RPC(RES) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenues declined by 4% to $364 million, primarily driven by a 17% decrease in pressure pumping revenues, while other service lines collectively grew by 8% [9][20] - EBITDA increased by 9% sequentially to$ 68.5 million, with EBITDA margins rising by 210 basis points to 18.8% [24] - Diluted EPS was $0.15, up from$ 0.13 in the previous quarter, with no non-GAAP adjustments [24] - Operating cash flow was $127.9 million, and free cash flow was$ 52.9 million after $75 million in CapEx [25] - The company maintained a strong balance sheet with$ 261.5 million in cash at the end of the quarter [26] Business Line Performance - Pressure pumping revenues declined by 17%, representing 40.4% of total revenues, while downhole tools grew by 7% to $100 million, coiled tubing grew by 18%, cementing increased by 1%, and rental tools grew by 9% [9][15][17][18][21] - Non-pressure pumping service lines collectively grew by 8%, demonstrating the strength and diversity of the company's portfolio [9][18] - The company's Tier 4 DGB fleets were highly utilized, with strong demand from semi-dedicated customers, and a new Tier 4 DGB fleet was deployed, bringing the total to three [11] Market and Competitive Landscape - The frac market remains highly competitive, with pricing stabilizing but activity in the spot and semi-dedicated markets remaining soft [9] - The company expects challenging conditions to force less well-capitalized smaller players out of the market, potentially reducing supply over time [13] - The rig count remains soft, with hopes of stabilization in the near term and potential growth not expected until next year [13] Strategic Direction and Industry Competition - The company is focused on controlling costs, evaluating additional efficiency actions, and maintaining a disciplined operating and financial approach [14] - Potential future investments include upgrades to frac fleets and acquisitions, particularly in non-pressure pumping service lines such as coiled tubing, downhole tools, wireline, and cementing [28][30] - The company is cautious about electric fleets, preferring to wait for technology and customer preferences to evolve before making significant investments [29] Management Commentary on Operating Environment and Future Outlook - Management acknowledged the challenging environment but expressed encouragement by profit growth and the resilience of non-pressure pumping service lines [8] - The company is optimistic about the rollout of a new downhole motor product, which has shown early success and high customer interest [16] - Management expects the market to eventually balance out, with activity potentially picking up as production declines and demand remains high [47] Other Important Information - The company received a$ 53 million tax refund related to past tax years, resulting in a lower effective tax rate of 17.8% for the quarter, which is not expected to be repeated in future quarters [26] - Year-to-date CapEx was $128 million, with the full-year CapEx range remaining unchanged at$ 200 million to $250 million [25] Q&A Session Summary Question: M&A Strategy and Financial Parameters - The company is looking for acquisitions that are accretive from both a cash flow and earnings valuation perspective, with a focus on areas with strong free cash flow fundamentals [35][36] - Management emphasized the importance of finding a balance between financial parameters and the potential for integrating new teams and capabilities [36] Question: Market Dynamics and Pressure Pumping Competitiveness - The pressure pumping market remains highly competitive, with additional capacity coming from both gassy basins and new e-fleet deployments [45] - The company is disciplined in its approach, choosing to idle certain crews rather than chase economically unattractive business [10][45] Question: Potential Investments in Tier 4 DGB Engines - The company sees an opportunity to stock up on Tier 4 DGB engines at potentially attractive prices due to market softness, though it is not actively playing the market for these components [51] Question: Technical Services Outlook for Q3 and Q4 - Management expects Q3 to be similar to Q2, with pressure pumping remaining a challenge but other service lines continuing to perform well [61] - Support services, which include non-pressure pumping business lines, are expected to remain steady, with no significant shifts anticipated [63]