UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________
Commission File No.
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices) | (Zip code) |
(
(Registrant’s telephone number, including area code)
Securities Registered under Section 12(b) of the Act:
Title of each class: |
| Trading Symbol(s) |
| Name of each exchange on which registered: |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | ☒ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 18, 2025, RPC, Inc. had
RPC, INC. AND SUBSIDIARIES
Table of Contents
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2025, AND DECEMBER 31, 2024
(In thousands, except share and par value data)
March 31, | December 31, | |||||
| 2025 |
| 2024 | |||
ASSETS | (Unaudited) | Note 1 | ||||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net of allowance for credit losses of $ | | | ||||
Inventories |
| |
| | ||
Income taxes receivable |
| |
| | ||
Prepaid expenses |
| |
| | ||
Other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Property, plant and equipment, less accumulated depreciation of $ | | | ||||
Operating lease right-of-use assets | | | ||||
Finance lease right-of-use assets | | | ||||
Goodwill |
| |
| | ||
Other intangibles, net | | | ||||
Retirement plan assets | | | ||||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
| ||
LIABILITIES |
|
|
|
| ||
Accounts payable | $ | | $ | | ||
Accrued payroll and related expenses |
| |
| | ||
Accrued insurance expenses |
| |
| | ||
Accrued state, local and other taxes |
| |
| | ||
Income taxes payable |
| |
| | ||
Unearned revenue | | | ||||
Current portion of operating lease liabilities | | | ||||
Current portion of finance lease liabilities and finance obligations | | | ||||
Accrued expenses and other liabilities |
| |
| | ||
Total current liabilities |
| |
| | ||
Long-term accrued insurance expenses |
| |
| | ||
Long-term retirement plan liabilities |
| |
| | ||
Long-term operating lease liabilities |
| |
| | ||
Long-term finance lease liabilities | | | ||||
Other long-term liabilities | | | ||||
Deferred income taxes |
| |
| | ||
Total liabilities |
| |
| | ||
Commitments and contingencies (Note 11) |
|
| ||||
STOCKHOLDERS’ EQUITY |
|
|
|
| ||
Preferred stock, $ |
|
| ||||
Common stock, $ |
| |
| | ||
Capital in excess of par value |
| |
| | ||
Retained earnings |
| |
| | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders’ equity | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
3
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2025, AND 2024
(In thousands except per share data)
(Unaudited)
Three months ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Revenues | $ | | $ | | ||
COSTS AND EXPENSES: |
|
| ||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) |
| |
| | ||
Selling, general and administrative expenses |
| |
| | ||
Depreciation and amortization |
| |
| | ||
Gain on disposition of assets, net |
| ( |
| ( | ||
Operating income |
| |
| | ||
Interest expense |
| ( |
| ( | ||
Interest income |
| |
| | ||
Other income, net |
| |
| | ||
Income before income taxes |
| |
| | ||
Income tax provision |
| |
| | ||
Net income | $ | | $ | | ||
Earnings per share |
|
|
| |||
Basic | $ | | $ | | ||
Diluted | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
4
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2025, AND 2024
(In thousands)
(Unaudited)
Three months ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
Net income | $ | | $ | | ||
Other comprehensive income (loss): |
|
| ||||
Foreign currency translation |
| |
| ( | ||
Comprehensive income | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
5
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2025, AND 2024
(In thousands)
(Unaudited)
Three months ended March 31, 2025 | |||||||||||||||||
Accumulated | |||||||||||||||||
Capital in | Other | ||||||||||||||||
Common Stock | Excess of | Retained | Comprehensive | ||||||||||||||
| Shares |
| Amount |
| Par Value |
| Earnings |
| Loss |
| Total | ||||||
Balance, December 31, 2024 |
| | $ | | $ | — | $ | | $ | ( | $ | | |||||
Stock issued for stock incentive plans, net |
| |
| |
| |
| — |
| — |
| | |||||
Stock purchased and retired |
| ( |
| ( |
| ( |
| ( |
| — |
| ( | |||||
Net income |
| — |
| — |
| — |
| |
| — |
| | |||||
Cash dividends ($ |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Foreign currency translation |
| — |
| — |
| — |
| — |
| |
| | |||||
Balance, March 31, 2025 | | $ | | $ | — | $ | | $ | ( | $ | | ||||||
Three months ended March 31, 2024 | |||||||||||||||||
Accumulated | |||||||||||||||||
Capital in | Other | ||||||||||||||||
Common Stock | Excess of | Retained | Comprehensive | ||||||||||||||
| Shares |
| Amount |
| Par Value |
| Earnings |
| Loss |
| Total | ||||||
Balance, December 31, 2023 |
| | $ | | $ | — | $ | | $ | ( | $ | | |||||
Stock issued for stock incentive plans, net |
| |
| |
| |
| — |
| — |
| | |||||
Stock purchased and retired |
| ( |
| ( |
| ( |
| ( |
| — |
| ( | |||||
Net income |
| — |
| — |
| — |
| |
| — |
| | |||||
Cash dividends ($ | — |
| — |
| — |
| ( |
| — | ( | |||||||
Foreign currency translation |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Balance, March 31, 2024 | | $ | | $ | — | $ | | $ | ( | $ | | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2025, AND 2024
(In thousands)
(Unaudited)
Three months ended March 31, | ||||||
| 2025 |
| 2024 | |||
OPERATING ACTIVITIES |
|
| ||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
| ||||
Depreciation and amortization |
| |
| | ||
Stock-based compensation expense |
| |
| | ||
Gain on disposition of assets, net |
| ( |
| ( | ||
Deferred income tax (benefit) provision |
| ( |
| | ||
Other non-cash adjustments | | | ||||
Decrease (increase) in assets: |
|
| ||||
Accounts receivable |
| |
| ( | ||
Income taxes receivable |
| |
| | ||
Inventories |
| ( |
| ( | ||
Prepaid expenses |
| |
| | ||
Other current assets |
| |
| | ||
Other non-current assets |
| |
| ( | ||
Increase (decrease) in liabilities: |
|
| ||||
Accounts payable |
| |
| | ||
Income taxes payable |
| |
| | ||
Unearned revenue | ( | ( | ||||
Accrued payroll and related expenses |
| ( |
| ( | ||
Accrued insurance expenses |
| ( |
| | ||
Accrued state, local and other taxes |
| |
| ( | ||
Other accrued expenses | ( | ( | ||||
Retirement plan liabilities |
| ( |
| | ||
Long-term accrued insurance expenses |
| |
| | ||
Other long-term liabilities |
| ( |
| | ||
Net cash provided by operating activities |
| |
| | ||
INVESTING ACTIVITIES |
|
|
|
| ||
Capital expenditures |
| ( |
| ( | ||
Proceeds from sale of assets |
| |
| | ||
Net cash used for investing activities |
| ( |
| ( | ||
FINANCING ACTIVITIES |
|
|
|
| ||
Payment of dividends |
| ( |
| ( | ||
Cash paid for common stock purchased and retired |
| ( |
| ( | ||
Cash paid for finance lease and finance obligations | ( | ( | ||||
Net cash used for financing activities |
| ( |
| ( | ||
Net increase (decrease) in cash and cash equivalents |
| |
| ( | ||
Cash and cash equivalents at beginning of period |
| |
| | ||
Cash and cash equivalents at end of period | $ | | $ | | ||
Supplemental cash flows disclosure: | ||||||
Income tax payments, net | $ | | $ | | ||
Interest paid | $ | | $ | | ||
Supplemental disclosure of noncash investing activities: | ||||||
Capital expenditures included in accounts payable | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
7
1. GENERAL
The accompanying unaudited consolidated financial statements include the accounts of RPC, Inc. and its wholly-owned subsidiaries (RPC or the Company) and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These consolidated financial statements have been prepared in accordance with Accounting Standards Codification (ASC) Topic 810, “Consolidation” and Rule 3A-02(a) of Regulation S-X. In accordance with ASC Topic 810 and Rule 3A-02 (a) of Regulation S-X, the Company’s policy is to consolidate all subsidiaries and investees where it has voting control.
In the opinion of management, all adjustments (all of which consisted of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for the year ending December 31, 2025.
The balance sheet at December 31, 2024, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2024.
A group that includes Amy Rollins Kreisler and Timothy C. Rollins, each of whom is a director of the Company, certain of their family members, and certain companies under their and/or their family members’ control, controls in excess of percent of the Company’s voting power.
Certain prior year amounts have been reclassified to conform to the presentation in the current year.
2. RECENT ACCOUNTING STANDARDS
Recently Issued Accounting Standards Not Yet Adopted:
Securities and Exchange Commission (SEC) Final Rules: Climate related Disclosure: These rules require disclosures relating to climate-related risks and risk management as well as the board and management’s governance of such risks. In addition, the rules include requirements to disclose the financial effects of severe weather events and other natural conditions in the audited financial statements and disclose information about greenhouse gas emissions, subject to a phased-in assurance requirement. Several petitions were filed challenging these climate-related disclosure rules and, in April 2024, the SEC voluntarily stayed the rules, pending completion of judicial review. On March 27, 2025, the SEC voted to end its defense of this Climate-related Disclosure.
ASU 2024-03: Income Statement (Topic 220): Disaggregation of Income Statement Expenses: The amendments in this ASU require public companies to disclose, in interim and year-end reporting periods, additional information about certain expenses in the financial statements. These disclosures are effective beginning with 2027 annual reports, and interim reports beginning with the first quarter of 2028. Early adoption is permitted on either a prospective or retrospective basis. The Company is currently assessing the potential impact of adoption of these provisions on the consolidated financial statements.
8
3. REVENUES
Accounting Policy:
RPC’s contract revenues are generated principally from providing oilfield services. These services are based on mutually agreed upon pricing with the customer prior to the services being delivered and, given the nature of the services, do not include the right of return. Pricing for these services is a function of rates based on the nature of the specific job, with consideration for the extent of equipment, labor, and consumables needed for the job. RPC typically satisfies its performance obligations over time as the services are performed. RPC records revenues based on the transaction price agreed upon with its customers.
Sales tax charged to customers is presented on a net basis within the accompanying Consolidated Statements of Operations and therefore excluded from revenues.
Nature of services:
RPC provides a broad range of specialized oilfield services to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international markets. RPC manages its business as either (1) services offered on the well site with equipment and personnel (Technical Services) or (2) services and tools offered off the well site (Support Services). For more detailed information about operating segments, see note titled Business Segment and Entity Wide Disclosures.
Our contracts with customers are generally short-term in nature and generally consist of a single performance obligation – the provision of oilfield services. RPC contracts with its customers to provide the following services by reportable segment:
Technical Services
| ● | Includes pressure pumping, downhole tools, coiled tubing, cementing, snubbing, nitrogen, well control, wireline and fishing. |
Support Services
| ● | Rental tools – RPC rents tools to its customers for use with onshore and offshore oil and gas well drilling, completion and workover activities. |
| ● | Other support services include pipe handling and pipe inspection and storage services, and well control training. |
Payment terms:
RPC’s contracts with customers state the final terms of the sales, including the description, quantity, and price of each service to be delivered. The Company’s contracts are generally short-term in nature and in most situations, RPC provides services ahead of payment - i.e., RPC has fulfilled the performance obligation prior to submitting a customer invoice. RPC invoices the customer upon completion of the specified services and collection is generally expected between
Significant judgments:
RPC believes the output method is a reasonable measure of progress for the satisfaction of our performance obligations, which are satisfied over time, as it provides a faithful depiction of (1) our performance toward complete satisfaction of the performance obligation under the contract and (2) the value transferred to the customer of the services performed under the contract. RPC has elected the right to invoice practical expedient for recognizing revenue related to its performance obligations.
9
Disaggregation of revenues:
See note titled Business Segment and Entity Wide Disclosures for disaggregation of revenue by operating segment and services offered in each of them and by geographic regions.
Contract balances:
Contract assets representing the Company’s rights to consideration for work completed but not billed are included in accounts receivable, net in the accompanying Consolidated Balance Sheets and are shown below:
March 31, | December 31, | ||||||
| 2025 |
| 2024 |
| |||
(in thousands) | |||||||
Unbilled trade receivables | $ | | $ | | |||
Substantially all of the unbilled trade receivables disclosed were, or are expected to be, invoiced during the following quarter.
Unearned revenue
Contract liabilities represent payments received in advance of satisfying the Company’s performance obligation and are recognized over time as the service is performed. Of the $
4. STOCK-BASED COMPENSATION
The Company has issued various forms of stock incentives, including incentive and non-qualified stock options, time-lapse restricted shares and performance share unit awards under its Stock Incentive Plans to officers, selected employees and non-employee directors.
In the first quarter of 2025, the Company issued
As of March 31, 2025, there were
10
5. DEPRECIATION AND AMORTIZATION
Depreciation and amortization disclosed in the Consolidated Statements of Operations related to the following components:
Three months ended | |||||||
March 31, | |||||||
| 2025 | 2024 |
| ||||
(in thousands) | |||||||
Cost of revenues | $ | | $ | | |||
Selling, general and administrative expenses | | | |||||
Total | $ | | $ | | |||
6. INCOME TAXES
The Company generally determines its periodic income tax expense or benefit based upon the current period income or loss and the annual estimated tax rate for the Company adjusted for discrete items including changes to prior period estimates. In certain instances, the Company uses the discrete method when it believes the actual year-to-date effective rate provides a more reliable estimate of its income tax rate for the period. The estimated tax rate is revised, if necessary, at the end of each successive interim period to the Company’s current annual estimated tax rate.
For the three months ended March 31, 2025, the effective rate reflects a provision of
7. EARNINGS PER SHARE
Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the respective periods. In addition, the Company has periodically issued share-based payment awards that contain non-forfeitable rights to dividends and are therefore considered participating securities. The following table shows the restricted shares of common stock (participating securities) outstanding and a reconciliation of outstanding weighted average shares:
Three months ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
(in thousands) | ||||||
Net income available for stockholders | $ | | $ | | ||
Less: Adjustments for earnings attributable to participating securities | ( | ( | ||||
Net income used in calculating earnings per share | $ | | $ | | ||
Weighted average shares outstanding (including participating securities) |
| |
| | ||
Adjustment for participating securities |
| ( |
| ( | ||
Shares used in calculating basic and diluted earnings per share |
| |
| | ||
8. CURRENT EXPECTED CREDIT LOSSES
The Company utilizes an expected credit loss model for valuing its accounts receivable, a financial asset measured at amortized cost. The Company is exposed to credit losses primarily from providing oilfield services. The Company’s expected allowance for credit losses for accounts receivable is based on historical collection experience, current and future economic and market conditions and a review of the current status of customers’ account receivable balances. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include
11
timely account reconciliation, dispute resolution, payment confirmation, consideration of customers’ financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible and recoveries of amounts previously written off are recorded when collected.
The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected:
Three months ended | ||||||
March 31, | ||||||
| 2025 | 2024 | ||||
(in thousands) | ||||||
Beginning balance | $ | | $ | | ||
Provision (benefit) for current expected credit losses | |
| ( | |||
Write-offs | ( |
| ( | |||
Recoveries collected (net of expenses) | |
| | |||
Ending balance | $ | | $ | | ||
9. INVENTORIES
Inventories consist of (i) raw materials and supplies that are consumed providing services to the Company’s customers, (ii) spare parts for equipment used in providing these services and (iii) components and attachments for manufactured equipment used in providing services. In the table below, spare parts and components are included as part of raw materials and supplies; tools that are assembled using components are reported as finished goods. Inventories are recorded at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method or the weighted average cost method.
March 31, | December 31, | |||||
(in thousands) | 2025 | 2024 | ||||
Raw materials and supplies | $ | | $ | | ||
Finished goods | |
| | |||
Ending balance | $ | | $ | | ||
10. OTHER INTANGIBLES, NET
Intangible assets are amortized over their legal or estimated useful life. The following table provides a summary of the gross carrying value and accumulated amortization by each major intangible class as of March 31, 2025, and December 31, 2024:
March 31, 2025 | December 31, 2024 | |||||||||||||
Estimated Useful Life (in years) | Gross | Accumulated Amortization | Gross | Accumulated Amortization | ||||||||||
(in thousands) | ||||||||||||||
Finite-lived Intangibles: | ||||||||||||||
Customer relationships | $ | | $ | ( | $ | | $ | ( | ||||||
Trade names and trademarks | | ( | | ( | ||||||||||
Software licenses | | ( | | ( | ||||||||||
$ | | $ | ( | $ | | $ | ( | |||||||
12
Amortization expense for each of the periods presented follows:
Three months ended | ||||||
March 31, | ||||||
(in thousands) |
| 2025 | 2024 | |||
Amortization of finite-lived intangible assets | $ | | $ | | ||
Estimated future amortization expense based on balances as of March 31, 2025, were as follows: $
11. COMMITMENTS AND CONTINGENCIES
Sales and Use Taxes - The Company has ongoing sales and use tax audits in various jurisdictions and may be subjected to varying interpretations of statutes that could result in unfavorable outcomes. In accordance with ASC 450-20, Loss Contingencies, any probable and reasonable estimates of assessment costs have been included in Accrued state, local and other taxes in the accompanying Consolidated Balance Sheet.
The Company has an outstanding state tax notification of audit results related to sales and use tax and with its outside legal counsel has evaluated the perceived merits of this tax assessment. The Company believes the likelihood of a material loss related to this contingency is remote and the amount of any liability cannot be reasonably estimated at this time. Therefore, no loss has been recorded and the Company currently does not believe the resolution of this claim will have a material impact on its consolidated financial position, results of operations or cash flows.
Litigation - RPC is a party to various routine legal proceedings primarily involving commercial claims, employee liability and workers’ compensation claims and claims for personal injury. RPC insures against these risks to the extent deemed prudent by its management, but no assurance can be given that the nature and amount of such insurance will, in every case, fully indemnify RPC against liabilities arising out of pending and future legal proceedings related to its business activities.
12. RETIREMENT PLANS
In the fourth quarter of 2024, the Board of Directors approved the termination of the Supplemental Retirement Plan (SERP). Pursuant to the Internal Revenue Service rules, participant balances will be distributed between 12 and 24 months after termination. The Company is currently evaluating its funding options and timing to distribute participant balances.
The Company permitted through December 31, 2024, selected highly compensated employees to defer a portion of their compensation to the SERP. The liabilities related to these deferrals are recognized as Long term retirement plan liabilities in the Consolidated Balance Sheet.
The Company maintains certain securities primarily in mutual funds and company-owned life insurance policies as a funding source to satisfy the obligation of the SERP that have been classified as trading and are stated at fair value totaling $
The SERP liabilities include participant deferrals, net of distributions, and are stated at fair value of approximately $
13
13. NOTES PAYABLE TO BANKS
The Company has a revolving Credit Agreement with Bank of America and
Under the Credit Agreement, when RPC’s trailing four quarter EBITDA (as calculated under the Credit Agreement) is equal to or greater than $
Revolving loans under the amended revolving credit facility bear interest at one of the following two rates at the Company’s election:
| ● | Term SOFR; plus, a margin ranging from |
| ● | the Base Rate, which is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus |
In addition, the Company pays an annual fee ranging from
As of March 31, 2025, RPC had
Three months ended | ||||||
March 31, | ||||||
Years Ended December 31, | ||||||
(in thousands) | 2025 |
| 2024 | |||
Interest incurred | $ | | $ | | ||
Interest paid | | | ||||
14. FAIR VALUE DISCLOSURES
The various inputs used to measure assets at fair value establish a hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three broad levels as follows:
14
The Company determines the fair value of equity securities that have a readily determinable fair value through quoted market prices. The total fair value is the final closing price, as defined by the exchange in which the asset is actively traded, on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.
Trading securities are comprised of the SERP assets, as described in the note titled Retirement Plans, and are recorded primarily at their net cash surrender values, calculated using their net asset values, which approximates fair value, as provided by the issuing insurance or investment company. Significant observable inputs, in addition to quoted market prices, were used to value the equity securities. The Company’s policy is to recognize transfers between levels at the beginning of quarterly reporting periods. For the quarter ended March 31, 2025, there were no significant transfers in or out of levels 1, 2 or 3.
Under the Company’s revolving credit facility, there was
The carrying amounts of other financial instruments reported in the balance sheet for current assets and current liabilities approximate their fair values because of the short maturity of these instruments. The Company currently does not use the fair value option to measure any of its existing financial instruments and has not determined whether it will elect this option for financial instruments acquired in the future.
15. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss consists of the following:
Foreign | |||
Currency | |||
(in thousands) |
| Translation | |
Balance at December 31, 2024 | $ | ( | |
Change during the period: |
| ||
Before-tax amount |
| | |
Balance at March 31, 2025 | $ | ( |
Foreign | |||
Currency | |||
(in thousands) |
| Translation | |
Balance at December 31, 2023 | $ | ( | |
Change during the period: |
| ||
Before-tax amount |
| ( | |
Balance at March 31, 2024 | $ | ( | |
16. CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED
The Company has a stock buyback program to repurchase up to
15
in privately negotiated transactions or in such other manner as determined by the Company. The timing of the repurchases and the actual amount repurchased will depend on a variety of factors, including the market price of the Company's shares, general market and economic conditions, and other factors. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended or discontinued at any time.
Shares purchased for withholding taxes represent taxes due upon vesting of time-lapse restricted shares granted to employees. Total share repurchases for 2025 and 2024 year to date are detailed below:
Three months ended March 31, 2025 | Three months ended March 31, 2024 | |||||||||||||||||
| No. of Shares | Avg. Price | Total Cost |
| No. of Shares | Avg. Price | Total Cost | |||||||||||
(in thousands except per share data) | ||||||||||||||||||
Shares purchased for withholding taxes | | $ | $ | | | $ | $ | | ||||||||||
Open market purchases | — | — | — | | | |||||||||||||
Total | | $ | $ | | | $ | $ | | ||||||||||
Excise tax payable on share repurchases totaling $
17. BUSINESS SEGMENT AND ENTITY WIDE DISCLOSURES
RPC’s reportable segments are the same as its operating segments. RPC manages its business under Technical Services and Support Services. Technical Services is comprised of service lines that generate revenue based on equipment, personnel or materials at the well site and are closely aligned with completion and production activities of our customers. Support Services is comprised of service lines which generate revenue from services and tools offered off the well site and are more closely aligned with the customers’ drilling activities. Selected overhead including certain centralized support services and regulatory compliance are classified as Corporate.
Technical Services consists primarily of pressure pumping, downhole tools, coiled tubing, cementing, snubbing, nitrogen, well control, wireline, fishing and water management. The services offered under Technical Services are high capital and personnel intensive businesses. The Company considers all of these services to be closely integrated oil and gas well servicing businesses and makes resource allocation and performance assessment decisions based on this operating segment as a whole across these various services.
Support Services consist primarily of drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels.
The Company’s Chief Operating Decision Maker (CODM) assesses performance and makes resource allocation decisions regarding, among others, staffing, growth and maintenance capital expenditures and key initiatives based on the operating segments outlined above.
The accounting policies of the reportable segments are the same as those referenced in Note 1 to the consolidated financial statements. Gains or losses on disposition of assets are reviewed on a consolidated basis, and accordingly the Company does not report gains or losses at the segment level. Intersegment revenues are generally recorded in segment operating results at prices that management believes approximate prices for arm’s length transactions and are not material to operating results.
RPC's CODM is its Chief Executive Officer. For each of the reportable segments, the CODM uses operating income to allocate resources (equipment, financial, and human resources).
16
Significant segment expense by reportable segment for the three months ended March 31, 2025 and 2024 are shown in the following tables:
| ||||||||||
Technical | Support | |||||||||
| Services |
| Services |
| Total | |||||
(in thousands except headcount) | ||||||||||
2025 |
|
|
| |||||||
Revenues | $ | | $ | | $ | | ||||
Employment costs (1) | | | | |||||||
Materials and supplies | | | | |||||||
Maintenance & repairs | | | | |||||||
Fleet and transportation | | | | |||||||
Other cost of revenues (2) | | | | |||||||
Cost of revenues (exclusive of depreciation and amortization) |
| $ | | $ | | $ | | |||
Employment costs (1) | | | | |||||||
Enterprise shared services (3) | | | | |||||||
Other selling, general and administrative expenses (4) | | | | |||||||
Selling, general and administrative expenses | $ | | $ | | $ | | ||||
Segment depreciation and amortization | | | | |||||||
Segment operating income | $ | | $ | | $ | | ||||
Unallocated corporate expenses (5) | | |||||||||
(Gain) on sale of assets | ( | |||||||||
Operating income | $ | | ||||||||
| ||||||||||
Technical | Support | |||||||||
| Services |
| Services |
| Total | |||||
(in thousands except headcount) | ||||||||||
2024 | ||||||||||
Revenues | $ | | $ | | $ | | ||||
Employment costs (1) | | | | |||||||
Materials and supplies | | | | |||||||
Maintenance & repairs | | | | |||||||
Fleet and transportation | | | | |||||||
Other cost of revenues (2) | | | | |||||||
Cost of revenues (exclusive of depreciation and amortization) |
| $ | | $ | | $ | | |||
Employment costs (1) |
| |
| | | |||||
Enterprise shared services (3) | | | | |||||||
Other selling, general and administrative expenses (4) | | | | |||||||
Selling, general and administrative expenses | $ | | $ | | $ | | ||||
Segment depreciation and amortization | | | | |||||||
Segment operating income | $ | | $ | | $ | | ||||
Unallocated corporate expenses (5) | | |||||||||
(Gain) on sale of assets | ( | |||||||||
Operating income | $ | | ||||||||
17
| (1) | Employment costs include employee payroll, share-based compensation, bonuses and amounts related to benefits for each of the income statement items. Additional employment costs are included within the shared services amount. |
| (2) | Includes expenses related to rent, travel, insurance and other costs. |
| (3) | Includes costs incurred at the enterprise level that are allocated to each reportable segment based on payroll cost, headcount and revenues. |
| (4) | Includes professional fees, utilities, travel & entertainment and other costs. |
| (5) | Unallocated corporate expenses are included in selling general and administrative expenses at the consolidated level. |
The table below shows the reconciliation of segment totals to the consolidated level for the three months ended March 31, 2025 and 2024:
| |||||||||||||||
Technical | Support | Segment | Unallocated | Consolidated | |||||||||||
| Services |
| Services |
| Total |
| Total |
| Total | ||||||
(in thousands) | |||||||||||||||
2025 | |||||||||||||||
Selling, general and administrative expenses | $ | | $ | | $ | | $ | | $ | | |||||
Depreciation and amortization | | | | | | ||||||||||
Capital expenditures (1) | | | | | | ||||||||||
Total assets (2) | $ | | $ | | $ | | $ | | $ | | |||||
2024 | |||||||||||||||
Selling, general and administrative expenses | $ | | $ | | $ | | $ | | $ | | |||||
Depreciation and amortization | | | | | | ||||||||||
Capital expenditures (1) | | | | | | ||||||||||
Total assets (2) | $ | | $ | | $ | | $ | | $ | | |||||
| (1) | Unallocated total primarily related to corporate capital expenditures. |
| (2) | Unallocated total primarily consists of cash and cash equivalents of $ |
The following summarizes revenues for the United States and separately for all international locations combined for the three months ended March 31, 2025, and 2024. The revenues are presented based on the location of the use of the equipment or services. Assets related to international operations are less than 10% of RPC’s consolidated assets, and therefore are not presented.
| Three months ended | |||||
March 31, | ||||||
| 2025 |
| 2024 | |||
(in thousands) | ||||||
United States revenues | $ | | $ | | ||
International revenues | |
| | |||
Total revenues | $ | | $ | | ||
18
Segment Revenues:
RPC’s operating segment revenues by major service lines are shown in the following table:
Three months ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
(in thousands) | ||||||
Technical Services: |
|
| ||||
Pressure Pumping | $ | | $ | | ||
Downhole Tools | |
| | |||
Coiled Tubing | |
| | |||
Cementing | | | ||||
Nitrogen | |
| | |||
Snubbing | |
| | |||
All other | |
| | |||
Total Technical Services | | | ||||
Support Services: |
|
|
|
| ||
Rental Tools | | | ||||
All other |
| |
| | ||
Total Support Services | | | ||||
Total revenues | $ | | $ | | ||
19
18. SUBSEQUENT EVENTS
Acquisition of Pintail Alternative Energy, LLC.
Effective April 1, 2025, the Company completed its acquisition of all of the limited liability company membership interests in Pintail Alternative Energy, LLC (“Pintail”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), with two private individuals as representatives of the sellers.
Pintail, headquartered in Midland, Texas, is a leading provider of oilfield wireline perforating services in the Permian Basin. Pintail operates more than 30 active fleets, and its conventional and electric wireline units are among the newest in the industry. The acquisition will build on RPC’s diversified oilfield services platform with geographic concentration in the most active oil producing region in the U.S. land market.
The purchase price was $
The Company will account for this transaction as a purchase of business under the acquisition method of accounting. The Company is currently evaluating the preliminary purchase price allocation, including the fair values of assets acquired and liabilities assumed. Accordingly, the full financial effects of the acquisition cannot be reasonably estimated at this time. The required disclosures under ASC 805, "Business Combinations" will be included in the Quarterly Report on Form 10-Q for the period ended June 30, 2025.
Dividends
On
Other
On April 23, 2025, the Company filed a shelf registration statement on Form S-3 which has not yet been declared effective and is subject to potential SEC review. The shelf registration includes a base prospectus and allows us to offer any combination of securities described in the prospectus, which include common stock, preferred stock, warrants, rights, depositary shares, purchase contracts and units containing two or more of the foregoing, in one or more offerings in an aggregate amount of up to $
20
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Overview
The following discussion should be read in conjunction with the Consolidated Financial Statements included elsewhere in this document. See also Forward-Looking Statements on page 28.
RPC, Inc. (RPC or the Company) provides a broad range of specialized oilfield services primarily to independent and major Oilfield companies engaged in exploration, production and development of oil and gas properties throughout the United States, including the Gulf of America, mid-continent, southwest, Rocky Mountain and Appalachian regions, and in selected international locations. The Company’s revenues and profits are generated by providing equipment and services to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells. We continuously monitor factors that impact current and expected customer activity levels, such as the prices of oil and natural gas, changes in pricing for our services and equipment, and utilization of our equipment and personnel. Our financial results are affected by geopolitical factors such as political instability in the petroleum-producing regions of the world, the actions of the OPEC oil cartel, overall economic conditions and weather in the United States, the prices of oil and natural gas, other shifting trends in our industry, and our customers’ drilling and production activities.
The discussion of our key business and financial strategies set forth under the Overview section in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2024, is incorporated herein by reference.
During the first quarter of 2025, total revenues of $332.9 million decreased by $45.0 million or 11.9% compared to the same period in the prior year.
Operating profit was $12.4 million for the three months ended March 31, 2025, compared to $32.3 million during the same period of 2024.
Net income for the three months ended March 31, 2025, was $12.0 million or $0.06 diluted earnings per share compared to net income of $27.5 million, or $0.13 diluted earnings per share in the same period of 2024.
Net cash provided by operating activities decreased to $39.9 million for the three months ended March 31, 2025, compared to $56.6 million in the same period of 2024 primarily due to a decrease in net income.
As of March 31, 2025, there were no outstanding borrowings under our credit facility.
How We Evaluate Our Operations
We use Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), EBITDA margin and Free cash flow, all non-GAAP measures, to evaluate and analyze the financial performance of our businesses.
We believe that EBITDA and EBITDA margin are important indicators of our performance and free cash flow is an important indicator of our financial condition and liquidity. EBITDA margin reflects EBITDA as a percentage of revenues. Management believes that EBITDA and EBITDA margin enable investors to compare the operating performance of our core business consistently over various time periods without regard to changes in our capital structure. Management believes that free cash flow, which measures our ability to generate needed cash from business operations, is an important financial measure for evaluating RPC’s financial condition and liquidity. Our definition of Free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures, since the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions.
EBITDA and EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income/(loss), operating income/(loss), and related margins, or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America (GAAP). Similarly, free cash flow should be considered
21
in addition to, rather than as a substitute for, GAAP presentation of net cash provided by operating, investing and financing activities, as a measure of our financial condition and liquidity.
See Non-GAAP Financial Measures below for a reconciliation of EBITDA to net income, and EBITDA margin to net income margin, the most directly comparable financial measure calculated and presented in accordance with GAAP, and a reconciliation of free cash flow to operating cash flow, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Results of Operations
Three months ended | ||||||
March 31, | ||||||
| 2025 |
| 2024 | |||
(in thousands, except for percentages) | ||||||
Revenues by business segment: | ||||||
Technical | $ | 311,844 | $ | 356,394 | ||
Support | 21,033 | 21,439 | ||||
Total revenue | 332,877 | 377,833 | ||||
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 243,895 | 276,609 | ||||
Selling, general and administrative expenses | 42,499 | 40,085 | ||||
Depreciation and amortization | 35,623 | 30,004 | ||||
Gain on disposition of assets | (1,526) | (1,214) | ||||
Other income, net | (885) | (767) | ||||
Interest expense | 131 | 234 | ||||
Interest income | (3,395) | (2,965) | ||||
Income tax provision | 4,505 | 8,380 | ||||
Net income | $ | 12,030 | $ | 27,467 | ||
Net income margin | 3.6% | 7.3% | ||||
Net cash provided by operating activities | $ | 39,865 | $ | 56,559 | ||
Non-GAAP Financial Measures | ||||||
EBITDA | $ | 48,894 | $ | 63,120 | ||
EBITDA margin | 14.7% | 16.7% | ||||
Free cash flow | $ | 7,595 | $ | 3,781 | ||
THREE MONTHS ENDED MARCH 31, 2025 COMPARED TO THREE MONTHS ENDED MARCH 31, 2024
Revenues. Revenues of $332.9 million for the three months ended March 31, 2025, decreased 11.9% compared to the three months ended March 31, 2024. The decrease in revenues was primarily due to lower pressure pumping activity levels compared to the prior year. Pressure pumping remains highly competitive. Management believes the industry continues to be over-supplied and efficiency gains are consistently adding pump hour capacity to the industry. These challenges, as well as a declining rig count, have resulted in activity, asset utilization, and pricing trending lower. International revenues represented 2.4% of total revenues in the first quarter of 2025 compared to 2.6% in the same period of the prior year. We believe that international revenues will continue to be less than 10% of RPC’s consolidated revenues in the foreseeable future.
During the first quarter of 2025, the average price of oil was 1.9% higher and the average price of natural gas was 70.4% higher, both as compared to the same period in the prior year. The average domestic rig count (Source: Baker Hughes, Inc.) for the three months ended March 31, 2025, was 6.5% lower than in the same period in 2024.
The Technical Services segment revenues for the first quarter of 2025 decreased by 12.5% compared to the same period of the prior year due primarily to a decrease in Pressure Pumping revenues. Technical Services reported operating income of $14.0 million during the first quarter of 2025 compared to operating income of $32.0 million in the first quarter of 2024. The decrease in Technical Services operating income was primarily due to lower pricing in pressure pumping and several other service lines. Support Services
22
segment revenues for the first quarter of 2025 decreased by 1.9% compared to the same period in the prior year, primarily due to lower activity levels within rental tools. Support Services reported operating income of $2.7 million for the first quarter of 2025 compared to operating income of $3.6 million for the first quarter of 2024. First quarter 2025 Support Services operating profit decreased by $900 thousand compared to the first quarter of the prior year due to lower activity levels and lower revenues over costs that are relatively fixed during the short term.
Cost of revenues. Cost of revenues decreased 11.8% to $243.9 million for the three months ended March 31, 2025, compared to $276.6 million for the three months ended March 31, 2024. Cost of revenues decreased in line with revenues primarily due to a decrease in expenses consistent with lower activity levels, such as materials and supplies, fleet and transportation and maintenance and repairs expenses. In accordance with Staff Accounting Bulletin (SAB) Topic 11.B, cost of revenues presented on the Consolidated Statements of Operations excludes depreciation and amortization totaling $32.4 million for the first quarter of 2025 compared to $27.3 million for the first quarter of 2024.
Selling, general and administrative expenses. Selling, general and administrative expenses increased to $42.5 million for the three months ended March 31, 2025, compared to $40.1 million for the three months ended March 31, 2024, primarily due to ERP system implementation costs.
Depreciation and amortization. Depreciation and amortization increased 18.7% to $35.6 million for the three months ended March 31, 2025, compared to $30.0 million for the three months ended March 31, 2024. Depreciation and amortization increased due to capital expenditures in the past year, including the addition of a Tier 4 duel-fuel pressure pumping fleet that went into service during the second quarter of 2024.
Gain on disposition of assets, net. Gain on disposition of assets, net was $1.5 million for the three months ended March 31, 2025, compared to $1.2 for the three months ended March 31, 2024. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.
Other income, net. Other income, net was $885 thousand for the three months ended March 31, 2025, compared to $767 thousand for the same period in the prior year.
Interest expense and interest income. Interest expense decreased to $131 thousand for the three months ended March 31, 2025, compared to $234 thousand for the three months ended March 31, 2024. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan costs. Interest income increased to $3.4 million compared to $3.0 million in the prior year due to a slightly higher average cash balance.
Income tax provision. Income tax provision was $4.5 million during the three months ended March 31, 2025 compared to $8.4 million tax provision for the same period in 2024. The effective tax rate was 27.2%for the three months ended March 31, 2025 compared to a 23.4% effective tax rate for the three months ended March 31, 2024. The increase in effective tax rate is primarily due to a stronger impact of detrimental permanent and discrete adjustments on a decreased pretax income.
Net income, net income margin and diluted earnings per share. Net income was $12.0 million during the three months ended March 31, 2025, or $0.06 diluted earnings per share, compared to net income of $27.5 million during the three months ended March 31, 2024, or $0.13 diluted earnings per share. Net income margin was 3.6% for the three months ended March 31, 2025, compared to 7.3% for the same period in the prior year.
EBITDA and EBITDA margin. EBITDA was $48.9 million, and EBITDA margin was 14.7% for the three months ended March 31, 2025 compared to $63.1 million and 16.7% for the same period in the prior year. The decline was primarily due to lower revenues, associated negative operating leverage and fixed cost absorption.
Cash provided by operating activities and Free cash flow. Cash provided by operating activities decreased to $39.9 million for the three months ended March 31, 2025, from $56.6 million for the three months ended March 31, 2024. Free cash flow increased to $7.6 million for the three months ended March 31, 2025, from $3.8 million for the three months ended March 31, 2024, primarily due to lower capital expenditures, partially offset by a decrease in cash provided by operating activities, driven by lower net income.
23
Non-GAAP Financial Measures
Reconciliation of GAAP and non-GAAP Financial Measures
Disclosed above are non-GAAP financial measures of EBITDA, EBITDA margin, and free cash flow. These measures should not be considered in isolation or as a substitute for performance or liquidity measures prepared in accordance with GAAP.
A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.
Set forth below are reconciliations of these non-GAAP measures with their most directly comparable GAAP measures.
(Unaudited) | Three months ended | |||||
March 31, | March 31, | |||||
(In thousands) |
| 2025 | 0 | 2024 | ||
Reconciliation of Net Income to EBITDA |
|
|
| |||
Net income | $ | 12,030 | $ | 27,467 | ||
Adjustments: | ||||||
Add: Income tax provision |
| 4,505 |
| 8,380 | ||
Add: Interest expense |
| 131 |
| 234 | ||
Add: Depreciation and amortization |
| 35,623 |
| 30,004 | ||
Less: Interest income |
| 3,395 |
| 2,965 | ||
EBITDA | $ | 48,894 | $ | 63,120 | ||
Revenues | $ | 332,877 | $ | 377,833 | ||
Net income margin | 3.6% | 7.3% | ||||
EBITDA margin | 14.7% | 16.7% | ||||
(Unaudited) | Three Months Ended March 31, | |||||
(In thousands) |
| 2025 |
| 2024 | ||
Reconciliation of Operating Cash Flow to Free Cash Flow |
|
|
|
| ||
Net cash provided by operating activities | $ | 39,865 | $ | 56,559 | ||
Capital expenditures | (32,270) | (52,778) | ||||
Free cash flow | $ | 7,595 | $ | 3,781 | ||
Liquidity and Capital Resources
Cash Flows
The Company’s cash and cash equivalents increased $749 thousand to $326.7 million as of March 31, 2025, compared to cash and cash equivalents of $326.0 million as of December 31, 2024.
24
The following table sets forth the historical cash flows for the three months ended March 31, 2025 and 2024:
Three months ended March 31, | ||||||
| 2025 |
| 2024 | |||
(In thousands) | ||||||
Net cash provided by operating activities | $ | 39,865 | $ | 56,559 | ||
Net cash used for investing activities | (27,443) | (49,006) | ||||
Net cash used for financing activities | (11,673) | (18,664) | ||||
Cash provided by operating activities for the three months ended March 31, 2025, decreased by $16.7 million compared to the three months ended March 31, 2024, primarily due to a decrease in net income, coupled with unfavorable changes in working capital. Change in working capital was a use of cash of $6.9 million in the three months ended March 31, 2025, compared to a $3.9 million use of cash in the same period last year. The most significant working capital related cash flows during the three months ended March 31, 2025, were a cash use of $44.0 million due to a decrease in unearned revenue due to the satisfaction of performance obligations that were associated with a customer cash prepayment we received in 2024, a $24.3 million cash source from a decrease in accounts receivable due to lower business activity levels compared to the prior year coupled with the timing of receipts. The changes in the other components were mainly due to the timing of payments and receipts.
Cash used for investing activities for the three months ended March 31, 2025, decreased by $21.6 million compared to the three months ended March 31, 2024, primarily due to a decrease in capital expenditures primarily related to the timing of new equipment deliveries and consistent with lower business activity levels. Capital expenditures were $32.3 million for the three months ended March 31, 2025, compared to $52.8 million for the three months ended March 31, 2024. In the prior year period, the Company was purchasing components of a new Tier 4 dual fuel pressure pumping fleet.
Cash used for financing activities for the three months ended March 31, 2025, decreased by $7.0 million compared to the three months ended March 31, 2024, primarily due to a decrease in repurchases of the Company’s common shares in the open market.
Financial Condition and Liquidity
The Company’s financial condition remains strong. We believe the liquidity provided by our existing cash and cash equivalents and our overall strong capitalization will provide sufficient liquidity to meet our requirements for at least the next twelve months. The Company’s decisions about the amount of cash to be used for investing and financing activities are influenced by our capital position, and the expected amount of cash to be provided by operations. RPC does not expect to utilize our revolving credit facility to meet these liquidity requirements in the near term.
The majority of our cash and cash equivalents are held at multiple financial institutions, each of which holds funds in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC). These financial institutions are among the largest in the United States and we believe are a safe place to hold our deposits.
The Company currently has a $100.0 million revolving credit facility that matures in June 2027. The facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. The revolving credit facility includes a full and unconditional guarantee by the Company's 100% owned domestic subsidiaries whose assets equal substantially all of the consolidated assets of the Company and its subsidiaries. Certain of the Company’s minor subsidiaries are not guarantors. The Credit Agreement’s maturity date is June 22, 2027, and the interest rate is based on Term Secured Overnight Financing Rate (Term SOFR). In addition, the terms of the agreement have a 1.00% per annum floor for Base Rate borrowings and permits the issuance of letters of credit in currencies other than U.S. dollars. As of March 31, 2025, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $16.1 million; therefore, a total of $83.9 million of the facility was available. The Company is currently in compliance with the credit facility financial covenants. For additional information with respect to RPC’s facility, see the note titled Notes Payable to Banks of the Consolidated Financial Statements.
In addition, the Company filed a shelf registration statement on Form S-3 on April 23, 2025, which has not yet been declared effective and is subject to potential SEC review. The shelf registration includes a base prospectus and allows us to offer any combination of securities described in the prospectus, which include common stock, preferred stock, warrants, rights, depositary shares, purchase contracts and units containing two or more of the foregoing, in one or more offerings in an aggregate amount of up to
25
$300 million. The Form S-3 is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions and our future capital needs. The terms of any future offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
Cash Requirements
The Company currently expects capital expenditures, inclusive of recently acquired Pintail, to be between $165 million and $215 million in 2025, to be directed towards both capitalized maintenance of our existing equipment and selected growth opportunities. As of March 31, 2025, $32.3 million has been spent. The Company is allocating capital to maintain its pressure pumping fleet and continues to evaluate future investments and options to further upgrade our equipment across the business.
The Company has ongoing sales and use tax audits in various jurisdictions subject to varying interpretations of statutes. The Company has recorded the exposure from these audits to the extent issues are resolved or are probable and reasonably estimable. These audits involve issues that could result in unfavorable outcomes that cannot be currently estimated. See note of the Consolidated Financial Statements titled Commitments and Contingencies for additional information.
The Company has a stock buyback program to repurchase up to 49,578,125 shares in the open market. As of March 31, 2025, 12,768,870 shares remained available to be repurchased. During the three months ended March 31, 2025, there were no shares repurchased by the Company in the open market. During the three months ended March 31, 2024, the Company repurchased 1,010,258 shares in the open market. The Company may repurchase outstanding common shares periodically based on market conditions and our capital allocation strategies considering restrictions under our credit facility. The stock buyback program does not have a predetermined expiration date. For additional information with respect to RPC’s stock buyback program, see note of the Consolidated Financial Statements titled Cash Paid for Common Stock Purchased and Retired.
In the fourth quarter of 2024, the Board of Directors approved the termination of the SERP. Pursuant to the Internal Revenue Service rules, participant balances will be distributed between 12 and 24 months after termination. The Company is currently evaluating its funding options and timing to distribute participant balances.
During 2024, the Company entered into a multi-year systems transformation program to upgrade our ERP and supply chain systems. We are currently in the early phases and expensed the majority of non-recurring costs incurred in 2024 and the first quarter of 2025. We plan to continue the ERP implementation through a phased approach with costs being incurred over the next few years.
Also, on April 22, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.04 per share payable June 10, 2025, to common stockholders of record at the close of business on May 9, 2025. The Company expects to continue to pay cash dividends to common stockholders, subject to industry conditions and RPC’s earnings, financial condition, and other relevant factors.
INFLATION
The Company purchases its equipment and materials from suppliers who provide competitive prices and employ skilled workers from competitive labor markets. If inflation in the general economy increases, the Company’s costs for equipment, materials and labor could increase as well. In addition, increases in activity in the domestic oilfield can cause upward wage pressures in the labor markets from which it hires employees, especially if employment in the general economy increases. Also, activity increases can cause supply disruptions and higher costs of certain materials and key equipment components used to provide services to the Company’s customers. In recent years, the price of labor and raw materials increased while labor shortages caused by the departure of skilled labor from the domestic oilfield industry in prior years. These cost increases have moderated but remain high by historical standards. Though the full impact is unclear, the Company does expect tariffs on goods imported into the US to result in increased prices for equipment.
OUTLOOK
The current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity and can be impacted by economic and policy developments as well as geopolitical disruptions, such as the continuing conflicts in the Middle East as well as Russia and Ukraine. RPC believes that oil prices currently remain at levels sufficient to motivate our customers to maintain drilling and completion activities, however the recent decline of oil prices and potential further volatility could
26
result in the Company’s customers opting to delay completion activity. Long-term, projected steady higher demand for oil and natural gas should drive increased activity in most of the basins in which RPC operates.
We continue to monitor the supply and demand for our services and the competitive environment, including trends such as increasing customer preferences for lower emission and more efficient equipment. Increased asset efficiency in recent years of oilfield completion fleets, particularly in pressure pumping, has inherently contributed to oversupply in the Oilfield Services (OFS) market. We believe that most of the feasible operating efficiency gains have been realized, but competition is expected to remain at a high level.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any material off balance sheet arrangements.
RELATED PARTY TRANSACTIONS
Marine Products Corporation (Marine Products)
In conjunction with RPC’s spin-off of its powerboat manufacturing business, RPC and Marine Products entered into various agreements that define the companies’ relationship. Per the terms of their Transition Support Services agreement, which may be terminated by either party, RPC provides certain administrative services, including financial reporting and income tax administration, acquisition assistance, etc., to Marine Products. Charges from the Company (or from corporations that are subsidiaries of the Company) for such services were $297 thousand for the three months ended March 31, 2025, and $324 thousand for the comparable period in 2024. All of the Company’s directors are also directors of Marine Products, and the executive officers are employees of both the Company and Marine Products.
Other
The Company periodically purchases, in the ordinary course of business, products or services from suppliers that are owned by officers or significant stockholders of or affiliated with certain directors of RPC. The total amounts paid to these affiliated parties were $16 thousand for the three months ended March 31, 2025, and $284 thousand for the three months ended March 31, 2024.
A group that includes Amy Rollins Kreisler and Timothy C. Rollins, each of whom is a director of the Company, certain of their family members, and certain companies under their and/or their family members’ control, controls in excess of fifty percent of the Company’s voting power.
RPC and Marine Products own 50% each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of $53 thousand for the three months ended March 31, 2025, and $51 thousand for the comparable period in 2024.
In the first quarter of 2025, we and our largest stockholder, LOR, Inc. (LOR), entered into a registration rights agreement (the Agreement), pursuant to which we granted LOR and certain of its affiliates (collectively, the Selling Stockholders) and their permitted transferees the right to require, subject to certain conditions and limitations, us to register for resale all Company securities held by such stockholders, and certain customary piggy back registration rights with respect to registrations initiated by us. Pursuant to the Agreement. we have filed a Form S-3 shelf registration statement on April 23, 2025 that registers the resale of up to 127,235,202 shares of our common stock held by the Selling Stockholders.
CRITICAL ACCOUNTING POLICIES
The discussion of Critical Accounting Policies is incorporated herein by reference from the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2024. There have been no significant changes in the critical accounting policies since year-end.
27
IMPACT OF RECENT ACCOUNTING STANDARDS
See note to the Consolidated Financial Statements titled Recent Accounting Standards for a description of recent accounting standards, including the expected dates of adoption and estimated effects on results of operations and financial condition.
SEASONALITY
Oil and natural gas prices affect demand throughout the oil and natural gas industry, including the demand for the Company’s products and services. The Company’s business depends in large part on the economic conditions of the oil and gas industry, and specifically on the capital expenditures of its customers related to the exploration and production of oil and natural gas. There is a positive correlation between these expenditures and customers’ demand for the Company’s services. As such, when these expenditures fluctuate, customers’ demand for the Company’s services fluctuates as well. These fluctuations depend on the current and projected prices of oil and natural gas and resulting drilling activity and are not seasonal to any material degree.
FORWARD-LOOKING STATEMENTS
Certain statements made in this report that are not historical facts are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “focus,” “plan,” and similar expressions generally identify forward-looking statements. Such forward-looking statements may include, without limitation, statements that relate to our business strategy, plans and objectives, and our beliefs and expectations regarding future demand for our equipment and services, trends in the industry, and other events and conditions that may influence the oilfield services market and our performance in the future. Forward-looking statements made elsewhere in this report include, without limitation, statements regarding: our belief that the likelihood of a material loss related to the outstanding state tax assessment is remote and cannot be reasonably estimated at this time, and the Company currently does not believe the resolution of this claim will have a material impact on its consolidated financial position, results of operations or cash flows; statements that repurchases of the Company’s stock may be made from time to time in the open market by block purchases, in privately negotiated transactions or in such other manner as determined by the Company; our ability to continue to monitor factors that impact current and expected customer activity levels, such as the prices of oil and natural gas, changes in pricing for our services and equipment, and utilization of our equipment and personnel; the effect of geopolitical factors such as political instability in the petroleum-producing regions of the world, the actions of the OPEC oil cartel, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers’ drilling and production activities on our financial results; our belief that EBITDA, EBITDA margin and free cash flow are important indicators of performance; our belief that EBITDA and EBITDA margin enable investors to compare the operating performance of our core business consistently over various time periods without regard to changes in our capital structure and that free cash flow is an important financial measure for evaluating our financial condition; our belief that the industry continues to be over-supplied and efficiency gains are consistently adding pump hour capacity to the industry, and these challenges as well as a declining rig count, have resulted in activity, asset utilization, and pricing trending lower; our belief that international revenues will continue to be less than ten percent of our consolidated revenues in the foreseeable future; our belief that our financial condition remains strong; our belief that the liquidity provided by our existing cash and cash equivalents and our overall strong capitalization will provide sufficient liquidity to meet our requirements for at least the next twelve months; our expectation that we will not need our revolving credit facility to meet our liquidity requirements; our belief that the financial institutions are a safe place to hold our deposits; our expectation that capital expenditures will be between $165 million and $215 million during 2025 and our expectation that such expenditures will be directed towards both capitalized maintenance of our existing equipment and selected growth opportunities; our plan to continue to evaluate future investments and options to further upgrade our equipment across the business; our inability to estimate the outcomes of sales and use tax audits in various jurisdictions; our plan to continue the ERP implementation through a phased approach with costs being incurred over the next few years; our expectation to continue to pay cash dividends to common stockholders, subject to industry conditions and our earnings, financial condition, and other relevant factors; our belief that if inflation in the general economy increases, our costs for equipment, materials and labor could increase as well; our belief that increases in activity in the domestic oilfield can cause upward pressures in the labor markets from which it hires employees, especially if employment in the general economy increases; our belief that activity increases can cause supply disruptions and higher costs of certain materials and key equipment components used to provide our services to our customers; our expectation that tariffs on goods imported into the U.S. will increase equipment prices; our belief that current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity and can be impacted by economic and policy developments as well as geopolitical disruptions, such as the continuing conflicts in the Middle East as well as Russia and Ukraine; our belief that oil prices currently remain at levels sufficient to motivate our customers to maintain drilling and completion activities, however, the recent decline of oil prices and potential further volatility could result in our customers opting to delay completion activity; our belief that long-term, projected steady
28
higher demand for oil and natural gas should drive increased activity in most of the basins in which we operate; our belief that most of the feasible operating efficiency gains have been realized, but competition is expected to remain at a high level; our plan to continue to monitor the supply and demand for our services and the competitive environment, including trends such as increasing customer preferences for lower emission and more efficient equipment; our expectation that changes in the foreign exchange rate will not have a material effect on our consolidated results of operations or financial conditions; our belief that the outcome of litigation will not have a material adverse effect on our financial position or results of operations.
Such forward-looking statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RPC to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Risk factors that could cause such future events not to occur as expected include the following: the volatility of oil and natural gas prices; our concentration of customers in the energy industry and periodic downturns; our business depends on capital spending by our customers, many of whom rely on outside financing to fund their operations; dependence on our key personnel; our ability to identify or complete acquisitions; our ability to attract and retain skilled workers; some of our equipment and several types of materials used in providing our services are available from a limited number of suppliers; whether outside financing is available or favorable to us; increasing expectations from customers, investors and other stakeholders regarding our environmental, social and governance practices; our compliance with regulations and environmental laws; the combined impact of the OPEC disputes and the COVID-19 pandemic on our operating results; possible declines in the price of oil and natural gas, which tend to result in a decrease in drilling activity and therefore a decline in the demand for our services; the ultimate impact of current and potential political unrest and armed conflict in the oil producing regions of the world, including the current conflict involving Israel and the Gaza Strip, which could impact drilling activity; adverse weather conditions in oil or gas producing regions, including the Gulf of America; competition in the oil and gas industry, especially in pressure pumping, and adverse impacts from the industry being over-supplied; limits to the Company’s ability to implement price increases; the potential impact of possible future regulations on hydraulic fracturing on our business; risks of international operations; reliance on large customers; our operations rely on digital systems and processes that are subject to cyber-attacks or other threats; and our cash and cash equivalents are held primarily at a single financial institution. Additional discussion of factors that could cause actual results to differ from management’s projections, forecasts, estimates and expectations is contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and in this Quarterly Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk exposure through borrowings on its credit facility and the Pintail note. As of March 31, 2025, there were no outstanding interest-bearing advances on our credit facility, which bear interest at a floating rate.
Additionally, the Company is exposed to market risk resulting from changes in foreign exchange rates. However, since the majority of the Company’s transactions occur in U.S. currency, this risk is not expected to have a material effect on its consolidated results of operations or financial condition.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures – The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, March 31, 2025 (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the Evaluation Date.
Changes in internal control over financial reporting – Management’s evaluation of disclosure controls and procedures described above did not identify any changes in the Company’s internal control over financial reporting that occurred during the Company’s
29
most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
RPC is involved in litigation from time to time in the ordinary course of its business. RPC does not believe that the outcome of such litigation will have a material adverse effect on the financial position or results of operations of RPC.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended March 31, 2025, no director or officer, as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended, of the Company
30
ITEM 6. EXHIBITS
Exhibit |
| Description |
3.1(a) | ||
3.1(b) | ||
3.1(c) | ||
3.2 | ||
4 | ||
31.1 | ||
31.2 | ||
32.1 | Section 906 certifications for Chief Executive Officer and Chief Financial Officer. | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
104
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101) |
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RPC, INC. | ||
/s/ Ben M. Palmer | ||
Date: April 24, 2025 | Ben M. Palmer | |
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
/s/ Michael L. Schmit | ||
Date: April 24, 2025 | Michael L. Schmit | |
Vice President, Chief Financial Officer and Corporate Secretary | ||
(Principal Financial and Accounting Officer) |
32