RPC, Inc. (RES) on Q1 2021 Results - Earnings Call Transcript
Operator: Good morning and thank you for joining us for RPC, Inc.'s First Quarter 2021 Financial Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Services. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to advise everyone, that this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer.
Jim Landers: Okay, so thank you, right, sorry for that break. Thank you and good morning. Before we begin our call today, I need to remind you that in order to talk about our company, we're going to mention a few things that are not historical facts. Some of the statements that will be made on this call could be forward-looking in nature, and reflect a number of known and unknown risks. I'd like to refer you to our press release issued today, along with our 2020 10-K and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net.
Rick Hubbell: Jim, thank you. This morning we issued our earnings press release for RPC's first quarter of 2021. 2020 was a very challenging year on many levels. Fortunately, the world is coming to terms with the Covid-19 pandemic. And hydrocarbon demand is slowly but surely recovering. This has led to a reduction in oil inventory to near its five year average, aided by supporting OPEC plus actions to date. As a result, the outlook for the oil and gas prices is encouraging, which should support modest growth in industry activities. The first quarter played out largely as we expected, except for the unusually severe cold weather during February. Our estimate is that this event negatively impacted our EBITDA by approximately $5 million. Not withstanding that event we see encouraging trends in most of our service lines, which gives us confidence in our 2021 outlook. Our CFO, Ben Palmer will discuss this and other financial results in more detail, after which I will provide some closing comments.
Ben Palmer: Thank you, Rick. For the first quarter of 2021 revenues decreased $182.6 million compared to $243.8 million in the first quarter of the prior year. Revenues decreased due primarily to significantly lower activity levels including the February adverse weather conditions and lower pricing compared to the first quarter of the prior year. Operating loss for the first quarter was $10.5 million compared to an adjusted operating loss of $13.2 million in the first quarter of the prior year. EBITDA for the first quarter was $7.8 million compared to adjusted EBITDA of $25.8 million in the same period of the prior year. Loss per share was $0.05 first quarter of this year, adjusted loss per share of $0.04 in the first quarter of 2020.
Rick Hubbell: Thank you, Ben. We're encouraged by how 2021 has started. Activity levels and pricing have largely tracked our expectations coming into the year. And all signs point to a continued modest recovery as the year progresses. We remain committed to capital discipline and do not plan to add incremental capacity until we have greater confidence that economic returns will justify the investment. ESG has continued to grow as a topic of interest among many of our customers. RPC aspires to be an environmentally friendly company; we are adapting our operations to reduce emissions wherever possible. We are in the final stages of upgrading another of our fleets to dual fuel capability at which two thirds of our deployed brand capacity will be ESG friendly. However, for RPC and most of our competitors, the easy conversions are largely done. Further ESG adaptation requires economics to improve before additional capital investments make financial sense.
Operator: Your first question comes from the line of Stephen Gengaro with Stifel.
Stephen Gengaro: Thanks, good morning, gentlemen. Two things if you don't mind, one is you might given just the revenue breakdown for the different segments. And then you just as a follow after that you talked about the five fleets that are -- will utilize in the first quarter at a high level and the sixth deployed fleet. And you made some commentaries on pricing. Are you thinking that we're starting to get some pricing? I mean, you mentioned additional CapEx needed to upgrade assets at a pretty high level. I am just trying to get a sense for the pricing trajectory we could see as we go through the year assuming this kind of gradual activity growth in the US market.
Jim Landers: Sure, Steven, hey, this is Jim. I'll start with the revenue breakdown. For the first quarter of 2021, our service lines generated the following percentage of revenue, percentage of consolidated revenue. So pressure pumping is our largest that was 41.0% of revenue. Through tubing solutions, our downhole tools and motors business was number two, at 30.9% of consolidated revenue. Coiling tubing was number three, at 8.1% of consolidated revenue. Nitrogen was number four at 6.1% of consolidated revenue, and our rental tool service line was in support was 3.3% of consolidated revenues for the first quarter. And with respect to pricing right question or obviously appropriate question. I would say that during the first quarter, we saw we had the opportunity and we were able to pass along some of the cost increase that we were incurring. So from a net pricing improvement perspective, I would say that's still, we're still waiting to see that. It is still very competitive, we obviously were able to get our fleets highly utilized, we have a process in place within pressure pumping in the company overall we want to remain very pricing disciplined. So the fact that we had high utilization indicates that we were achieving, out of the pricing, minimum pricing that we were targeting. So that's a good thing. Some of the increase in revenue, again, though, was due to price - I mean to pricing increases to cover cost increases. So all of that didn't fall completely into our incrementals. But we are very pleased with the level of activity and the improvements and what that can support in from this point forward, but I will continue to emphasize that it is still very competitive.
Stephen Gengaro: Thanks, if I could slide one other one and it's connected when you think about, and I know it's been hard because the movements have been -- had been violent and the utilization have been on lower side in the part of 2020. But how do you think about incremental stone fell in? Do you think they'll normalize back toward historical levels now? Or do you think if they're still kind of choppy as things unfold here?
Jim Landers: Steven, this is Jim, we actually, I go on record saying that incrementals also normalize, we don't have anything that we know of that's going to be noisy in the quarters. And the one offset to that would be that some revenue increase may come from just passing along cost increases for things like profit, things like that. But other than that, we think incrementals should go back to a more traditional set of metrics for RPC.
Rick Hubbell: And let me add on that score, I think, to emphasize I think the pricing discipline is what will be required to generate those normal incrementals someone could go out and just try to be busy, price aggressively and maybe generate some more utilization and revenue increase, but they're not going to generate the incremental so we're going to try to remain. We're very focused on trying to remain pricing disciplined. We are much more interested in profitable revenue growth, not on growth for growth say.
Operator: And at this time, there are no further questions. I would like to turn the call back to Mr. Jim Landers for any closing remarks.
Jim Landers: Thank you, fellas. Thanks for everybody who called in to listen this morning. We appreciate it. We'll talk to you soon and hope you have a good day. Thank you.
Operator: Thank you. I would like to remind callers that today's conference will be replayed on www.rpc.net within two hours following the completion of the call. This concludes today's conference call. You may now disconnect.
