reflect the challenges of the OFS market. Though we did have some bright spots in the Q4 and some positive developments heading into 2025, the environment overall remains highly competitive, and seasonal slowdowns certainly impacted parts of our business as customers faced typical fourth-quarter seasonal issues related to budget exhaustion, holiday downtime, and unpredictable weather. While recent quarters showed more weakness in pressure pumping with outperformance in other service lines, fourth-quarter results in pumping showed some signs of improvement after a difficult Q3. Pressure pumping generated higher revenues, while our non-pumping services tracked more with the industry activity declines. Market dynamics remain largely unchanged, with the spot and semi-dedicated market amply supplied with horsepower capacity, and pricing remaining under pressure as OFS companies compete to maximize utilization.

[Ben Palmer, President and CEO at RPC Inc.]

Bottom line, pressure pumping in the Q4 was up 3% sequentially, while all other service lines in aggregate declined 3%. For the full year, however, pumping was off by 24%, while other service lines declined only 2%. We believe bolstering our other less capital-intensive service lines over time with organic investments and potential acquisitions will help drive growth and reduce volatility in our financial results. We're encouraged by the general optimism around the energy industry with the new presidential administration and the opportunities that may present themselves in the coming years for our customers. However, many aspects of energy supply and demand remain unclear. While activity increases could provide tailwinds for OFS providers, significant increases in oil and gas supplies might pressure energy prices and have negative consequences on completion activity.

[Ben Palmer, President and CEO at RPC Inc.]

At the end of the day, we have limited visibility on actual policy and regulatory changes and the impact those might have on our results. But one thing remains unchanged: we are eager to serve our customers and deliver outstanding service regardless of how the macro and legislative landscapes evolve. Shifting to Q4 service line commentaries, I'll start with pressure pumping. Despite some sequential gains in fracking coming off a soft Q3, we reiterate that we continue to exercise economic discipline, opting to idle certain assets rather than operate them without adequate returns. Consistent with our Q3 results, we still see a difference in demand within our frack assets for our Tier 4 DGBs, where we have better visibility with more dedicated customers.

[Ben Palmer, President and CEO at RPC Inc.]

At this point, we have relatively solid commitments for these fleets through parts or all of 2025, and we are delivering excellent well-site performance with respect to gas substitution and overall efficiencies. Conversely, demand remains a headwind for our legacy diesel equipment, resulting in more aggressive pricing. We intend to upgrade our fleet over time and continue to rigorously assess the through-cycle economics to justify our capital investments. Of course, if and when we invest in Tier 4 DGB assets, we will pull older equipment out of service so we don't add to industry frack capacity. Looking at our non-pressure pumping service lines, we were pleased by some specific developments, though not satisfied with the overall results. In total, these service line revenues were down 3%, with mixed performance from business to business. Coiled tubing was up low double digits, with some new business wins contributing to growth.

[Ben Palmer, President and CEO at RPC Inc.]

Cementing also increased in the quarter with strong revenues, operations, and cost execution. Downhole tools revenues declined modestly in the quarter due to seasonal factors. While 2025 may be challenging from an overall market perspective, we are pleased with our progress on two key new products, as we've mentioned on previous calls. Our recently launched 3.5-inch downhole motor is gaining traction, and we look forward to further momentum in 2025 for this lower-pressure, high-rate motor. We also recently launched our new UnPlug system, which uses our Perf PODs to block flow at each individual perforation rather than a single point above each stage. This provides numerous advantages over traditional single-point isolation. Field trials were completed in Q3 of 2024, and we are now in full commercial deployment, having completed hundreds of stages across many well sites.

[Ben Palmer, President and CEO at RPC Inc.]

We see this technology as being well-positioned to capture share of the North American land frack plug market and believe it has the potential to be a positive growth catalyst that is largely independent of broader OFS demand. Rental tools also declined slightly in the quarter due mostly to seasonal factors. Mike will now discuss the quarter's financial results.

[Mike Schmit, CFO at RPC Inc.]

Thanks, Ben. Shifting to the Q4 financial results with sequential comparisons to the Q3 of 2024, revenues decreased 1% to $335 million, driven primarily by lower non-pressure pumping activity, specifically downhole tools and rental tools, which offset growth in pressure pumping. Breaking down our operating segments, technical services, which represented 94% of our total revenues in the quarter, were essentially unchanged. Support services were down 14% and represented 6% of our total fourth-quarter revenues. The following is a breakdown of our fourth-quarter revenues for our top five service lines: pressure pumping, 40%; downhole tools, 27.9%; coiled tubing, 9.9%; cementing, 8.3%; rental tools, 4.3%. Together, these service lines accounted for 90% of our total revenues. Cost of revenues, excluding depreciation and amortization during the Q4, increased by $2.7 million to $250.2 million, or a 1% increase.

[Mike Schmit, CFO at RPC Inc.]

The higher cost of revenues is primarily due to higher insurance costs related to our operations. We also incurred higher employee costs primarily related to healthcare benefits, which can fluctuate throughout the year. These cost increases were partially offset by lower maintenance and repair expenses. As you may recall, our pumping operations were particularly soft in the Q3. Thus, we used that downtime to perform more maintenance work on our assets. Given the sequentially higher utilization in the Q4, we performed less of this maintenance work toward the end of the year. SG&A expenses were $41.2 million, up from $37.7 million, largely reflecting the fixed cost of our support service functions as well as timing of year-end incentive amounts.

[Mike Schmit, CFO at RPC Inc.]

Our fourth-quarter effective tax rate was 9.1%, which was below the company's typical tax rate, primarily due to the implementation of certain tax strategies and interest received on some tax refunds. Diluted EPS was $0.06 for the Q4, down from $0.09 in the Q3. There were no non-GAAP adjustments to either of those EPS figures. EBITDA was $46.1 million, down from $55.2 million, with EBITDA margins decreasing 270 basis points sequentially to 13.7%. For the quarter, operating cash flow was $94.2 million, and after CapEx of $40.5 million, free cash flow was $53.7 million. For the full year, operating cash flow was $349.4 million, and after CapEx of $219.9 million, our free cash flow was $129.5 million.

[Mike Schmit, CFO at RPC Inc.]

Of note, our 2024 cash flow included the receipt of a $53 million tax refund earlier in the year, as well as some other working capital benefits later in the year related to the timing of customer payments. In light of challenging business conditions, we are pleased with our two-year cumulative free cash flow of more than $340 million, even after adding a Tier 4 DGB fleet in each of those years. This supported steady capital returns to our investors while still leaving our balance sheet highly liquid and capable of funding growth opportunities. At year-end, we had $326 million in cash and no debt on the balance sheet. During the quarter, we paid $8.6 million in dividends, bringing our 2024 total to more than $34 million. We also repurchased nearly $10 million of stock during the year, mostly related to our buyback program.

[Mike Schmit, CFO at RPC Inc.]

We spent $220 million in 2024 on capital expenditures, finishing within our guided range of $200 million-$250 million. We currently project to spend between $150-$200 million in capital expenditures throughout 2025. I'll now turn it back over to Ben for some closing remarks.

[Ben Palmer, President and CEO at RPC Inc.]

Thank you, Mike. Coming out of 2024, I'd like to reiterate several themes as we enter the new year and articulate a few strategic, operational, and capital allocation themes so you have a firm understanding of our operating philosophy and intentions. Our corporate objective is to create long-term shareholder value by delivering world-class oilfield services to our customers with a conservative financial management approach. We believe RPC has a well-established track record of profitability and free cash flow despite the many ups and downs of the oilfield services industry. And within this cyclical backdrop, we have exercised financial discipline, which has afforded us the ability to invest in our operations as well as support consistent dividends and periodic share buybacks. We believe the company is fairly diversified with an attractive mix of service offerings, customers, and geographic presences. We consider ourselves well-positioned financially to further invest and grow the business.

[Ben Palmer, President and CEO at RPC Inc.]

We see several strategic imperatives to executing on our goals: improve margins and execution and optimize our assets. Increase operational scale through M&A. Rebalance our portfolio with a focus on high-cash-flow service offerings. And strengthen our customer mix by increasing our focus on blue-chip E&Ps given industry consolidation. As we plan for 2025 and beyond, we have some action plans aligned with these strategic themes, which we believe together will help drive profitable growth, financial strength, and long-term value. As discussed, we continue to invest in innovation, bringing proprietary and novel services and products to market to distinguish ourselves from our competition. We are also diligently monitoring costs, capacity, and headcount, and will continue to take actions to align with demand and maximize margins. Furthermore, we have information technology projects underway to support improved data collection and analysis, which we believe will lead to optimized decision-making and improved efficiencies.

[Ben Palmer, President and CEO at RPC Inc.]

Lastly, we constantly evaluate sales of non-core assets to sharpen our focus on core operations and monetize any non-strategic assets. Lastly, with respect to M&A, we continue to evaluate opportunities and feel the environment remains favorable for a potential acquisition. We are focused on high-cash-flow operations with quality management teams, strong customer service, and value propositions and synergy opportunities. We believe we are a buyer of choice given our reputation in the market for supporting companies we bring under the RPC umbrella and look forward to sharing M&A developments when they materialize. In an often volatile market, our discipline remains consistent with a focus on financial stability and long-term shareholder returns. I want to thank all of our employees who work tirelessly to deliver high levels of service and value to our customers. Thanks for joining us this morning, and at this time, we're happy to address any questions.

[Operator]

At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Don Crist with Johnson Rice. Your line is now open. Please go ahead.

[Don Crist, Senior Research Analyst at Johnson Rice]

Morning, guys. Hope y'all are doing well.

[Ben Palmer, President and CEO at RPC Inc.]

Good morning.

[Don Crist, Senior Research Analyst at Johnson Rice]

Yeah. I wanted to start with the technical services segment. I mean, obviously, margins compressed a little bit in the Q4 there. Was there something in there on the cost side? Because it looks like it was more on the cost side than on the revenue side, like maybe repositioning a fleet for work or something else that we can't readily point to that maybe compressed those margins, and do you think those kind of rebound as we move into the Q1?

[Mike Schmit, CFO at RPC Inc.]

Yeah. Hi, Don. This is Mike. We had some higher-than-normal insurance costs during the quarter. We reset our insurance deductibles near the end of the year, and actuaries do their thing, and we had some pretty significant increases there. So that really impacted us during the quarter. So it was less operational and kind of more it was insurance-related operations, but just kind of an unusual event. We don't anticipate that will be recurring.

[Don Crist, Senior Research Analyst at Johnson Rice]

Okay. And obviously, there's been a lot of reports that as pressure pumping weakened in the Q4 during the RFP season, it was kind of bad timing from that standpoint. But as you kind of look to 2025, do you anticipate any kind of reductions there, particularly on the pressure pumping side, due to increased competition as we kind of move through 2025? I know you're more in the spot market than contracted market, but are you seeing that as well?

[Ben Palmer, President and CEO at RPC Inc.]

Don, this is Ben. It's very difficult to predict. Again, we did see some improvement there in the Q4. Many of the customers we work for during the Q4, we have opportunities with well into 2025. So at this point in time, we're not currently anticipating any or see on the horizon any particular softness arising. Likewise, we certainly can't say that we are highly optimistic that our revenues there will continue to progress, but we feel pretty good about who we're working for right now and the level of activity we have currently.

[Mike Schmit, CFO at RPC Inc.]

Hey, Don. When the year started, we had a lot of weather issues across the country, so that impacted everybody. So as we started Q1, things started a little slower, but that's less about customers and more just about weather, and we think that's really going to impact everybody in Q1.

[Don Crist, Senior Research Analyst at Johnson Rice]

Right. Okay. And I think I ask this every quarter, but given your cash hoard on the balance sheet and your propensity to do M&A, how is that market looking today? I mean, obviously, deals kind of slowed down as we moved through 2024 as the bid and ask kind of widened some, but are the bid-ask spreads coming closer in the parity or where you think that it's a value to actually deploy some of that capital and grow into some of the other business lines?

[Ben Palmer, President and CEO at RPC Inc.]

Yeah. Don, this has been up. We're certainly interested in trying to create some growth with some accretive acquisitions with respect to the bid-ask spreads and where those are heading or where they've been. I mean, we have a number of things we've looked at. I'm not sure we could say that we've got a large enough universe of opportunities to specifically say we're seeing those spreads change. I don't know that we could speak to that directly. Maybe an investment banker seeing many more opportunities could speak to that. But obviously, there's been a lot of volatility, right? The OFS market did see some increase in share prices within the last few weeks, but we've also recently seen some weakness. So it's variable, difficult to predict, but we'll just have to see.

[Ben Palmer, President and CEO at RPC Inc.]

Obviously, that's part of the process to try to reach a deal, reach an agreement that hopefully is a win-win situation and can be accretive to our results. That's clearly what we're looking to achieve.

[Don Crist, Senior Research Analyst at Johnson Rice]

I appreciate all the color. I'll turn it back. Thanks.

[Ben Palmer, President and CEO at RPC Inc.]

Thank you, Don.

[Operator]

Thanks, Don. Your next question comes from the line of Stephen Gengaro with Stifel. Please go ahead.

[Stephen Gengaro, Managing Director of Oilfield Services at Stifel]

Thanks. Good morning, gentlemen. I apologize if this was asked. Did you give the product line breakdowns for the quarter?

[Mike Schmit, CFO at RPC Inc.]

I did, but I'm happy to do it again.

[Stephen Gengaro, Managing Director of Oilfield Services at Stifel]

I'll look at the transcript. You don't have to say it again. It's fine.

[Ben Palmer, President and CEO at RPC Inc.]

Okay.

[Stephen Gengaro, Managing Director of Oilfield Services at Stifel]

You mentioned in the press release the insurance settlement, and did you give it or the elevated insurance costs? Did you give a magnitude of that? I'm trying to kind of calibrate the impact it had on the margins and EBITDA in the quarter.

[Mike Schmit, CFO at RPC Inc.]

Yeah. I don't think we gave an exact number. It was a few million dollars, and it was less of a settlement and more we have some changes in our deductibles and everybody's insurance costs are going up, and ours kind of reset in the Q4. So the actuaries do their magic, and we were a bit surprised by the amount of the impact, but it definitely impacted our margins.

[Stephen Gengaro, Managing Director of Oilfield Services at Stifel]

Okay. Great. Thanks. That is helpful. And then just the final one. When you talk to customers on the pressure pumping side, and I know the dynamics are fluid and there's been some pricing pressures others have talked about, but what are the conversations like as far as kind of contract term? And I believe you guys have talked a little bit about over the last year trying to get maybe a little bit more term and a little less spot market work. Where does that kind of situation stand right now?

[Ben Palmer, President and CEO at RPC Inc.]

For us, we still don't have any long-term firm contracts. These are all just sort of customer agreements. We are pleased with the direction of the mix of our business. We do have—we've come into in the last several months some opportunities that we would call more semi-dedicated. There's not line of sight for the next year plus, but we do have kind of a multi-month view. So that's good. We're pleased with where it is today, and we'll continue to work on that and try to improve that mix, maintain that, and hopefully improve it a bit.

[Stephen Gengaro, Managing Director of Oilfield Services at Stifel]

Great. The final question I had was you've talked on the dual fuel fleet side, and I'm pretty sure to date you haven't done anything on the electric side. We've heard that operators kind of prefer the flexibility of dual fuel in a lot of cases. What do you see in the market? And are e-fleets something that you're considering, or do you think you'll stick with sort of the dual fuel approach?

[Ben Palmer, President and CEO at RPC Inc.]

Yeah. It varies from customer to customer, and dual fuel does have some flexibility that electric doesn't. That is a true statement. We've said before and continue to say we're not going to address our right or wrong lack of electric fleet capability. We're not going to lean into that and begin to invest in that over a multi-year prospect. Is it an issue? I mean, it's a segment of the market that we're currently not competing in, and we're not going to compete in that from an organic perspective. So we'll continue to lean in. The technology continues to evolve and change. Customers like to have the latest and greatest technology. There are some new technologies that are on the horizon. So we'll just see. We'll continue to monitor it. We do like the flexibility of the Tier 4 dual fuel.

[Ben Palmer, President and CEO at RPC Inc.]

And so we'll see where it goes from there. But again, we're not going to lean into an electric offering from an organic perspective.

[Stephen Gengaro, Managing Director of Oilfield Services at Stifel]

Great. Okay. Thank you for the call, gentlemen.

[Ben Palmer, President and CEO at RPC Inc.]

Thank you.

[Mike Schmit, CFO at RPC Inc.]

Thank you.

[Operator]

Your next question comes from the line of Cosimo Botta with Gabelli. Your line is now open.

[Kassimo Botta, Research Analyst at Gabelli]

Hi, guys. Thanks for taking my question. Good morning. How are you?

[Ben Palmer, President and CEO at RPC Inc.]

Good. Good.

[Kassimo Botta, Research Analyst at Gabelli]

Yeah. I guess most of mine got asked, but just in terms on your CapEx guidance for 2025, I know you said a $50 million range between it. So that's kind of pricing in, I guess, one fleet. So I was just wondering your outlook and whether you think the chances that you're going to get enough of a fleet and what the lead time for that might be.

[Ben Palmer, President and CEO at RPC Inc.]

Actually, that range, I think we said that that does not include a new Tier 4 DGB in that range that we communicated. We're going to watch it. If we can get some firm commitments enough from a customer, we'll certainly move up that decision. In terms of the timeline, it's probably it hasn't changed a whole lot in terms of what we know or what we're told. It's probably a six- to nine-month process to get a full fleet ordered and delivered. So that's kind of where we are. We're playing it that way at this point in time. We'll see. Again, we've got some good customer relationships, semi-dedicated, pretty well keeping us busy. So we'll see. That'll be a decision a little bit down the road. But we'll keep you guys apprised.

[Kassimo Botta, Research Analyst at Gabelli]

Okay. Awesome. Thank you. Thanks for the update. I'll turn it back.

[Ben Palmer, President and CEO at RPC Inc.]

Thank you.

[Operator]

Again, if you would like to ask a question, press star one on your telephone keypad. There are no further questions at this time. That concludes our Q&A session. I will now turn the conference back over to Mr. Ben Palmer for closing remarks.

[Ben Palmer, President and CEO at RPC Inc.]

Thank you very much, everybody. Appreciate you joining us this morning and appreciate your questions and your interest. I hope you have a good rest of the day and look forward to touching base. Take care.

[Operator]

Ladies and gentlemen, that concludes today's call. Please be reminded that the conference call will be replayed on rpc.net within two hours following the completion of the call. You may now disconnect. Thank you all for joining.

Participants

Executives

• Mike Schmit, CFO
• Ben Palmer, President and CEO

Analysts

• Don Crist, Senior Research Analyst at Johnson Rice
• Kassimo Botta, Research Analyst at Gabelli
• Stephen Gengaro, Managing Director of Oilfield Services at Stifel