This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Good morning and thank you for joining us for RPC, Inc.' 's first quarter 2022 financial earnings conference call. Today's call will be hosted by Rick Habel, President and CEO, and Ben Palmer, Chief Financial Officer. Also present is Jim Landris, 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.
spk01: Thank you, operator, and good morning, everyone. Before we begin our call today, I want 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 issue today, along with our 2021 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 EBITDA, which is a non-GAAP measure of operating performance. 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 the capital structure. We're also required to use EBITDA to report compliance with financial covenants under our credit facility. Our press release today and our website provided reconciliation of EBITDA to net income, the nearest gap financial measure. Please review that disclosure if you're interested in seeing how it's calculated. If you do not receive our press release for any reason, please visit our website at rpc.net for a copy. I will now turn the call over to our President and CEO, Rick Hull. Thank you, Jim.
spk02: This quarter was marked by unexpected changes in RPC's business. We began the year in a moderately improving market as healthy commodity prices encouraged our customers to go back to work after the holidays. In response, the U.S. rig count and well completions improved moderately. During the quarter, we encountered operational challenges resulting from many years of oil field underinvestment and several years of COVID-related supply disruptions. However, our industry's outlook changed tremendously in February when Russia's invasion of Ukraine caused oil and natural gas prices to increase. and more importantly force the international community to immediately rethink the strategic importance of reliable hydrocarbon fuel sources during the past few months the price of oil increased to more than a hundred dollars a barrel for the first time since 2014. our customers responded by increasing their planned activities as it became clear higher commodity prices would endure and the appeal of the politically stable U.S. oil field group. We finished the first quarter in the beginning stages of the strongest oil field service environment we've experienced in many years. Now our CFO, Ben Palmer, will discuss our financial results in detail, after which I will provide some closing comments.
spk01: Thank you, Rick. For the first quarter of 2022, revenues increased to $284.6 million compared to $182.6 million in the same quarter of the prior year. Revenues increased due to higher customer activity levels, pricing improvements, and a larger fleet of pressure pumping equipment in service. Operating profit for the first quarter was $23 million compared to an operating loss of $10.5 million in the same quarter of the prior year. EBITDA for the first quarter was $43 million, compared to EBITDA of $7.8 million in the same quarter last year. Our diluted earnings per share were $0.07, compared to $0.05 loss per share in the same quarter last year. Cost of revenues during the first quarter of 2022 was $200. $146.2 million or 80.1% of revenues during the first quarter of 2021. Cost of revenues increased primarily due to increases in expenses consistent with higher activity levels, such as materials and supplies expenses, maintenance and repairs expenses, employment costs, and fuel costs. In addition, These costs increased due to higher market prices for materials and supplies, fuel, and other raw materials. Cost of revenues as a percentage of revenues decreased due to the leverage of higher revenues over direct employment costs improved pricing for RPC services and a favorable job mix within pressure pumping. Selling, general, and administrative expenses increased to $36.2 million in the first quarter of 2022, from $30.6 million in the first quarter of the prior year due to increases in employment-related costs. Selling, general, and administrative expenses decreased to 12.7% of revenues in the first quarter of 2022 compared to 16.8% of revenues in the first quarter of 2021 due to the leverage of higher revenues over costs that are relatively fixed during the short term. Depreciation and amortization was $19.5 million in the current quarter compared to $17.8 million in the same quarter of the prior year. Our technical services segment revenues for the first quarter were $266.3 million, a 54.3% increase compared to $172.6 million in the same quarter of the prior year. Segment operating profit was $21.8 million compared to $5.8 million operating loss in the first quarter of the prior year. the improvements in technical services operating results were driven by higher customer activity levels result resulting in higher utilization of our existing equipment and some pricing improvements our sports services segment revenues for the first quarter were 18.3 million an 83.3 percent increase compared to 10 million in the same quarter of the prior year segment operating profit In the first quarter, it was $2.8 million compared to an operating loss of $2.9 million in the first quarter last year. On a sequential basis, first quarter revenues increased by 6.1%. Again, to $284.6 million from $268.3 million. This was due to improved pricing in all of our service lines as well as higher customer activity levels. Early in the first quarter, our pressure pumping service line was impacted by customer-provided sand supply issues. For those customers, we have assumed responsibility for the supplying of sand, and those issues have since subsided. We expect this to further demonstrate the value we add to these customers. Cost of revenues during the first quarter increased by 4.1% to $208.8 million from $200.6 million in the prior quarter. As a percentage of revenues, cost of revenues decreased slightly to 73.4% from 74.8% in the prior quarter. This was due to pricing improvements and an improved job mix in RPC's technical services segment. Selling general and administrative expenses increased by 12.8% to $36.2 million from $32.1 million in the prior quarter. And this was primarily due to employment-related costs, including variable incentive compensation consistent with improved operating performance. Operating profit during the first quarter was $23 million compared to $20.1 million in the prior quarter. Our EBITDA was $43 million compared to $39.4 million in the prior quarter. Our technical services segment revenues increased by $11.9 million, or 4.7%, again, due to higher customer activity levels in many of our service lines and pricing improvements. Technical services segment generated a $21.8 million operating profit compared to a $20.5 million operating profit in the prior quarter. Our support services segment revenues increased by 32.4% to $18.3 million. Support services operating profit was $2.8 million compared to an operating loss of $373,000 in the prior quarter. During the first quarter of 2022, RPC continued to operate eight horizontal pressure pumping fleets. This was unchanged from the previous quarter. First quarter 2022 capital expenditures were $19.1 million. We currently estimate full year 2022 capital expenditures to be approximately $115 million. This is roughly split between capitalized maintenance and for existing equipment and selected growth opportunity. In addition, RPC will make $24 million of finance lease payments for a pressure pumping fleet acquired in 2021. payment in Q3 of 2022. With that, I'll turn it back over to Rick for some closing remarks.
spk02: Ben, thank you. As I mentioned earlier, unanticipated geopolitical events have changed our environment tremendously over the past two months. We believe their impact will allow us to plan our operations and investments with more certainty and generate improved financial results as this cycle unfolds. However, our approach towards capital expenditures remains disciplined. We recognize that some of our older pressure pumping equipment is approaching the end of its productive life and anticipate any new fleets will ultimately replace an older fleet. In this improved environment, we are focusing on working capital management, making appropriate investments in the business to maintain our capacity, and capturing cash flow improvements. RPC has a history of returning capital to shareholders, a tradition we anticipate resuming in the near future. Thanks for joining us this morning, and at this time we're happy to address any questions that you may have.
spk03: Everyone, if you would like to ask a question, you will need to press star 1 on your telephone. To withdraw your question, just press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Daniel from Daniel Energy. Your line is open.
spk00: Good morning, gentlemen. Thanks for putting me in. Sure, John. Just a couple quick ones for me. I know you mentioned eight fleets as an average in Q1. Can you speak to where you are today and where you expect to be as for getting into the summer months.
spk01: John, thank you. This is Ben. You kind of went out in and out there just a little bit. I think you were asking how we see that maybe changing or progressing over the summer.
spk00: Yeah, just any color would be helpful.
spk01: Yeah, yeah. Again, we currently have eight. We are working to put another existing fleet out, and we expect that could happen as soon as the second quarter, but maybe more likely early third quarter. But that's all of the existing plans right now that we have submitted a plan.
spk00: Just in terms of any CapEx that's growth oriented, can you speak to where you might deploy that in light order?
spk01: Good question. It's a variety of small items. It doesn't encompass any particular expansion within pressure pumping. It's just a few miscellaneous investments on the fringes, and I wouldn't expect the delivery of those particular items to have any immediate significant impact. We certainly see our results improving and building with the trends of higher prices and more utilization and things like that. So it's a good question, an appropriate question, but I don't see anything there that's really noteworthy to point out that would have a dramatic impact on our results.
spk00: Fair enough. Thank you for putting me in. I'll turn it over. Thanks, John. Thank you.
spk03: Again, everyone, to ask a question, just press the star 1 on your telephone keypad. Presenters, there are no questions over the phone. Please continue.
spk01: Okay. Well, John, thank you for calling in for your question. This is Jim Landers. My closing remark will be to give the revenue percentages of our major service lines. Each quarter we're asked for that, so I'm going to go ahead and give it. So for the first quarter of 2022, as a percentage of RPC consolidated revenue, here are the percentages of revenue for our major service lines. Pressure pumping was 42.1% of revenue. Our crew tubing service line was 28.5% of revenue. Coil tubing was 9.4% of revenue. Nitrogen was 2.7% of revenue. Rental tools, which is in our support services segment, was 4.6% consolidated RPC revenues. And snubbing was 2.2% of revenues. Again, we appreciate people who called in to listen. We hope everybody has a good day. Talk to you soon.
spk03: This concludes today's conference call. And please be reminded that for the replay, you may visit www.rpc.net within two hours following the completion of the call. Thank you and have a great day.
Disclaimer