RPC, Inc. Reports Fourth Quarter And Full Year 2023 Financial Results And Declares Regular Quarterly Cash Dividend

Rhea-AI Summary

RPC, Inc. announced unaudited results for Q4 and full year 2023. Q4 saw a 19% sequential revenue increase to $394.5M, net income of $40.3M, and adjusted EBITDA of $79.5M. Full year 2023 revenues were up 1% to $1.6B, with net income of $195.1M. The company remained debt-free and acquired the Spinnaker cementing business. However, the holiday season slowdown and declining oil prices affected customer demand. The company is highly liquid and debt-free, focusing on capital returns to shareholders and organic investments.

Positive

• Sequential revenue increase of 19% to $394.5M in Q4
• Net income of $40.3M and adjusted EBITDA of $79.5M in Q4
• Full year 2023 revenues up 1% to $1.6B with net income of $195.1M
• The company remained debt-free and acquired the Spinnaker cementing business
• Highly liquid, debt-free, focusing on capital returns to shareholders and organic investments

Negative

• Holiday season slowdown and declining oil prices affected customer demand

Insights

Financial Analyst

The reported sequential revenue growth of 19% and a 120% increase in net income for RPC, Inc. in the fourth quarter of 2023 are significant indicators of the company's operational performance. The sharp rise in net income margin by 470 basis points to 10.2% suggests improved profitability, likely due to higher utilization of the company's pressure pumping fleet. The financial health of RPC is further underscored by its debt-free status and strong cash flow generation, with free cash flow of $213.8 million for the year.

Investors should note the company's capital allocation strategy, which includes paying dividends and repurchasing shares, amounting to $34.6 million and $21.1 million, respectively, in 2023. This reflects a commitment to returning value to shareholders and could be viewed positively by the market. However, the oil price decline towards the end of the year and the resulting slowdown in customer demand might raise concerns about potential impacts on future earnings, particularly if this trend continues.

Market Research Analyst

From a market perspective, the integration of the Spinnaker cementing business and the planned introduction of a new Tier 4 dual-fuel fleet are strategic moves that could enhance RPC's service offerings and efficiency. The shift towards more environmentally friendly equipment may also align with increasing industry and regulatory trends towards sustainability. However, the market will need to monitor how these investments affect RPC's margins and whether they can be leveraged to capture additional market share, especially in a volatile oil price environment.

RPC's commentary on the uncertain environment and their liquid, debt-free position suggests a conservative approach to navigating potential industry downturns. The company's ability to maintain operational flexibility and financial discipline will be critical in responding to fluctuations in the oilfield services sector, which is closely tied to commodity prices and overall energy demand.

Energy Sector Analyst

The U.S. rig count and oil and natural gas prices are vital metrics for the energy sector, influencing the activity levels in oilfield services. The reported decrease in the U.S. rig count by 19.8% year-over-year and the decline in oil prices by 5.0% from the previous year may signal a cooling in drilling activity, which could have downstream effects on service providers like RPC. While the company has managed to improve its financials sequentially, the broader industry trend suggests potential challenges ahead.

Additionally, the acquisition of the Spinnaker cementing business could potentially provide synergies and diversify RPC's revenue streams. However, the success of this acquisition will depend on the company's ability to effectively integrate Spinnaker's operations and leverage its customer relationships to drive growth amid industry headwinds.

ATLANTA, Jan. 25, 2024 /PRNewswire/ -- RPC, Inc. (NYSE: RES) ("RPC" or "the Company"), a leading diversified oilfield services company, announced its unaudited results for the fourth quarter and full year ended December 31, 2023.

* Non-GAAP and adjusted measures, including adjusted operating income, adjusted net income, adjusted earnings per share (diluted), EBITDA and adjusted EBITDA, adjusted EBITDA margin, and free cash flow are reconciled to the most comparable GAAP measures in the appendices of this earnings release.
* Sequential comparisons are versus 3Q:23. The Company believes quarterly sequential comparisons are most useful in assessing industry trends and RPC's recent financial results. Both sequential and year-over-year comparisons are available in the tables at the end of this earnings release.

Fourth Quarter 2023 Highlights

• Revenues increased 19% sequentially to $394.5 million
• Net income was $40.3 million, up 120% sequentially, and diluted earnings per share (EPS) was $0.19; net income margin increased 470 basis points sequentially to 10.2%
• Adjusted EBITDA was $79.5 million, up 53% sequentially; Adjusted EBITDA margin increased 440 basis points sequentially to 20.1%
• The strong sequential improvement in revenues and profitability resulted from significantly higher pressure pumping fleet utilization compared to the third quarter of 2023

Full Year 2023 Highlights

• Revenues increased 1% year-over-year to $1.6 billion
• Net income was $195.1 million and diluted EPS was $0.90; net income margin was 12.1%
• Adjusted EBITDA was $374.4 million, with Adjusted EBITDA margin of 23.1%
• Net cash flow from operating activities was $394.8 million and free cash flow was $213.8 million
• The Company remained debt-free, paid $34.6 million in dividends and repurchased $21.1 million of common stock in 2023 (including $8.6 million of buyback program repurchases during 4Q:23)
• The Company acquired the Spinnaker cementing business effective July 1, expanding RPC's existing cementing operations and customer relationships

Management Commentary

"We closed out 2023 with a strong sequential improvement in fourth quarter financial results," stated Ben M. Palmer, RPC's President and Chief Executive Officer. "As anticipated, the fourth quarter began with a solid increase in pressure pumping activity. However, as oil prices fell toward the end of the year, customer demand followed suit and we experienced a more significant holiday season slowdown than originally expected. Looking forward, we have a new Tier 4 dual-fuel fleet on order and anticipate placing it in service by the end of the second quarter of 2024, replacing a Tier 2 diesel fleet as we upgrade our asset base without adding to pressure pumping industry capacity.

"We have over $220 million in cash on the balance sheet, are highly liquid, debt-free, and capable of navigating an uncertain environment. This solid financial position also supports targeted organic investments, as well as continued capital returns to our shareholders through both dividends and opportunistic share buybacks. With the Spinnaker integration essentially complete, we are actively assessing additional acquisition opportunities to bolster selected service lines, increase our scale, and enhance our growth outlook," concluded Palmer.

Selected Industry Data (Source: Baker Hughes, Inc., U.S. Energy Information Administration)
		4Q:23			3Q:23			Change			% Change		4Q:22			Change			% Change
U.S. rig count (avg)			622			649			(27)		(4.2)	%		776			(154)		(19.8)	%
Oil price ($/barrel)		$	78.52		$	82.17		$	(3.65)		(4.4)	%	$	82.67		$	(4.15)		(5.0)	%
Natural gas ($/Mcf)		$	2.74		$	2.59		$	0.15		5.8	%	$	5.55		$	(2.81)		(50.6)	%

4Q:23 Consolidated Financial Results (Sequential Comparisons versus 3Q:23)

Revenues were $394.5 million, up 19%. Revenues increased primarily due to a significant rebound in pressure pumping activity compared to 3Q:23. However, growth was constrained by lower-than-expected activity during the December holiday season, which may have been influenced by declining oil prices throughout the quarter.

Cost of revenues, which excludes depreciation and amortization, was $279.4 million, up from $239.1 million. These costs increased as a function of revenue growth during the quarter.

Selling, general and administrative expenses were $38.1 million, down from $42.0 million. The decrease in expenses is due in part to a reduction in incentive compensation and other cost control measures.

Gain on disposition of assets was $1.6 million, reflecting asset sales through the Company's normal course of operations.

Interest income totaled $2.6 million, reflecting higher cash balances.

Income tax provision was $12.3 million, or 23.4% of income before income taxes.

Net income and diluted EPS were $40.3 million and $0.19, respectively, up from $18.3 million and $0.08, respectively, in 3Q:23. Net income margin increased 470 basis points sequentially to 10.2%.

Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation, and amortization) was $79.5 million, up from $51.9 million; adjusted EBITDA margin increased 440 basis points sequentially to 20.1%.  

Non-GAAP adjustments: there were no adjustments to GAAP performance measures in 4Q:23, other than those necessary to calculate EBITDA. However, in the first and second quarters of 2023, the Company reported pension settlement charges totaling $18.3 million, or $0.07 of diluted EPS, which were excluded when calculating adjusted financial measures (see Appendices A, B and C).

Balance Sheet, Cash Flow and Capital Allocation

Cash and cash equivalents were $223.3 million at the end of 2023, with no outstanding borrowings under the Company's $100 million revolving credit facility.

Net cash provided by operating activities and free cash flow were $394.8 million and $213.8 million, respectively, for the full year 2023.

Payment of dividends totaled $34.6 million in 2023. The Board of Directors declared a regular quarterly cash dividend of $0.04 per share, payable March 11, 2024, to common stockholders of record at the close of business on February 9, 2024.

Share repurchases totaled $21.1 million in 2023. Buybacks under the Company's share repurchase program totaled $8.6 million during 4Q:23 (1,200,000 shares) and $18.7 million (2,469,056 shares) for the full year.

Segment Operations: Sequential Comparisons (versus 3Q:23)

Technical Services performs value-added completion, production and maintenance services directly to a customer's well. These services include pressure pumping, downhole tools and services, coiled tubing, cementing, and other offerings.

• Revenues were $371.1 million, up 22%
• Operating income was $46.4 million, up 146%
• Results were driven primarily by higher pressure pumping revenues, the largest service line within Technical Services, and the related leverage of fixed personnel costs

Support Services provides equipment for customer use or services to assist customer operations, including rental of tubulars and related tools, pipe inspection and storage services, and oilfield training services.

• Revenues were $23.5 million, down 14%
• Operating income was $5.0 million, down 27%
• Results were driven by lower activity in rental tools and the high fixed-cost nature of these service lines

		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,
(In thousands)		2023			2023			2022			2023			2022
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues:
Technical Services		$	371,059		$	303,069		$	458,135		$	1,516,137		$	1,516,363
Support Services			23,472			27,348			23,895			101,337			85,399
Total revenues		$	394,531		$	330,417		$	482,030		$	1,617,474		$	1,601,762
Operating income:
Technical Services		$	46,442		$	18,912		$	110,529		$	245,904		$	281,622
Support Services			5,036			6,861			6,703			26,461			18,095
Corporate expenses			(3,880)			(4,840)			(4,500)			(18,473)			(17,660)
Pension settlement charges			—			—			(2,921)			(18,286)			(2,921)
Gain on disposition of assets, net			1,615			1,778			2,509			9,344			8,804
Total operating income		$	49,213		$	22,711		$	112,320		$	244,950		$	287,940
Interest expense			(95)			(101)			(71)			(341)			(614)
Interest income			2,596			1,450			699			8,599			1,171
Other income, net			839			804			619			3,035			1,135
Income before income taxes		$	52,553		$	24,864		$	113,567		$	256,243		$	289,632

Conference Call Information

RPC, Inc. will hold a conference call today, January 25, 2024, 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 www.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.

About RPC

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.

Forward Looking Statements

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. Such forward-looking statements include statements that look forward in time or express management's beliefs, expectations or hopes. In particular, such statements include, without limitation: our expectation to place a new Tier 4 DGB pressure pumping fleet in service by the end of the second quarter of 2024; our capability to navigate an uncertain environment; our financial ability to support investments in the business and return capital to shareholders; and, our intention to assess acquisition opportunities to bolster selected service lines, increase our scale, and enhance our growth outlook. Risk factors that could cause such future events not to occur as expected include the following: the price of oil and natural gas and overall performance of the U.S. economy, both of which can impact capital spending by our customers and demand for our services; business interruptions due to adverse weather conditions; changes in the competitive environment of our industry; and our ability to identify and complete acquisitions. Additional factors that could cause the actual results to differ materially from management's projections, forecasts, estimates, and expectations are 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
irdept@rpc.net

Mark Chekanow, CFA, Vice President Investor Relations
(404) 419-3809
mark.chekanow@rpc.net

 

RPC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data)
		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
		2023			2023			2022			2023			2022
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
REVENUES		$	394,531		$	330,417		$	482,030		$	1,617,474		$	1,601,762
COSTS AND EXPENSES:
Cost of revenues (exclusive of depreciation and amortization shown separately below)			279,399			239,084			308,571			1,089,519			1,088,115
Selling, general and administrative expenses			38,127			42,012			38,211			165,940			148,573
Pension settlement charges			—			—			2,921			18,286			2,921
Depreciation and amortization			29,407			28,388			22,516			108,123			83,017
Gain on disposition of assets, net			(1,615)			(1,778)			(2,509)			(9,344)			(8,804)
Operating income			49,213			22,711			112,320			244,950			287,940
Interest expense			(95)			(101)			(71)			(341)			(614)
Interest income			2,596			1,450			699			8,599			1,171
Other income, net			839			804			619			3,035			1,135
Income before income taxes			52,553			24,864			113,567			256,243			289,632
Income tax provision			12,294			6,547			26,562			61,130			71,269
NET INCOME		$	40,259		$	18,317		$	87,005		$	195,113		$	218,363
EARNINGS PER SHARE
Basic		$	0.19		$	0.08		$	0.40		$	0.90		$	1.01
Diluted		$	0.19		$	0.08		$	0.40		$	0.90		$	1.01
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic			216,006			216,333			216,618			216,472			216,518
Diluted			216,006			216,333			216,618			216,472			216,518

 

RPC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
		(In thousands)
		December 31,			December 31,
		2023			2022
		(Unaudited)
ASSETS
Cash and cash equivalents		$	223,310		$	126,424
Accounts receivable, net			324,915			416,568
Inventories			110,904			97,107
Income taxes receivable			52,269			42,403
Prepaid expenses			12,907			17,753
Other current assets			2,768			3,086
Total current assets			727,073			703,341
Property, plant and equipment, net			435,139			333,093
Operating lease right-of-use assets			24,537			28,864
Finance lease right-of-use assets			1,036			—
Goodwill			50,824			32,150
Other intangibles, net			12,825			1,084
Other assets			35,411			30,481
Total assets		$	1,286,845		$	1,129,013
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	85,036		$	115,213
Accrued payroll and related expenses			30,956			33,161
Accrued insurance expenses			5,340			3,232
Accrued state, local and other taxes			4,461			4,296
Income taxes payable			275			499
Unearned revenue			15,743			—
Pension liabilities			—			9,610
Current portion of operating lease liabilities			7,367			10,728
Current portion of finance lease liabilities and finance obligations			375			—
Accrued expenses and other liabilities			2,304			1,864
Total current liabilities			151,857			178,603
Long-term accrued insurance expenses			10,202			7,149
Long-term retirement plan liabilities			23,724			23,106
Long-term operating lease liabilities			18,600			19,517
Long-term finance lease liabilities			819			—
Other long-term liabilities			7,840			5,430
Deferred income taxes			51,290			37,473
Total liabilities			264,332			271,278
Common stock			21,502			21,661
Capital in excess of par value			—			—
Retained earnings			1,003,380			856,013
Accumulated other comprehensive loss			(2,369)			(19,939)
Total stockholders' equity			1,022,513			857,735
Total liabilities and stockholders' equity		$	1,286,845		$	1,129,013

 

RPC INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		(In thousands)
Years ended December 31,		2023			2022
		(Unaudited)
OPERATING ACTIVITIES
Net income		$	195,113		$	218,363
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash charges			108,249			83,664
Pension settlement charges			18,286			2,921
Working capital			57,810			(122,523)
Other operating activities			15,305			18,861
Net cash provided by operating activities			394,763			201,286
INVESTING ACTIVITIES
Capital expenditures			(181,005)			(139,552)
Proceeds from sale of assets			18,091			15,837
Purchase of business			(78,798)			—
Net cash used for investing activities			(241,712)			(123,715)
FINANCING ACTIVITIES
Payment of dividends			(34,562)			(8,645)
Cash paid for common stock purchased and retired			(21,088)			(918)
Cash paid for finance lease and finance obligations			(515)			(24,017)
Net cash used for financing activities			(56,165)			(33,580)
Net increase in cash and cash equivalents			96,886			43,991
Cash and cash equivalents at beginning of period			126,424			82,433
Cash and cash equivalents at end of period		$	223,310		$	126,424

Non-GAAP Measures

RPC, Inc. has used the non-GAAP financial measures of adjusted operating income, adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, adjusted EBITDA margin, and free cash flow in today's earnings release. These measures should not be considered in isolation or as a substitute for performance or liquidity measures prepared in accordance with GAAP. Management believes that presenting these non-GAAP measures enables investors to compare our operating performance consistently over various time periods net of unusual or non-recurring charges, and in the case of adjusted EBITDA, without regard to changes in our capital structure.

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 in the appendices below are reconciliations of these non-GAAP measures with their most directly comparable GAAP measures. These reconciliations also appear on RPC, Inc.'s investor website, which can be found on the Internet at www.rpc.net.

Appendix A
(Unaudited)		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
(In thousands)		2023			2023			2022			2023			2022
Reconciliation of Operating Income to Adjusted Operating Income
Operating income		$	49,213		$	22,711		$	112,320		$	244,950		$	287,940
Add: Pension settlement charges			—			—			2,921			18,286			2,921
Adjusted operating income		$	49,213		$	22,711		$	115,241		$	263,236		$	290,861

 

Appendix B
(Unaudited)		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
(In thousands)		2023			2023			2022			2023			2022
Reconciliation of Net Income to Adjusted Net Income
Net income		$	40,259		$	18,317		$	87,005		$	195,113		$	218,363
Adjustments:
Add: Pension settlement charges, before taxes			—			—			2,921			18,286			2,921
Less: Tax effect of pension settlement charges			—			—			(719)			(4,370)			(719)
Total adjustments, net of tax			—			—			2,202			13,916			2,202
Adjusted net income		$	40,259		$	18,317		$	89,207		$	209,029		$	220,565

 

(Unaudited)		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
		2023			2023			2022			2023			2022
Reconciliation of Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share
Diluted earnings per share		$	0.19		$	0.08		$	0.40		$	0.90		$	1.01
Adjustments:
Add: Pension settlement charges, net of tax		$	—		$	—		$	0.01		$	0.09		$	0.01
Less: Tax effect of pension settlement charges			—			—			—			(0.02)			—
Adjusted diluted earnings per share		$	0.19		$	0.08		$	0.41		$	0.97		$	1.02
Weighted average shares outstanding (in thousands)			216,006			216,333			216,618			216,472			216,518

 

Appendix C
(Unaudited)		Three Months Ended									Year Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
(In thousands)		2023			2023			2022			2023			2022
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Net income		$	40,259		$	18,317		$	87,005		$	195,113		$	218,363
Adjustments:
Add: Income tax provision			12,294			6,547			26,562			61,130			71,269
Add: Interest expense			95			101			71			341			614
Add: Depreciation and amortization			29,407			28,388			22,516			108,123			83,017
Less: Interest income			2,596			1,450			699			8,599			1,171
EBITDA		$	79,459		$	51,903		$	135,455		$	356,108		$	372,092
Add: Pension settlement charges			—			—			2,921			18,286			2,921
Adjusted EBITDA		$	79,459		$	51,903		$	138,376		$	374,394		$	375,013
Net income margin			10.2 %			5.5 %			18.0 %			12.1 %			13.6 %
Adjusted EBITDA margin			20.1 %			15.7 %			28.7 %			23.1 %			23.4 %

 

Appendix D
(Unaudited)
		Year Ended
(In thousands)		2023			2022
Reconciliation of Operating Cash Flow to Free Cash Flow
Net cash provided by operating activities		$	394,763		$	201,286
Capital expenditures			(181,005)			(139,552)
Free cash flow		$	213,758		$	61,734

 

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SOURCE RPC, Inc.

FAQ

What was the revenue increase in Q4 2023?

The sequential revenue increase in Q4 2023 was 19% to $394.5M.

What was the net income in Q4 2023?

The net income in Q4 2023 was $40.3M.

What was the adjusted EBITDA in Q4 2023?

The adjusted EBITDA in Q4 2023 was $79.5M.

What were the full year 2023 revenues?

The full year 2023 revenues were up 1% to $1.6B.

What was the net income for full year 2023?

The net income for full year 2023 was $195.1M.

What did the company acquire in 2023?

The company acquired the Spinnaker cementing business.

What affected customer demand in Q4 2023?

The holiday season slowdown and declining oil prices affected customer demand.

What is the focus of the company in terms of capital returns?

The company is focusing on capital returns to shareholders and organic investments.