RPC, Inc.

Good morning, and thank you for joining us for RPC, Inc.' 's fourth quarter 2025 earnings conference call. Today's call will be hosted by Ben Palmer, President and CEO, and Mike Schmidt, Chief Financial Officer. 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. I will now turn the call over to Mr. Schmidt.

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 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 between the 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.

Thanks, Mike, and thank you for joining our call this morning. Today, we'll talk about our fourth quarter results and provide you with a few operational highlights. Fourth quarter results reflect a sequential revenue decline across the majority of our service lines. later in the month. During the quarter, service lines other than pressure pumping represented 70% of total revenues and saw a 4% sequential decrease compared to the third quarter of 2025. Although we did see revenues increase at Spender Group's submitting business, Patterson Tubular Services' storage and inspection business, and cut pressure control, snubbing, and well revenues decreased 9% sequentially. We saw growth in our southeast and northeast regions. Our largest region, the western VidCon, which includes Elk City and Odessa locations, was flat sequentially. Weakness was experienced in the international and the Rocky Mountain regions. RootTuning Solutions is a market leader in downhole completion tools and includes a portfolio of products and advanced technology. We have seen success building since our late 2024 rollout of the A10 downhole motor. The new motor is positioned in the completions market to specifically address today's longer laterals and higher flow rates. We believe this tool technology provides customers with unmatched performance and has resulted in incremental share gains. Virginia Solutions continues to expand the rollout of its new metal-on-metal power sector expanding downhole environments. This improved technology allows us to expand to the new markets due to these advantages. We initially prototyped the MetalMax motor in a few key geographic areas, and it recently expanded into other regions. Retrieving Solutions continues to actively market and develop its unplugged effective stage isolation. While the product is early in its lifecycle, adoption has steadily increased. Also within technical services, cut pressure controls revenues were up 1% sequentially, but by increases in well control activity, cavern gas storage work. This unit was built to support a long-term customer, their storage well maintenance schedule over the next several years. This work is regulatory driven and is part of our effort to continue diversifying into other markets. Coal tubing, our largest service line within Cut Pressure Control, was down 2% sequentially after a really strong third quarter. Our new 2 and 7 We are upgrading an existing coiling unit to handle the larger two and seven eighths inch tubing, and it's expected to be in service by the middle of 2026. Pentel Completions, the largest wireline provider in the Permian Basin, experienced a decline in revenues of 3% during the quarter. Given our market position, we expect 2026 to trend closely with large Permian operator activity. This decline largely related to holiday shutdowns and a fleet we idled in October. We do not expect to reactivate any fleets until returns improve. Many of our businesses have been impacted by recent winter storms early in the first quarter. While activity is expected to continue as conditions improve, these lost operating days are not fully recoverable and the associated RTC's focus remains on leveraging our strong balance sheet and maximizing long-term shareholder returns. We continue to strategically grow our less capital-intensive service lines, both organically and through acquisitions. With that, Michael and I will discuss the quarter's financial results. Thanks, Ben.

Our fourth quarter financial results, with sequential comparisons to the third quarter of 2025, are as follows. Revenues decreased 5% to $426 million compared to Q3. Breaking down our operating segments, technical services, which represented 95% of our total fourth quarter revenues, was down 4%. Support services, which represented 5% of our revenues, was down 18%. The following is a breakdown of the fourth quarter revenues for our largest service lines. Pressure pumping, 27.6%. Wireline, 24.1%. Downhole tools, 22.4%. Coiled tubing, 9.7%. Cementing, 5.9%. Rental tools, 3.4%. Together, these service lines accounted for 93% of our total revenues. As disclosed in this morning's press release, we made the decision to expense wireline cables that were previously being capitalized beginning in the fourth quarter. This was due to a change in our useful lives because of increased activity and change in work type. The impact is seen primarily through an increase in cost of revenues and a reduction in capital expenditures, but also a modest decrease in depreciation and amortization. Cost of revenues excluding depreciation and amortization $337 million compared to $335 million in the previous quarter. This increase was primarily related to expensing wireline cables and other materials and supplies expenses related to job mix. SG&A expenses were $48 million up slightly from $45 million. As a percent of revenue, SG&A increased 120 basis points to 11.2%, primarily due to employee incentives and higher other related employment costs. The effective tax rate was unusually high during the quarter. The higher rate was primarily due to the liquidation of our company-owned life insurance policies that were part of the previously announced dissolution of the company's non-qualified supplemental retirement income plan, coupled with the non-deductible portion of acquisition-related employment costs. Adjusted diluted EPS was $0.04 in the fourth quarter. Adjustments totaled $0.06 in related to the expense of wireline cables purchased and capitalized from previous quarters, acquisition-related employment costs, and a significant increase in tax expense related to taxable gains on the sale of the company-owned life insurance policies and other investments related to liquidation of the company's non-qualified supplemental retirement income plan. Adjusted EBITDA was $55.1 million down from $67.8 million to the broad-based decline across the majority of the businesses. Adjusted EBITDA margin decreased 230 basis points sequentially to 12.9%. The adjustments made to EBITDA were made to make future periods more comparable. Operating cash flow to date was $201.3 million, and after CapEx of $148.4 million, free cash flow was $52.9 million. The change to expensing wireline tables reduced both operating cash flow and CapEx, but resulted in no change to free cash flow. At quarter end, we had approximately $210 million in cash, a $50 million seller finance note payable, and no borrowings from our $100 million revolving credit facility. Payment of dividends totaled $35.1 million year-to-date through Q4 25. During the quarter, we paid $8.8 million in dividends. Full-year 2025 capital expenditures were $148 million, primarily related to maintenance capex and inclusive of opportunistic asset purchases, as well as our ERP and other IT system upgrades. Capital expenditures were $12 million lower due to wireline cables being expensed rather than capitalized in the fourth quarter. Additionally, we saw approximately $15 million in anticipated capital expenditures delayed into 2026. Due to this delay, we expect 2026 capital expenditures in the range $150 to $180 million. We'll adjust our spend based on activity levels. I'll now turn it back over to Ben for some closing remarks.

Thank you, Mike. 2025 was a challenging year with year-end oil prices reaching its lowest levels since COVID. While we have seen recent improvement in oil and natural gas prices, we need further increases to disperse significant customer activity levels. Our management teams have experienced many cycles over the years, and we will continue to focus on costs, returns, and maintaining financial flexibility. This flexibility allows us to take advantage of opportunities that arise and to pursue growth opportunities through selective investment for organic growth, investment in new technologies, and M&A within our existing markets and the broader energy sector. I want to thank all of our employees who put in tremendous work high levels of service and value to our customers. Thank you for joining us this morning, and at this time, we're happy to address any questions you might have.

At this time, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Don Crist with Johnson Rice. Please go ahead.

Good morning, guys. Hopefully, y'all are doing well this morning. My first question, and Ben, I don't want to pin you down to any kind of guidance for the first quarter, but given the weather impacts for the first, call it two weeks of the year, do you think it kind of shakes out similar to the fourth quarter directionally? And again, I'm not looking for specific numbers here.

To be honest with you, Don, it's a great question. We're still trying to analyze the impact. We do have – we're quite geographically diversified, but we are concentrated in the Permian and in the VidCon, Oklahoma, and both of those areas were hit pretty hard. So reasonable question. I understand why you're asking, but we don't know yet. But certainly it's not insignificant.

I understand it's hard to quantify given we still got a lot of winter left. My second question would be, we've seen a lot of your competitors have challenges outside of pressure pumping and the other business lines that y'all operate in. A lot of that equipment starts to move overseas to the Middle East and other places for unconventional type development. Are you seeing that other business lines, you know, through tubing and coil and wire lines start to normalize or some of your competitors go away and have a little bit less competition there as that equipment moves overseas?

Maybe a little bit of that. I don't know that it's a tremendous amount yet, but certainly every little bit can help. There have been, we've heard of some competitors in some of those other service lines that are obviously reorganizing or being sold, absorbed by other competitors. So perhaps that is an indication that the market stress is getting to some of the less well-capitalized companies, and hopefully that'll inert our benefit.

Okay, and just one last question for me. You know, obviously, you've been very prudent with the balance sheet over the years and selectively done M&A, but, you know, you've got a pretty large cash hoard right now. Any indication that we could see some stock buybacks, or are you going to just keep that for M&A in the near term?

We're always evaluating the various uses of our capital. us necessarily in the near term doing anything dramatically different, but that's in the tool chest and we're looking at it. I appreciate it. I'll get back in queue. Thanks. Thank you, Don.

Your next question comes from the line of John Daniel with Daniel Energy Partners. Please go ahead.

Hey, guys. Thanks for including me. You mentioned that the fleet was idling. Is there anything? Can you hear me okay? I'm a little bit difficult. Yeah, cut out.

How about now? How about now? That's better. That's better. All right. Sorry. Just driving to Midland. My question is, you know, with the fleet that was idled in October, I think you said October, at least in what quarter? Is there anything today which would suggest that you think that fleet comes back this year? And with the reactivation, is it a function of price, or would it be a function of if you had a sufficient amount of work, even at current pricing? Just how do you think about that?

Good question. I would have to say, I mean, we're always looking and evaluating opportunities where I would say probability is we would need to you know be really comfortable that it's uh incrementally better pricing we're not looking for the same uh pricing at at the prior uh activity levels right and as we've always talked over the years you know some of it given i mean we do have some uh customers that our confidence in how steady the activity can be at a certain pricing and so forth. So I think we're not in a panic to try to put that fleet back to work. We want to make sure we're comfortable that it's going to be generating probably better cash flow than we've recently been experiencing, not just from that fleet, but just overall. We would want each other to present a pretty high probability that we would have an incremental benefit from bringing it back into service.

Okay. Fair enough. The second question is about M&A. Obviously, you guys have the balance sheet to prosecute deals should you wish to. When you step back and think about just the market, you've got some of your peers that are chasing power. Others will be more focused on international. It would seem that the universe of realistic buyers of traditional land equipment is kind of diminishing. I don't know if that's that's a reasonably fair statement is that would you agree with that and does it argue you take you know be very you know careful i mean just take your time there's no rush to do deals if there's limited buyers just if you could kind of bloviate on that i think that's a good way to set it up uh yeah i i you know they're i'm not knowledgeable of the entire market but yes i don't think there's a whole lot of competition out be ones that would either add to some of our existing service lines.

It could be a really good strategic fit, but all of it, depending on, of course, trajectory of their business and the price and all of those sorts of things. So, yeah, we're not in panic. We traditionally don't lean into highly competitive bidding situations and to We do have the balance sheet, not only the capital capacity, but the cash gives us a lot of flexibility. And so OFS is something we're looking at. But we too want to open up the aperture of what's the possible. We've been doing some things that are on the edges of other parts of energy, like some of the gas storage work. We don't have any yet that's of a significant amount, but we like that diversification. And so we're opening up that tour to look at even more broadly than we may have in the past.

Okay. Well, thank you for including me today.

Well, thank you, John. Drive safely.

Yes, sir. Again, if you would like to ask a question, press star 1. And your next question comes from the line of Derek Podheiser with Piper Sandler. Please go ahead.

Hey, good morning, guys. Maybe we could just start with some additional insight. Morning. Just some additional insight and maybe some history into the updated wireline accounting treatment. Maybe just why now and not when the deal occurred last year. I think you mentioned a change in work type with the wireline. Just trying to understand better, you know, really what happened that caused this change.

sure um jerry thanks for the question uh previously you know they had an audit and previously they were uh capitalizing wireline but their business had started changing about the time that uh we had to have the acquisition um you know it's more simulfrac travel frag and just working more so it's something we kept our eyes on and that we wanted to make sure we were comfortable with by the end of the year we were only depreciating them over 18 months previously which was kind of where they historically have been but we knew that the type of work was changing and so we were just monitoring over you know the last couple quarters how much spend we were having on on wireline cables and you know we were more comfortable that is you know closer to you know under a year and so rather than letting it build over time being aggressive we thought the right thing to do was within our purchase accounting window we had enough evidence to at this point before year end to go ahead and make the switch and you know we focused on free cash flow here and it doesn't have a ton of it has zero free cash flow impact so for us we just thought it was you know the correct accounting treatment as we looked at kind of how quickly we were using up the cables which had really changed and started changing as the work changed

Derek, as you know, too, I mean, we and the pumping industry went through this with fluid ants a number of years ago. So it's not dissimilar in that regard. So I appreciate the question.

Right, right. Yeah, no, that was very helpful. I appreciate the color. And yeah, it did remind me of the fluid an issue years ago. I GUESS MAYBE A QUESTION ON THROUGHTUBING SOLUTIONS. YOU TALKED ABOUT INTERNATIONAL REGIONS AND YOUR FOOTPRINT THERE. MAYBE CAN YOU EXPAND ON THAT, MAYBE TO EDUCATE US ON THE LOCATION AND THE TYPE OF TECHNOLOGY YOU'RE DEPLOYING THERE AND HOW YOU REALLY SEE THAT BUSINESS GROWING OVER THE NEXT COUPLE YEARS?

YEAH. WELL, WITH RESPECT TO THE COLOR ON INTERNATIONAL, WE HAVE PAIRED BACK SIGNIFICANTLY OUR INTERNATIONAL

where we were a number of years ago through taking solutions uh has the largest presence internationally of our uh service lines um the middle east is is where we have uh the most activity and that's the area that did experience the weakness that we were pertinent in canada area where we've done some work historically and have center work up in canada

Got it. Is there any renewed focus as far as the Middle East and the build out of unconventionals and through tubing, you know, being a potential, you know, growth trajectory for you, maybe reigniting just given the unconventional build out of Middle East, or is that not the correct read through?

It's possible. You know, we kind of several years ago kind of changed our business model there. So we had less of Yes, I mean, I think our tools certainly can perform very well in those environments like they do here in the state. So I would expect and hope that we would have some improvement there, but like that we're not directly there ourselves. not anything that we're counting on in any of our current forecasts, but we hope it does come to fruition.

Got it. Okay, that's helpful. And then maybe just a third question. A quick State of the Union on the current spot market in pressure pumping. You know, how's the competition? I mean, it's always been oversupplied, but You know, you've stacked a fleet, and I'm sure some of your competitors have stacked a fleet. I'm not sure if any of the smaller mom-and-pop privates have gone away, just given where pricing and activity has gone to. Obviously, we have accelerating attrition as well. So maybe could you help us further understand the state of the market today? Do you see competition reducing? Any sort of, you know, secular fundamental improvement that we could potentially see in the spot market as we work through the year?

um we're not seeing anything dramatic yet at this point of course uh you know some there's you know there's some of the uh consolidation that was occurring over the last couple of years this results in just selling off some of the the uh some of the properties and things like that and that brings in some of the customers that are more spotty looking if you will uh so it could create some opportunities but it it's really more the same going to begin with our pricing. Again, one of the reasons we, you know, idle the fleet, we trend a little bit ahead count. So we're trying to do what we can to make the best of the situation. We are, you know, we're certainly continuing to maintain the business, but, you know, the returns just need to improve. And we're hopeful that competitors, there are some mom and pops out there that are We continue to support pressure pumping, but we're focused on some of the other service lines that are less capital intensive, and we'll see where all that takes us.

Right, right. All right, great. Appreciate the color. I'll turn it back.

Thank you. Appreciate it, Eric. Your next question comes from the line of Chuck Minervino with Susquehanna. Please go ahead.

Hi, good morning. Morning, Chuck. I was just wondering if you could talk a little bit about that 2026 CapEx. Sounds like you had some deferred spend from 2025, but then also I guess the wireline cable now comes out of the CapEx. Maybe they were offsetting each other, but if they are, you still got to have CapEx up in 2026. So we're just curious if you can kind of touch on that a little bit and if there's maybe room for that to come down if you're looking to generate a little bit more free cash flow during the year.

Well, I think we put out there, I think it's a quote-unquote conservative number and that it's maybe larger. We could have said something smaller, but we're trying to be realistic with respect to our near-term and longer-term plans. I mean, we've always, certainly if things move dramatically in one way or the other, you know, CapEx But we scrutinize our CapEx very, very carefully. Certainly there's opportunities to reduce it if conditions warrant. The way we run the business, our management teams, they look at their plans, they come up with their CapEx plans, but they know that in terms of unapproved or undelivered equipment, it's always subject it's not committed if it's in the budget uh that doesn't mean it can be spent so we scrutinize it very carefully so there is an opportunity for that number to come down and likewise there could be opportunities for go up slightly right or something if a opportunity comes along that we can pursue we've got the balance sheet to be able to do that so uh but uh but but yeah we everybody understands that you know at the end of the day the the road and everybody buys into that and understands and trying to do what's prudent to be able to support our businesses and selectively grow them. But, but, uh, but obviously be very, very mindful and particular and selective about capex investments. We'll continue to be that.

Got it. Um, and then just one other, you know, in support services, I know not a huge piece of the overall revenue pie, but but the rental tool revenue down pretty sharply. It sounds like late in the year. I know there's always seasonality late in the year. Was that particularly kind of sharper than you've seen historically? And I was just kind of curious if there was any reason for it or any more color you could provide.

Yeah, it is. It was. You can have one or two customers that slow down for whatever reason. And I think it too was impacted in the Rockies, similar to through tubing solutions that we talked about. So it's kind of one or two customer specific that impacted that. So it's really just some of it was not permanent delays. I mean, it's just obviously they're a rental tool company and drilling. So this was

some delays on on drilling some wells but we believe it's only delays it was just delaying it slightly so it's not a lost opportunity or anything like that it was just a delay the other call out on that is they had a really great third quarter so I mean that was pretty tough comparable gotcha okay thank you very much thank you appreciate it

There are no further questions at this time. I will now turn the call back over to Ben Palmer for closing remarks.

Thank you very much, operator. We appreciate everybody calling in and listening, and look forward to talking to some of you perhaps later today, and hope you have a good rest of the day. Take care.

Today's call will be available for replay on www.rpc.net within two hours following the completion of the call. ladies and gentlemen that concludes today's call thank you all for joining you may now disconnect