RPC(US:RES)2019-01-23 19:32Financial Data and Key Metrics Changes - Revenues for Q4 2018 decreased to $376.8 million from $427.3 million in the prior year, reflecting a decline due to lower activity levels caused by year-end budget depletion among customers [11][12] - EBITDA for Q4 was $61.7 million compared to $101.1 million for the same period last year [11] - Operating profit decreased to $19.7 million from $60.3 million in the prior year [11] - Diluted earnings per share were $0.06 compared to $0.18 in the prior year, excluding the impact of tax reform [12] - Cost of revenues was $274.4 million, or 72.8% of revenues, compared to $285.7 million or 66.9% of revenues during the same period last year [12][13] Business Line Data and Key Metrics Changes - Technical Services segment revenues decreased by 13.1% compared to the same quarter in the prior year, with operating profit dropping to $19.9 million from $67 million [15] - Support Services segment revenues increased by 20.8%, with operating profit improving to $2.5 million compared to an operating loss of $1.6 million in the same period last year [16] - Pressure pumping service line was notably impacted by the decline in oil prices, leading to reduced activity levels [9] Market Data and Key Metrics Changes - The company noted a significant decline in customer drilling and completion activities due to unexpected oil price drops and budgetary constraints [9] - The pressure pumping fleet remains at approximately 1,050,000 hydraulic horsepower, with capital expenditures for Q4 2018 at $43 million and full-year 2018 at $243 million [19][20] Company Strategy and Development Direction - The company remains focused on executing long-term strategies despite short-term uncertainties in the market [22] - Management emphasized the importance of maximizing return on invested capital and maintaining a conservative approach to capital expenditures [23] - The company plans to maintain capital expenditures at approximately the same level in 2019, with flexibility to adjust based on market conditions [20][28] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the early 2019 outlook due to customer concerns about coal prices and budget reevaluations [22] - The company highlighted the need to balance pricing and utilization to optimize EBITDA in the current environment [34] - Management acknowledged the uncertainty in customer budgets and the potential for lower activity levels in the first quarter of 2019 [25][26] Other Important Information - The effective tax rate for 2018 was 21%, down from 30% in 2017 [12] - Selling, general and administrative expenses were $40 million in Q4, a decrease from $42 million in the prior year, but increased as a percentage of revenues due to lower revenues [14] Q&A Session Summary Question: Customer budgets and plans for 2019 - Management noted that customers are being cautious with their 2019 budgets due to recent oil price declines, but they are not shutting down operations entirely [25][26] Question: Capital expenditures and flexibility - Management indicated that there is flexibility to manage capital expenditures down if necessary, with a split of approximately 60% maintenance and 40% growth for 2019 [28][29] Question: Pricing expectations in pressure pumping - Management stated that pricing declined 2% sequentially from Q3 to Q4, and they are currently testing the market to find the optimal pricing and utilization balance [34] Question: Returns on invested capital - Management aims for a return on invested capital in the low 20s, with a cost of capital in the low teens [38][39] Question: Dedicated versus spot fleets - Management confirmed a preference for dedicated fleets but acknowledged the need to balance pricing and activity levels [42][45] Question: Customer behavior and contract approaches - Management indicated that it is too early to see significant changes in customer agreement behavior compared to 2018, with customers still cautious about long-term commitments [103][104]