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Rpc, Inc. Reports Third Quarter 2015 Financial Results

The following excerpt is from the company's SEC filing.

ATLANTA, October 28, 2015 - RPC, Inc. (NYSE: RES) today announced its unaudited results for the third quarter ended September 30, 2015. 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 and in selected international markets.

For the quarter ended September 30, 2015 revenues decreased 53.0 percent to $291.9 million compared to $620.7 million in the third quarter of last year. Revenues decreased compared to the prior year due to lower activity levels and pricing for our services. Operating loss for the quarter was $51.5 million compared to operating profit of $106.7 million in the prior year. Net loss for the quarter was $35.2 million or $0.16 loss per share, compared to net income of $64.9 million or $0.30 diluted earnings per share last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased to $15.4 million compared to $163.4 million in the prior year.

Cost of revenues during the third quarter of 2015 was $234.6 million, or 80.4 percent of revenues, compared to $398.3 million, or 64.2 percent of revenues, during the third quarter of last year. Cost of revenues decreased due to lower costs resulting from lower activity levels, reduced personnel and incentive compensation, and price reductions from suppliers, partially offset by the impact of increasing service intensity. Additionally, as a result of a change in accounting estimate implemented during 2015, replacement parts totaling approximately $12.6 million were charged to cost of revenues rather than being capitalized. In addition, RPC recognized $3.8 million in additional cost of revenues during the third quarter of 2015 due to write-downs in the value of materials and supplies which are slow-moving or can no longer be effectively utilized in providing our services to customers. As a percentage of revenues, cost of revenues increased due to competitive pricing for our services and inefficiencies resulting from lower activity levels, as well as higher maintenance and repair expenses due to increasing service intensity.

Selling, general and administrative expenses were $35.9 million in the third quarter of 2015 compared to $50.8 million in the third quarter of 2014. These expenses decreased due to lower total employment costs and other cost reduction efforts as well as decreases in expenses which vary with activity levels. As a percentage of revenues, these costs increased to 12.3 percent in the third quarter of 2015 compared to 8.2 percent in the third quarter of 2014 primarily due to the relatively fixed nature of these costs during the short term. Depreciation and amortization increased to $69.0 million during the quarter compared to $57.2 million in the third quarter of the prior year due to capital equipment placed in service during the previous four quarters. RPC’s loss on disposition of assets was $3.8 million during the third quarter of 2015 compared to a loss of $7.7 million in the third quarter of 2014. The decrease in the loss on disposition of assets was partly due to a change in accounting estimate implemented during 2015 as discussed above.

EBITDA is a financial measure which does not conform to generally accepted accounting principles (GAAP). Additional disclosure regarding this non-GAAP financial measure is disclosed in Appendix A to this press release.

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Third Quarter 2015 Earnings Release

Interest expense during the third quarter of 2015 was $250 thousand, a decrease compared to $456 thousand during the third quarter of the prior year. Interest expense during the third quarter of this year was lower because of a lower average balance on RPC’s syndicated credit facility.

For the nine months ended September 30, 2015, revenues decreased 41.6 percent to $995.8 million compared to $1.7 billion last year. Net loss for the nine-month period was $61.7 million, or $0.29 loss per share, compared to net income of $167.6 million, or $0.77 diluted earnings per share last year.

Discussion of Sequential Quarterly Financial Results

RPC’s revenues for the quarter ended September 30, 2015 decreased by $5.6 million or 1.9 percent compared to the second quarter of 2015. Revenues decreased due to lower activity levels and pricing for our services, partially offset by increased service intensity in pressure pumping. Cost of revenues during the third quarter decreased by $7.0 million or 2.9 percent due to lower employment expenses and lower materials and supplies expenses. Selling, general and administrative expenses during the third quarter of 2015 decreased by $4.5 million or 11.1 percent compared to the second quarter. RPC’s operating loss decreased slightly from $52.5 million in the second quarter of 2015 to $51.5 million in the third quarter. RPC’s loss before income taxes increased slightly from $52.6 million in the second quarter to $53.9 million in the third quarter. Net loss also increased slightly, from $34.1 million in the second quarter of 2015 to $35.2 million in the third quarter, while loss per share was $0.16 in both the second and third quarters of 2015.

Management Commentary

“The decline in the U.S. domestic oilfield unexpectedly steepened in the third quarter due to continued weakness in oil prices...


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