RPC, Inc. Reports Second Quarter 2023 Financial Results

ATLANTA, July 26, 2023 /PRNewswire/ -- RPC, Inc. (NYSE: RES) today announced its unaudited results for the second quarter and six months ended June 30, 2023. 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 June 30, 2023, RPC generated revenues of $415.9 million, a decrease compared to $476.7 million in the first quarter. Revenues declined due to job delays and cancellations by several pressure pumping customers as well as weaker activity levels in most of the natural gas-directed basins in which RPC operates. Operating profit for the second quarter of 2023 was $82.4 million compared to $90.7 million in the first quarter. Net income for the second quarter of 2023 was $65.0 million, or $0.30 diluted earnings per share, compared to net income of $71.5 million, or $0.33 diluted earnings per share, in the first quarter.

Adjusted operating profit¹ for the second quarter of 2023 was $83.3 million compared to $108.0 million in the first quarter of 2023. Adjusted net income² for the second quarter of 2023 was $65.7 million, or $0.30 adjusted diluted earnings per share², compared to adjusted net income of $84.9 million, or $0.39 adjusted diluted earnings per share, in the first quarter. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA)³ for the second quarter of 2023 was $110.1 million, a decrease compared to $132.9 million in the first quarter. In connection with the final termination of our pension plan, RPC recorded a non-cash pension settlement charge of $911 thousand in the second quarter of 2023 compared to a $17.4 million charge in the prior quarter.

Cost of revenues during the second quarter of 2023 was $265.8 million compared to $305.3 million in the first quarter. Cost of revenues as a percentage of revenues was 63.9 percent in the second quarter of 2023, essentially the same as 64.0 percent of revenues in the first quarter. Selling, general and administrative expenses were $43.6 million in the second quarter of 2023 compared to $42.2 million in the first quarter of 2023. Depreciation and amortization was $26.2 million in the second quarter of 2023 compared to $24.1 million in the first quarter of 2023.

RPC's revenues for the quarter ended June 30, 2023 increased by $40.4 million, or 10.7 percent, compared to the second quarter of the prior year due to improved pricing, higher customer activity levels and a larger active fleet of revenue-producing equipment. Cost of revenues during the second quarter of 2023 increased by $4.9 million compared to the second quarter of 2022. As a percentage of revenues, cost of revenues decreased to 63.9 percent in the second quarter of 2023 from 69.5 percent in the second quarter of 2022 because of improved pricing for our services and increases in customer supplied materials, as well as reduced maintenance expense due to an improvement in the average age of our equipment.

Selling, general and administrative expenses increased by $7.7 million in the second quarter of 2023 compared to the second quarter of the prior year primarily due to costs related to the settlement of a vendor dispute and the July 1, 2023 acquisition of Spinnaker Oilwell Service, LLC ("Spinnaker"). RPC's operating profit in the second quarter of 2023 was $82.4 million, compared to $60.4 million in the second quarter of 2022. Net income for the second quarter of 2023 was $65.0 million compared to $46.9 million in the second quarter of 2022. Adjusted EBITDA³ for the second quarter of 2023 was $110.1 million compared to $80.6 million in the second quarter of 2022.

For the six months ended June 30, 2023, revenues increased 35.2 percent to $892.5 million compared to $660.1 million for the same period last year. Net income for the six-month period was $136.5 million, or $0.63 diluted earnings per share, compared to net income of $62.0 million, or $0.29 diluted earnings per share, in the same period last year.

Rig Count and Commodity Price Statistics

The average U.S. domestic rig count during the second quarter of 2023 was 719, a 5.4 percent decrease compared to the first quarter of 2023, and unchanged compared to the same period in 2022. The average price of oil during the second quarter of 2023 was $73.54 per barrel, a 3.2 percent decrease compared to the first quarter of 2023, and a 32.5 percent decrease compared to the same period in 2022. The average price of natural gas during the second quarter of 2023 was $2.16 per Mcf, a decrease of 18.8 percent compared to the first quarter of 2023, and a 71.2 percent decrease compared to the same period in the prior year.

Management Commentary

"RPC's second quarter 2023 financial results reflect a slight decline in drilling and completion activity, particularly in natural gas-directed basins. This weakness impacted our pressure pumping revenues and profits, as several large customers either reduced their well completion activity or delayed completion work," stated Ben M. Palmer, RPC's President and Chief Executive Officer. "While we believe that this slowdown is temporary, we are taking prudent cost-cutting measures to better align our cost structure to activity levels.

"As we announced several weeks ago, RPC acquired Spinnaker Oilwell Services, a leading provider of oilfield cementing services in the Permian and mid-Continent basins. This acquisition will significantly expand our cementing business beyond its current location in South Texas to two other basins in which we provide our other services. As we begin the integration of Spinnaker into our operations, we continue to be impressed with the quality of Spinnaker's management, employees and operations," concluded Palmer.

Summary of Segment Operating Performance

RPC manages two operating segments – 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, downhole tools and services, coiled tubing, nitrogen, hydraulic workover services, surface pressure control equipment, well control, cementing 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 tubulars and related tools, pipe inspection and storage services, and oilfield training services.

Technical Services second quarter 2023 revenues decreased by 13.7 percent compared to the prior quarter but increased by 9.5 percent compared to the same period of the prior year. Technical Services generated an operating profit of $77.0 million in the second quarter of 2023 compared to $103.5 million in the prior quarter and an operating profit of $59.8 million in the second quarter of the prior year. The year-over-year improvements in Technical Services operating results were driven by higher customer activity levels, improved pricing, and a larger active fleet of revenue-producing equipment.

Support Services revenues increased by 4.7 percent during the second quarter of 2023 compared to the prior quarter and by 33.2 percent compared to the same period of the prior year. The revenue increase was due to higher activity levels and improved pricing within rental tools. Support Services generated an operating profit of $7.9 million in the second quarter of 2023 and $6.6 million in the first quarter. Second quarter 2023 Support Services operating profit increased by $4.6 million compared to the second quarter of the prior year due to higher activity levels, improved pricing, and leverage of higher revenues over costs that are fixed during the short term.

RPC, Inc. will hold a conference call today, July 26, 2023 at 9:00 a.m. ET to discuss the results for the quarter. Interested parties may listen in by accessing a live webcast in the investor relations section of RPC, Inc.'s website at rpc.net. The live conference call can also be accessed by calling (888) 440-5966, or (646) 960-0125 for international callers, and use conference ID number 9842359. For those not able to attend the live conference call, a replay will be available in the investor relations section of RPC, Inc.'s website beginning approximately two hours after the call and for a period of 90 days.

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 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. 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, including statements regarding (i) our belief that the slowdown in drilling and completion activity is temporary, and (ii) our continued belief in the quality of Spinnaker's management and operations. 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 for the year ended December 31, 2022.

For information about RPC, Inc., please contact:

Michael L. Schmit, Chief Financial Officer
(404) 321-2140
[email protected]

Jim Landers, Vice President Corporate Services
(404) 321-2162
[email protected]

Appendix A

RPC, Inc. has used the non-GAAP financial measure of adjusted operating profit in today's earnings release and anticipates using this non-GAAP financial measure in today's earnings conference call. This measure should not be considered in isolation or as a substitute for operating profit, or other performance measures prepared in accordance with GAAP. 

Management believes that presenting the financial measure of adjusted operating profit enables us to compare our operating performance consistently over various time periods.

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 this non-GAAP measure with its most directly comparable GAAP measure.  This reconciliation also appears on RPC, Inc.'s investor website, which can be found on the Internet at rpc.net.

The Reconciliation of Operating Profit to Adjusted Operating Profit is shown below:

Appendix B

RPC, Inc. has used the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share in today's earnings release and anticipates using these non-GAAP financial measures in today's earnings conference call.  These measures should not be considered in isolation or as a substitute for net income, income per share, or other performance measures prepared in accordance with GAAP. 

Management believes that presenting the financial measures of adjusted net income and adjusted income per share, enable us to compare our operating performance consistently over various time periods.

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 these non-GAAP measures with their most directly comparable GAAP measures.  This reconciliation also appears on RPC, Inc.'s investor website, which can be found on the Internet at rpc.net.

The Reconciliation of Net Income to Adjusted Net Income and the Reconciliation of Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share is shown below:

Appendix C

RPC has used the non-GAAP financial measures of earnings before interest, taxes, depreciation, and amortization (EBITDA) and adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) in today's earnings release and anticipates using EBITDA and adjusted EBITDA in today's earnings conference call. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for net income or other performance measures prepared in accordance with GAAP. 

RPC uses EBITDA and adjusted EBITDA as measures of operating performance because they allow us to compare performance consistently over various periods without regard to changes in our capital structure. Adjusted EBITDA is useful to compare operating performance net of unusual or non-recurring charges. 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 net income, the most directly comparable GAAP measure, to EBITDA and adjusted EBITDA.  This reconciliation also appears on RPC's investor website, which can be found on the Internet at rpc.net.

The Reconciliation of Net Income to EBITDA and Adjusted EBITDA is shown below:

¹Adjusted operating profit is a financial measure which does not conform to GAAP. Additional disclosure regarding this non-GAAP financial measure and its reconciliation to operating profit, the nearest GAAP financial measure, is disclosed in Appendix A to this press release.

²Adjusted net income and adjusted diluted earnings per share are financial measures which do not conform to GAAP. Additional disclosure regarding these non-GAAP financial measures and their reconciliation to net income and income per share, the nearest GAAP financial measures, are disclosed in Appendix B to this press release.

³Adjusted EBITDA and EBITDA are financial measures which do not conform to GAAP. Additional disclosure regarding these non-GAAP financial measures and their reconciliation to net income, the nearest GAAP financial measure, are disclosed in Appendix C to this press release.

SOURCE RPC, Inc.