RPC, Inc. Reports First Quarter 2012 Financial Results
- Revenues Increased by 31.6 Percent Compared to the First Quarter of 2011 - Net Income Increased by 23.2 Percent Compared to the First Quarter of 2011 - Diluted EPS Increased to $0.37, Compared to $0.30 in the First Quarter 2011
Press Release: RPC, Inc. –
ATLANTA, April 25, 2012 /PRNewswire/ -- RPC, Inc. (RES) today announced its unaudited results for the first quarter ended March 31, 2012. 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 March 31, 2012, revenues increased 31.6 percent to $502,557,000 compared to $381,761,000 in the first quarter last year. Revenues increased compared to the prior year due to a larger fleet of revenue-producing equipment, higher activity levels, and a favorable job mix in several service lines. Operating profit for the quarter was $130,857,000 compared to operating profit of $106,326,000 in the prior year. Net income was $80,755,000 or $0.37 diluted earnings per share, compared to net income of $65,524,000 or $0.30 diluted earnings per share last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 25.4 percent to $183,347,000 compared to $146,197,000 in the prior year. [1]
Cost of revenues was $273,799,000, or 54.5 percent of revenues, during the first quarter of 2012, compared to $201,252,000, or 52.7 percent of revenues, in the prior year. Cost of revenues increased due to the variable nature of these expenses. Cost of revenues also increased as a percentage of revenues due to higher employment and fuel costs compared to the prior year, as well as the negative impact of lower pricing for many of our services as compared to the prior year.
Selling, general and administrative expenses were $44,927,000 in the first quarter of 2012, a 24.6 percent increase compared to $36,057,000 in the prior year. This increase was primarily due to increases in headcount to support higher business activity levels. As a percentage of revenues, however, these costs decreased to 8.9 percent in 2012 compared to 9.4 percent last year due to the fixed nature of many of these expenses and our ability to leverage these costs over higher revenues. Depreciation and amortization increased to $51,570,000 during the quarter compared to $39,537,000 last year, due to the capital expenditures made during the last year.
Interest expense decreased from $1,079,000 last year to $596,000 in 2012 due to lower interest rates during the quarter under RPC's syndicated revolving credit facility as compared to the prior year, partially offset by a higher average balance on the facility.
"During the first quarter of 2012, RPC benefited from a larger fleet of revenue-producing equipment and high activity levels in the oil-directed domestic basins in which we operate," stated Richard A. Hubbell, RPC's President and Chief Executive Officer. "We placed equipment in service which we ordered during 2011, and continued to improve our management of the logistical issues and procurement of many of the raw materials used in providing our services. These factors combined to allow us to generate both sequential and year-over year improvements in revenues and net income. From an industry perspective, the average domestic rig count during the first quarter was 1,990, a 16.0 percent increase compared to the same period in 2011 but a 1.0 percent decrease compared to the fourth quarter of 2011. The average price of natural gas was $2.41 per Mcf, a 41.9 percent decrease compared to the prior year, and a 25.4 percent decrease compared to the fourth quarter of 2011. In contrast to the price of natural gas, the average price of oil rose during the quarter. The average price of oil during the quarter was $102.99 per barrel, a 9.6 percent increase compared to the prior year, and an 8.9 percent increase compared to the fourth quarter of 2011. The unconventional rig count, which is a more important indicator of the demand for RPC's services, increased by 15.4 percent compared to the prior year, and during the first quarter of 2012 represented 69.8 percent of U.S. domestic drilling activity.
"While we are pleased with our first quarter results, the decline in natural gas drilling activity and natural gas prices continues to impact RPC's overall activity levels and pricing for many of our services. While the overall rig count remains high, activity levels in many of the natural gas-directed shale plays are declining. Our response to this trend includes redeploying equipment and personnel from these areas of lower activity to basins that are more oil-directed. While RPC has operational facilities in most of these areas, and believes we will be able to accomplish this transition smoothly, there is the risk of some operational disruption. We remain concerned about competitive pressures which are likely to continue in the near term, given low natural gas prices.
"During the first quarter of 2012 we invested over $121 million in new equipment and capitalized improvements. Most of these capital expenditures funded purchases of revenue-producing equipment ordered in 2011. In addition, we purchased approximately 2.6 million shares of common stock and made the largest dividend payment in our history. In spite of these uses of cash, the balance on our syndicated credit facility has declined since the end of 2011, and I am pleased to report that we have a ratio of debt to total capitalization of only 18 percent.
"We remain cautious about near-term domestic drilling activity levels due to natural gas prices which are at a 10-year low. We will continue our allocation of resources to domestic basins which show the highest potential in an environment of continued high oil prices. In addition, we will monitor discretionary spending and scrutinize capital expenditures as we manage our company to achieve long-term shareholder value," concluded Hubbell.
Summary of Segment Operating Performance
RPC's business segments are Technical Services and Support Services.
Technical Services includes RPC's oilfield service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer's well. These services are generally directed toward improving the flow of oil and natural gas from producing formations or to address well control issues. The Technical Services segment includes pressure pumping, coiled tubing, hydraulic workover services, nitrogen, downhole tools, surface pressure control equipment, well control, and fishing tool operations.
Support Services includes RPC's oilfield service lines that provide equipment for customer use or services to assist customer operations. The equipment and services offered include rental of drill pipe and related tools, pipe handling, inspection and storage services and oilfield training services.
Technical Services revenues increased 32.1 percent for the quarter compared to the prior year primarily due to an increase in the fleet of revenue-producing equipment and high activity levels. Support Services revenues increased by 26.8 percent during the quarter compared to the prior year due principally to improved utilization and a favorable job mix in the rental tool service line, which is the largest service line within this segment. Operating profit in both Technical and Support Services improved due to higher revenues.
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