RPC, Inc., a leading diversified oilfield services company, has announced its unaudited results for the third quarter ended September 30, 2024. Despite facing headwinds in the industry, the company has demonstrated its ability to adapt and maintain a strong financial position.

Navigating Turbulent Times with Agility and Resilience

Weathering the Storm: Pressure Pumping Challenges and Diversified Service Lines

The third quarter saw sequentially lower revenues and profits for RPC, Inc. as the oilfield services market faced challenges. The company's largest service line, pressure pumping, experienced a 12% decline in revenues due to lower asset utilization in a highly competitive marketplace. However, the company's other service lines, such as cementing, downhole tools, and rental tools, were relatively more stable, with a combined 4% decrease in revenues.The decline in pressure pumping revenues was primarily attributed to softness in the company's spot and semi-dedicated customer base, as well as the negative impact of customer consolidation and associated acquisition of certain customers. Despite these headwinds, RPC's management remains focused on taking measured cost actions to preserve margins until industry conditions improve.

Innovative Offerings and Acquisition Appetite: Positioning for Growth

As the company looks to the future, it plans to expand some of its innovative new products and services in coiled tubing and downhole tools to capitalize on attractive opportunities. RPC's management has expressed a high appetite for high-quality acquisitions and is encouraged by the availability of actionable transactions.The company's strong balance sheet, with nearly $280 million in cash and no debt at the end of the third quarter, positions it well to support existing businesses, potential mergers and acquisitions, and dividend payments. This financial flexibility allows RPC to navigate the current market challenges and position itself for future growth.

Navigating Industry Dynamics: Rig Count, Oil Prices, and Natural Gas Prices

The third quarter saw a sequential decline in the U.S. rig count, which decreased by 2.8% to 586 rigs. Oil prices also declined, dropping by 6.4% to $76.57 per barrel, while natural gas prices increased slightly by 1.4% to $2.10 per Mcf.These industry dynamics have added headwinds to an already competitive marketplace, contributing to the challenges faced by RPC's pressure pumping service line. However, the company's diversified service offerings and strong financial position have enabled it to weather the storm and remain resilient.

Financial Performance: Navigating Margin Pressures and Maintaining Profitability

RPC's financial performance in the third quarter reflected the challenges faced by the industry. Revenues decreased by 7% sequentially to $337.7 million, with net income declining by 42% to $18.8 million, and diluted earnings per share (EPS) decreasing to $0.09.The company's adjusted EBITDA, a key metric, also declined by 19% sequentially to $55.2 million, with the adjusted EBITDA margin decreasing by 240 basis points to 16.4%. These declines were primarily driven by lower revenues, particularly in the pressure pumping service line, and the associated negative operating leverage and fixed cost absorption.Despite these margin pressures, RPC remained debt-free and paid $8.6 million in dividends during the third quarter, ending the period with a strong cash position of $277 million. The company's focus on cost management and financial discipline has enabled it to maintain profitability and preserve its balance sheet strength.

Segment Performance: Navigating Diverse Service Offerings

RPC's two business segments, Technical Services and Support Services, demonstrated varying performance during the third quarter.The Technical Services segment, which includes pressure pumping, downhole tools, coiled tubing, and other offerings, saw revenues decline by 8% sequentially, with operating income decreasing by 46%. This was primarily driven by lower activity levels in pressure pumping and the related negative leverage of fixed costs, particularly labor.In contrast, the Support Services segment, which provides equipment and services to assist customer operations, including rental tools and pipe inspection services, experienced a 7% increase in revenues and a 21% increase in operating income. The high fixed-cost nature of these service lines contributed to the improved performance.The divergent trends within RPC's business segments highlight the company's ability to navigate the diverse needs of its customers and adapt its service offerings to the changing market conditions.