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 April 23, 2014 - 7:15 AM EDT
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RPC, Inc. Reports First Quarter 2014 Financial Results

ATLANTA, April 23, 2014 /PRNewswire/ -- RPC, Inc. (NYSE: RES) today announced its unaudited results for the first quarter ended March 31, 2014.  RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States, and in selected international markets. 

For the quarter ended March 31, 2014, revenues increased 17.8 percent to $501.7 million compared to $425.8 million in the first quarter of 2013.  Revenues increased compared to the prior year due to higher activity levels in several of our large service lines, greater service intensity, and a larger fleet of revenue-producing equipment, partially offset by lower pricing for our services. Operating profit for the first quarter increased by 14.0 percent to $65.2 million compared to operating profit of $57.2 million in the same period for the prior year due to higher revenues.  Net income was $39.4 million or $0.18 diluted earnings per share, compared to $35.1 million or $0.16 diluted earnings per share in the same period of 2013.  Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 9.2 percent to $120.8 million compared to $110.6 million in the prior year.1

Cost of revenues during the first quarter of 2014 was $330.0 million, or 65.8 percent of revenues, compared to $268.2 million, or 63.0 percent of revenues, in the prior year.  Cost of revenues increased primarily due to higher materials and supplies expenses associated with increased activity levels and service intensity, and higher employment costs associated with increased activity levels.  Cost of revenues as a percentage of revenues increased primarily due to competitive pricing for our services.

Selling, general and administrative expenses were $48.7 million in the first quarter of 2014, compared to $44.9 million in the same period of the prior year.  Selling, general and administrative expenses increased due to higher activity levels but decreased as a percentage of revenues compared to the prior year due to the leverage of fixed costs over higher revenues.  Depreciation and amortization increased to $55.5 million during the quarter compared to $52.8 million in the first quarter of 2013.

"RPC's financial results during the first quarter of 2014 compared to the prior year reflect higher activity levels and greater service intensity in our largest service lines," stated Richard A. Hubbell, RPC's President and Chief Executive Officer. "In addition, our financial results benefited from the slight growth in the size of our pressure pumping fleet, which operated in oil and liquids-rich basins, as well as some activity increases in selected markets due to the higher price of natural gas during the first quarter of 2014.  These positive developments were partially offset by the impact of prolonged winter weather during the first quarter as well as continued competitive pricing for our services.  We estimate that severe weather in several of our U.S. domestic markets, particularly during January and February, reduced RPC's first quarter revenues by approximately five percent.  From an industry perspective, the average U.S. domestic rig count during the first quarter was 1,779, a 1.2 percent increase compared to the same period in 2013, and a 1.3 percent increase compared to the fourth quarter of 2013.  The average price of natural gas during the first quarter was $4.86 per Mcf, a 38.9 percent increase compared to the prior year, and a 26.9 percent increase compared to the fourth quarter of 2013.  The average price of oil during the quarter was $98.70 per barrel, a 4.6 percent increase compared to the prior year and a 1.3 percent increase compared to the fourth quarter of 2013.  The average price of benchmark natural gas liquids was $1.30 per gallon during the first quarter of 2014, a 50.7 percent increase compared to the first quarter of 2013, and a 9.5 percent increase compared to the fourth quarter of 2013.  The unconventional rig count, an important indicator of the demand for RPC's services, increased by 5.7 percent compared to the prior year, and during the first quarter of 2014 represented 78.2 percent of U.S. domestic drilling activity.  Our geographical concentration in markets with higher activity levels continues to benefit our financial results, and facilitated revenue growth that exceeded the changes in these industry metrics. 

"RPC also continues to benefit from higher completion service intensity and improved drilling efficiencies.  The efficiency of the average U.S. domestic drilling rig increased by three percent during the first quarter of 2014 compared to the prior year, which supplemented the growth in the overall rig count.  In the Permian Basin, where the largest single concentration of our pressure pumping fleet operates, the drilling rig count has risen at a greater rate than the rest of the U.S. domestic market, and is increasingly comprised of unconventional drilling and completion operations.  During the quarter, we experienced steady increases in our revenues and profitability as customer activities resumed from the holidays and winter weather became less of an issue.  However, the continued growing service intensity of our work increased the logistical requirements related to raw materials.  During the first quarter, we experienced very high demand for proppant in certain markets and had to use more costly transportation methods to meet our customers' needs. These efforts reduced our efficiencies and increased our costs, which negatively impacted our operating margin.  We are now seeing indications that the costs of raw materials used in providing services to our customers may increase.  These factors, coupled with continued strong competition and qualified labor scarcity, continue to pressure our profitability. 

"During the first quarter, we invested $37.9 million in maintenance and growth capital expenditures.  The balance on our syndicated credit facility at the end of the quarter was $80.8 million, an increase compared to $53.3 million at the end of 2013.  However, our balance sheet showed $44.3 million in cash at the end of the first quarter, a higher than normal balance which was due to the timing of cash receipts.  Our balance sheet continues to be well-capitalized and allows us to take advantage of any strategic opportunities that may arise," concluded Hubbell. 

Summary of Segment Operating Performance

RPC's business segments are Technical Services and Support Services.

Technical Services includes RPC's oilfield service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer's well.  These services are generally directed toward improving the flow of oil and natural gas from producing formations or to address well control issues.  The Technical Services segment includes pressure pumping, coiled tubing, hydraulic workover services, nitrogen, downhole tools, surface pressure control equipment, well control, and fishing tool operations.

Support Services includes RPC's oilfield service lines that provide equipment for customer use or services to assist customer operations.  The equipment and services offered include rental of drill pipe and related tools, pipe handling, inspection and storage services and oilfield training services.

Technical Services revenues increased 18.5 percent for the quarter compared to the prior year due to higher activity levels in most of the service lines within this segment, as well as greater service intensity and raw material usage in pressure pumping, the largest service line within this segment.  Support Services revenues increased 9.2 percent during the quarter compared to the prior year principally due to higher activity levels in the rental tool service line, which is the largest service line within this segment.  Operating profit in both Technical and Support Services increased due to higher activity levels.  In Technical Services, operating profit also increased due to greater service intensity in pressure pumping.  

 

(in thousands)


Three Months Ended March 31



2014


2013






Revenues:





   Technical services

$

466,970

$

394,011

   Support services


34,722


31,810

Total revenues

$

501,692

$

425,821

Operating Profit:





   Technical services

$

64,896

$

58,501

   Support services


7,457


6,258

   Corporate expenses


(4,889)


(4,900)

   Loss on disposition of assets, net


(2,232)


(2,640)

Total operating profit

$

65,232

$

57,219

Interest Expense


(337)


(340)

Interest Income


4


5

Other Income, net


80


555






Income before income taxes

$

64,979

$

57,439

 

RPC, Inc. will hold a conference call today, April 23, 2014 at 9:00 a.m. ET to discuss the results of the first quarter.  Interested parties may listen in by accessing a live webcast in the investor relations section of RPC, Inc.'s website at www.rpc.net.  The live conference call can also be accessed by calling (888) 329-8893 or (719) 325-2469 and using the access code #2865781.  For those not able to attend the live conference call, a replay of the conference call will be available in the investor relations section of RPC, Inc.'s website (www.rpc.net) beginning approximately two hours after the call. 

RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest, Appalachian and Rocky Mountain regions, and in selected international markets.  RPC's investor website can be found at www.rpc.net.

Certain statements and information included in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including all statements that look forward in time or express management's beliefs, expectations or hopes.  In particular, such statements include, without limitation, our belief that our balance sheet allows us to take advantage of any strategic opportunities that may arise.  These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RPC to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Such risks include changes in general global business and economic conditions; drilling activity and rig count; risks of reduced availability or increased costs of both labor and raw materials used in providing our services; the impact on our operations if we are unable to comply with regulatory and environmental laws; turmoil in the financial markets and the potential difficulty to fund our capital needs; the potentially high cost of capital required to fund our capital needs; the impact of the level of unconventional exploration and production activities may cease or change in nature so as to reduce demand for our services, the ultimate impact of current and potential political unrest and armed conflict in the oil-producing regions of the world, which could impact drilling activity; adverse weather conditions in oil or gas producing regions, including the Gulf of Mexico; competition in the oil and gas industry; an inability to implement price increases; risks of international operations; and our reliance upon large customers.  Additional discussion of factors that could cause the actual results to differ materially from management's projections, forecasts, estimates and expectations is contained in RPC's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2013.

For information about RPC, Inc., please contact:
Ben M. Palmer
Chief Financial Officer
(404) 321-2140
irdept@rpc.net

Jim Landers
Vice President, Corporate Finance
(404) 321-2162
jlanders@rpc.net

1 EBITDA is a financial measure which does not conform to generally accepted accounting principles (GAAP). Additional disclosure regarding this non-GAAP financial measure is disclosed in Appendix A to this press release.

 

 

RPC INCORPORATED AND SUBSIDIARIES











CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data)


Periods ended March 31, (Unaudited)



First Quarter







2014



2013


% BETTER

(WORSE)


REVENUES


$

501,692


$

425,821


17.8

%

COSTS AND EXPENSES:










Cost of revenues



330,015



268,227


(23.0)


Selling, general and administrative expenses


48,708



44,914


(8.4)


Depreciation and amortization



55,505



52,821


(5.1)


Loss on disposition of assets, net



2,232



2,640


15.5


Operating profit



65,232



57,219


14.0


Interest expense



(337)



(340)


0.9


Interest income



4



5


(20.0)


Other income, net



80



555


(85.6)


Income before income taxes



64,979



57,439


13.1


Income tax provision



25,591



22,363


(14.4)


NET INCOME


$

39,388


$

35,076


12.3

%





















EARNINGS PER SHARE










Basic


$

0.18


$

0.16


12.5

%

Diluted


$

0.18


$

0.16


12.5

%











AVERAGE SHARES OUTSTANDING









Basic



215,175



216,194




Diluted



216,214



217,525




 

RPC INCORPORATED AND SUBSIDIARIES







CONSOLIDATED BALANCE SHEETS






At March 31, (Unaudited)


(In thousands)



2014



2013

ASSETS






Cash and cash equivalents

$

44,293


$

10,283

Accounts receivable, net


467,978



375,126

Inventories


135,727



132,682

Deferred income taxes


12,502



5,952

Income taxes receivable


2,099



11,996

Prepaid expenses


8,538



10,516

Other current assets


1,691



4,110

   Total current assets


672,828



550,665

Property, plant and equipment, net


707,774



758,587

Goodwill


32,150



24,093

Other assets


21,543



19,231

   Total assets

$

1,434,295


$

1,352,576







LIABILITIES AND STOCKHOLDERS' EQUITY






Accounts payable

$

141,398


$

122,797

Accrued payroll and related expenses


30,439



24,976

Accrued insurance expenses


6,374



6,404

Accrued state, local and other taxes


6,505



5,026

Income taxes payable


6,593



777

Other accrued expenses


1,230



1,397

   Total current liabilities


192,539



161,377

Long-term accrued insurance expenses


11,183



10,714

Notes payable to banks


80,800



87,600

Long-term pension liabilities


22,229



27,798

Other long-term liabilities


7,902



2,388

Deferred income taxes


141,330



150,210

   Total liabilities


455,983



440,087

Common stock


21,884



22,056

Capital in excess of par value


-



-

Retained earnings


966,966



904,860

Accumulated other comprehensive loss


(10,538)



(14,427)

   Total stockholders' equity


978,312



912,489

   Total liabilities and stockholders' equity

$

1,434,295


$

1,352,576

 

Appendix A

RPC has used the non-GAAP financial measure of earnings before interest, taxes, depreciation and amortization (EBITDA) in today's earnings release, and anticipates using EBITDA in today's earnings conference call.  EBITDA should not be considered in isolation or as a substitute for operating income, net income or other performance measures prepared in accordance with U.S. GAAP.  RPC uses EBITDA as a measure of operating performance because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. We are also required to use EBITDA to report compliance with financial covenants under our revolving credit facility. A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Set forth below is a reconciliation of EBITDA with Net Income, the most comparable GAAP measure.  This reconciliation also appears on RPC's investor website, which can be found on the Internet at www.rpc.net.

 

Periods ended March 31, (Unaudited)



First Quarter


% BETTER
(WORSE)





2014



2013













Reconciliation of Net Income to EBITDA









Net Income 


$

39,388


$

35,076


12.3

%

Add:










     Income tax provision 



25,591



22,363


(14.4)


     Interest expense



337



340


0.9


     Depreciation and amortization



55,505



52,821


(5.1)


Less:










     Interest income



4



5


(20.0)


EBITDA


$

120,817


$

110,595


9.2

%











EBITDA PER SHARE










     Basic 


$

0.56


$

0.51


9.8

%

     Diluted 


$

0.56


$

0.51


9.8

%

 

 

 

SOURCE RPC, Inc.


Source: PR Newswire (April 23, 2014 - 7:15 AM EDT)

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