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RPC, Inc. Reports Second Quarter 2017 Financial Results

For the quarter ended June 30, 2017, revenues increased to $398.8 million compared to $143.0 million in the second quarter of last year. Revenues increased compared to the prior year due to higher activity levels and pricing for our services, higher service intensity, and a slightly larger fleet of in-service revenue-producing equipment. Operating profit for the quarter was $67.0 million compared to an operating loss of $75.2 million in the prior year. Net income for the quarter was $43.8 million or $0.20 diluted earnings per share, compared to net loss of $48.7 million or $0.23 loss per share last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $110.3 million compared to a loss of $19.1 million in the prior year.1 For the six months ended June 30, 2017, revenues increased to $696.9 million compared to $332.1 million last year. Net income for the six-month period was $47.5 million, or $0.22 diluted earnings per share, compared to net loss of $81.2 million, or $0.38 loss per share last year.

Cost of revenues during the second quarter of 2017 was $254.0 million, or 63.7 percent of revenues, compared to $127.0 million, or 88.8 percent of revenues, during the second quarter of last year. Cost of revenues increased primarily due to higher activity levels and service intensity. As a percentage of revenues, cost of revenues decreased due to improved pricing for our services as well as leverage of higher revenues over direct costs.

Selling, general and administrative expenses were $40.3 million in the second quarter of 2017 compared to $36.5 million in the second quarter of 2016. These expenses increased due to higher compensation costs, as well as other expenses consistent with higher activity levels. As a percentage of revenues, these costs decreased to 10.1 percent in the second quarter of 2017 compared to 25.5 percent in the second quarter of 2016, due to the leverage of higher revenues over primarily fixed expenses. Depreciation and amortization decreased to $41.3 million compared to $56.3 million in the second quarter of the prior year.

RPC recorded a $3.8 million gain on disposition of assets during the quarter, primarily due to the sale of operating equipment related to its oilfield pipe inspection business. Interest expense during the second quarter of 2017 was $114 thousand compared to $126 thousand during the second quarter of the prior year. Interest expense during the second quarters of 2016 and 2017 consisted solely of loan facility fees and costs. Interest income during the second quarter of 2017 was $411 thousand, an increase compared to $104 thousand during the second quarter of 2016.

Discussion of Sequential Quarterly Financial Results

RPC's revenues for the quarter ended June 30, 2017 increased by $100.7 million, or 33.8 percent, compared to the first quarter of 2017. Revenues increased due to higher activity levels and improved pricing for our services, as well as a slightly larger fleet of in-service revenue-producing equipment. Cost of revenues during the second quarter of 2017 increased by $37.8 million, or 17.5 percent, due to higher materials and supplies expenses and employment costs. Selling, general and administrative expenses during the second quarter of 2017 increased by $3.1 million, or 8.4 percent, compared to the first quarter of 2017 due to increased costs consistent with higher activity levels and improved profitability. RPC's operating profit during the second quarter of 2017 was $67.0 million, an increase of $65.4 million, compared to the first quarter operating profit of $1.6 million. Net income increased from $3.6 million in the first quarter of 2017 to $43.8 million in the second quarter of 2017. Diluted earnings per share for the second quarter increased to $0.20 compared to $0.02 in the first quarter of 2017.

Management Commentary

"The U.S. domestic rig count increased for the fourth consecutive quarter, and at a record rate from the historic low set during the second quarter of last year," stated Richard A. Hubbell, RPC's President and Chief Executive Officer. "Our customers increased their drilling and completion activities, and this increase coupled with RPC's well-maintained pressure pumping service capacity allowed us to generate strong sequential revenue growth and incremental profitability. The average U.S. domestic rig count during the second quarter of 2017 was 895, an increase of 113.1 percent compared to the same period in 2016, and an increase of 20.3 percent compared to the first quarter of 2017. The average price of natural gas during the second quarter was $3.08 per Mcf, a 40.6 percent increase compared to the prior year, and a 2.3 percent increase compared to the first quarter of 2017. The average price of oil during the second quarter was $48.19 per barrel, a 4.7 percent increase compared to the prior year but a 6.8 percent decrease compared to the first quarter of 2017. RPC's revenues increased at a greater rate than the change in these industry metrics because of our preparation over the last several years to participate in improving market conditions, our strong market presence in the Permian Basin, and the re-activation of some of the Company's idle equipment.

"We currently have indications of strong customer demand through the end of 2017. However, we are closely monitoring the recent fluctuations in the price of oil and its potential impact on our customer drilling and completion plans. We are very pleased with the current...


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