UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2019 Commission File No. 1-8726 RPC, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) Delaware 58-1550825 Indicate by check mark whether the registrant has submitted electronically every ...

RPC, Inc. (NYSE:RES) Q1 2019 Earnings Conference Call April 24, 2019 9:00 AM ET Company Participants James Landers - Vice President, Corporate Finance Richard Hubbell - President and Chief Executive Officer Benjamin Palmer - Chief Financial Officer Conference Call Participants Connor Lynagh - Morgan Stanley & Co. Praveen Narra - Raymond James & Associates, Inc. Scott Gruber - Citigroup Tommy Moll - Stephens Inc. Chase Mulvehill - Bank of America Merrill Lynch Vaibhav Vaishnov - Scotia Howard Weil Kenneth Si ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) RPC, Inc. provides specialized oilfield services and equipment through Technical and Support Services segments, with performance highly dependent on oil and gas prices and customer capital expenditures - RPC provides specialized oilfield services and equipment primarily in the United States and select international markets, operating through two main segments: **Technical Services** and **Support Services**[11](index=11&type=chunk) - In 2018, approximately **85%** of revenues were related to oil-directed activities, while **15%** were related to natural gas[12](index=12&type=chunk) Revenue Contribution by Key Service Lines (2016-2018) | Service Line | 2018 Revenue % | 2017 Revenue % | 2016 Revenue % | | :--- | :--- | :--- | :--- | | Pressure Pumping | 55% | 62% | 46% | | Downhole Tools | 25% | 19% | 23% | | Coiled Tubing | 6% | 7% | 10% | [Business Segments](index=4&type=section&id=Item%201.%20Business%23Business%20Segments) The company operates two segments: Technical Services, providing capital-intensive on-site services, and Support Services, offering off-site equipment rental and consulting - **Technical Services** include on-site services such as pressure pumping, downhole tools, coiled tubing, and well control, driven by well completion and production activities[13](index=13&type=chunk) - **Support Services** include off-site equipment rental and consulting, with demand primarily influenced by customer drilling activity[14](index=14&type=chunk) [Industry](index=7&type=section&id=Item%201.%20Business%23Industry) The volatile oil and gas service industry, driven by commodity prices, saw a Q4 2018 oil price drop impacting customer plans, with strong demand for services in unconventional wells - U.S. annual well completions increased by **79.7%** between 2016 and 2018, but were still **31.9%** lower than the 2014 cyclical peak[34](index=34&type=chunk) - A sharp drop in oil prices in **Q4 2018** has caused customers to delay or curtail drilling and completion plans for the near term[35](index=35&type=chunk) - Unconventional wells, which require RPC's specialized services, reached a historical high of approximately **94%** of total U.S. drilling in late 2018/early 2019[37](index=37&type=chunk) - International revenues increased **61.9%** in 2018 to **$90.4 million**, representing **5%** of consolidated revenues, driven by activity in Argentina, Mexico, and Pakistan[38](index=38&type=chunk)[113](index=113&type=chunk) [Competition](index=10&type=section&id=Item%201.%20Business%23Competition) RPC faces intense competition from large integrated companies and smaller peers, leading to pricing declines due to increased market pressure - The oilfield services industry is **highly competitive**, with rivals including large integrated companies (Halliburton, Baker Hughes, Schlumberger) and other publicly traded peers[45](index=45&type=chunk)[46](index=46&type=chunk) - New and expanding competitors increased pressure in **2017-2018**, causing service pricing to **decline** during the fourth quarter of 2017 and throughout 2018[45](index=45&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from volatile oil and gas prices, intense competition, environmental regulations, operational disruptions, and substantial management ownership - Demand for services is **highly dependent** on **volatile** oil and natural gas prices, which affect customers' capital investment decisions[53](index=53&type=chunk) - The company faces **intense competition**, which can affect pricing and market share, with key competitive factors including service quality, availability, safety, and price[60](index=60&type=chunk) - Compliance with **stringent environmental laws**, particularly those related to hydraulic fracturing, could increase operating costs and reduce demand for pressure pumping services[65](index=65&type=chunk)[66](index=66&type=chunk) - Executive officers, directors, and their affiliates hold **74%** of RPC's common stock, effectively controlling operations and limiting the influence of public stockholders[70](index=70&type=chunk) [Unresolved Staff Comments](index=15&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[77](index=77&type=chunk) [Properties](index=15&type=section&id=Item%202.%20Properties) RPC owns or leases approximately 120 offices and operating facilities, which management deems adequate for current and anticipated needs - The company owns and leases around **120 facilities**, with major owned locations in Broussard, LA; Houston, TX; and Kilgore, TX, and major leased locations in Midland, TX; The Woodlands, TX; and Oklahoma City, OK[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) [Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) RPC is involved in routine legal proceedings, which management believes will not materially adversely affect its business or financial condition - The company is party to various routine legal proceedings but believes their outcome will **not have a material adverse effect** on its financial condition[81](index=81&type=chunk) [Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are provided in Exhibit 95.1 to the Form 10-K - Required mine safety disclosures are provided in Exhibit 95.1 to the Form 10-K[82](index=82&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) RPC's common stock trades on the NYSE, with **215.2 million shares** outstanding as of February 2019, and the company repurchased shares in Q4 2018 - RPC's common stock is listed on the New York Stock Exchange under the symbol RES, with **215,210,657 shares** outstanding as of February 15, 2019[86](index=86&type=chunk) Share Repurchases - Q4 2018 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Oct 2018 | 778 | $14.51 | | Nov 2018 | 100,000 | $13.67 | | Dec 2018 | 129,010 | $11.34 | | **Q4 Total** | **229,788** | **$12.36** | - As of December 31, 2018, **8,843,769 shares** remained available for repurchase under the company's stock buyback program[91](index=91&type=chunk) [Selected Financial Data](index=20&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes RPC's five-year financial data, highlighting 2018 revenues of **$1.72 billion**, net income of **$175.4 million**, and no long-term debt Key Financial Data (2017 vs. 2018, in thousands) | Metric (in thousands, except per share) | 2018 | 2017 | | :--- | :--- | :--- | | Revenues | $1,721,005 | $1,595,227 | | Operating Profit | $210,030 | $226,217 | | Net Income | $175,402 | $162,511 | | Diluted EPS | $0.82 | $0.75 | | Dividends Paid Per Share | $0.47 | $0.20 | | Capital Expenditures | $242,610 | $117,509 | | Total Assets | $1,199,580 | $1,147,224 | | Long-Term Debt | $0 | $0 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 2018 financial performance, a negative near-term outlook due to oil price drops, a strong balance sheet, and critical accounting policies [Outlook](index=22&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Outlook) The near-term outlook is cautious due to **Q4 2018** oil price drops, oversupply in services, and heightened competition, impacting pricing and utilization - The significant drop in oil prices in **Q4 2018** has **negative implications** for RPC's near-term activity levels, revenues, and earnings[106](index=106&type=chunk) - Management believes the market for several oilfield completion services, including pressure pumping, has become **oversupplied** due to higher industry efficiency, which will **negatively affect pricing and utilization**[108](index=108&type=chunk) - RPC expanded its fleet modestly in 2018 and has ordered a small amount of new equipment for 2019, focusing on maintaining a **strong balance sheet** amidst potential lower activity levels[109](index=109&type=chunk) [Results of Operations](index=25&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Results%20of%20Operations) In 2018, revenues grew **7.9%** to **$1.72 billion**, but operating profit declined due to higher cost of revenues, while net income increased due to a lower tax rate 2018 vs. 2017 Performance (in millions) | Metric (in millions) | 2018 | 2017 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,721.0 | $1,595.2 | $125.8 | 7.9% | | Cost of Revenues | $1,183.0 | $1,050.8 | $132.2 | 12.6% | | Operating Profit | $210.0 | $226.2 | ($16.2) | -7.2% | | Net Income | $175.4 | $162.5 | $12.9 | 7.9% | 2017 vs. 2016 Performance (in millions) | Metric (in millions) | 2017 | 2016 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,595.2 | $729.0 | $866.2 | 118.8% | | Operating Profit (Loss) | $226.2 | ($238.9) | $465.1 | N/A | | Net Income (Loss) | $162.5 | ($141.2) | $303.7 | N/A | [Liquidity and Capital Resources](index=27&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Liquidity%20and%20Capital%20Resources) The company maintains a strong financial condition with increased cash from operations, projected higher capital expenditures, and an undrawn **$125 million** credit facility Cash Flow Summary (in thousands) | Cash Flow Activity | 2018 | 2017 | | :--- | :--- | :--- | | Net cash provided by operating activities | $389,009 | $133,704 | | Net cash used for investing activities | ($219,727) | ($104,386) | | Net cash used for financing activities | ($144,070) | ($70,103) | - The company has a **$125 million** revolving credit facility maturing in July 2023, with **no outstanding borrowings** as of December 31, 2018[139](index=139&type=chunk) - Capital expenditures are expected to be approximately **$289 million** in 2019, up from **$242.6 million** in 2018[141](index=141&type=chunk) - In 2018, the company paid **$101.1 million** in dividends and repurchased **$43.0 million** of its stock[215](index=215&type=chunk) [Critical Accounting Policies](index=31&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Critical%20Accounting%20Policies) Management identifies critical accounting policies requiring significant judgment, including doubtful accounts, income taxes, self-insured expenses, asset depreciation, and pension liabilities - The allowance for doubtful accounts is based on evaluation of industry trends, customer financial conditions, and historical experience, with a 0.50 percentage point change impacting the allowance by **$1.9 million**[156](index=156&type=chunk)[157](index=157&type=chunk) - The effective tax rate was **20.7%** in 2018, down from **30.2%** in 2017, primarily due to the Tax Cuts and Jobs Act (TCJA)[158](index=158&type=chunk) - The company self-insures certain risks and has recorded liabilities of **$18.3 million** as of Dec 31, 2018, based on an estimated exposure range of **$15.9 million** to **$20.8 million**[162](index=162&type=chunk) - The defined benefit pension plan was **under-funded** as of Dec 31, 2018, with key assumptions including a **7%** expected return on plan assets and a **4.65%** discount rate[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces interest rate risk from its variable-rate credit facility and foreign exchange risk, though neither is currently material - The company is subject to interest rate risk on its revolving credit facility, but had **no outstanding borrowings** as of December 31, 2018[184](index=184&type=chunk) - Exposure to foreign exchange rate risk is **not expected to be material** as most transactions are conducted in U.S. currency[185](index=185&type=chunk) [Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2018, including balance sheets, income statements, cash flows, and notes, with an unqualified auditor's opinion on internal controls [Consolidated Financial Statements](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data%23Consolidated%20Financial%20Statements) The consolidated financial statements show RPC's 2018 financial position with **$1.20 billion** in assets, **$1.72 billion** in revenue, and **$175.4 million** in net income Consolidated Balance Sheet Highlights (as of Dec 31, 2018, in thousands) | Account (in thousands) | Amount | | :--- | :--- | | Total Current Assets | $618,938 | | Property, Plant and Equipment, net | $517,982 | | **Total Assets** | **$1,199,580** | | Total Current Liabilities | $143,237 | | Total Liabilities | $249,161 | | Total Stockholders' Equity | $950,419 | | **Total Liabilities and Stockholders' Equity** | **$1,199,580** | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2018, in thousands) | Account (in thousands) | Amount | | :--- | :--- | | Revenues | $1,721,005 | | Operating Profit | $210,030 | | Income Before Income Taxes | $221,280 | | **Net Income** | **$175,402** | [Notes to Consolidated Financial Statements](index=44&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data%23Notes%20to%20Consolidated%20Financial%20Statements) The notes detail RPC's accounting policies, including revenue recognition, income taxes, debt, employee benefits, and segment performance, highlighting the impact of TCJA - The company adopted the new revenue standard (ASC 606) on January 1, 2018, using the modified retrospective method, with **no material impact** on its financial statements[248](index=248&type=chunk) - The Tax Cuts and Jobs Act (TCJA) reduced the federal tax rate from **35%** to **21%**, resulting in a discrete tax benefit of **$19.3 million** in 2017 and a lower effective tax rate in 2018[274](index=274&type=chunk)[275](index=275&type=chunk) - The defined benefit pension plan was **under-funded by $5.1 million** as of December 31, 2018, with the company contributing **$5.0 million** to the plan during the year[309](index=309&type=chunk)[311](index=311&type=chunk) Segment Revenues by Major Service Line (2018, in thousands) | Service Line | 2018 Revenue | | :--- | :--- | | **Technical Services** | **$1,647,213** | | - Pressure Pumping | $945,919 | | - Downhole Tools | $423,811 | | **Support Services** | **$73,792** | | - Rental Tools | $50,809 | | **Total Revenues** | **$1,721,005** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=75&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[351](index=351&type=chunk) [Controls and Procedures](index=75&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2018[353](index=353&type=chunk) - Management's assessment concluded that the company maintained **effective** internal control over financial reporting as of December 31, 2018, which was supported by the independent auditor's report[189](index=189&type=chunk)[354](index=354&type=chunk) [Other Information](index=75&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[356](index=356&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=75&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, corporate governance, and the code of ethics is **incorporated by reference** from the 2019 Proxy Statement - Information concerning directors, executive officers, the audit committee, and the code of ethics is **incorporated by reference** from the 2019 Proxy Statement[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk) [Executive Compensation](index=76&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is **incorporated by reference** from the company's 2019 Annual Meeting Proxy Statement - Information regarding executive compensation is **incorporated by reference** from the 2019 Proxy Statement[363](index=363&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=76&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is **incorporated by reference** from the 2019 Proxy Statement, with **5.4 million** securities available for future issuance under equity plans - Information regarding security ownership is **incorporated by reference** from the 2019 Proxy Statement[364](index=364&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2018) | Plan Category | Securities to be Issued Upon Exercise | Securities Available for Future Issuance | | :--- | :--- | :--- | | Approved by securityholders | 0 | 5,402,634 | | Not approved by securityholders | 0 | 0 | | **Total** | **0** | **5,402,634** | [Certain Relationships and Related Party Transactions, and Director Independence](index=76&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Party%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is **incorporated by reference** from the 2019 Proxy Statement - Information regarding related party transactions and director independence is **incorporated by reference** from the 2019 Proxy Statement[368](index=368&type=chunk) [Principal Accountant Fees and Services](index=76&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is **incorporated by reference** from the 2019 Proxy Statement - Information regarding principal accountant fees and services is **incorporated by reference** from the 2019 Proxy Statement[369](index=369&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=77&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules filed with the Form 10-K, including corporate documents, plans, and certifications - This section lists **all filed documents**, including financial statements, Schedule II (Valuation and Qualifying Accounts), and numerous exhibits[371](index=371&type=chunk)[372](index=372&type=chunk) - **Key exhibits** include the 2014 Stock Incentive Plan, various credit agreements and amendments, and certifications by the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act[372](index=372&type=chunk)[373](index=373&type=chunk)[375](index=375&type=chunk)

RPC, Inc. (NYSE:RES) Q4 2018 Results Earnings Conference Call January 23, 2019 9:00 AM ET Company Participants Richard Hubbell - President and CEO James Landers - Vice President, Corporate Finance Ben Palmer - CFO Conference Call Participants Marc Bianchi - Cowen Chase Mulvehill - Bank of America Merrill Lynch James Wicklund - Credit Suisse Mike Urban - Seaport Global Securities Ken Sill - SunTrust Robinson Humphrey John Daniel - Simmons Stephen Gengaro - Stifel Connor Lynagh - Morgan Stanley George O’Lea ...