RPC, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Although the request references 2021 Q4, the filing is an annual report and the supplied text does not provide a clear standalone fourth-quarter income statement or cash-flow summary.
Business context
RPC provides oilfield services and equipment, primarily to U.S. oil and gas producers. Its two operating segments are Technical Services, including pressure pumping and downhole tools, and Support Services, including rental tools and pipe-related services. Results are highly sensitive to commodity prices, customer capital spending, drilling and completion activity, and service pricing.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $864.9 million | $598.3 million |
| Operating income (loss) | $16.3 million | ($309.6 million) |
| Net income (loss) | $7.2 million | ($212.2 million) |
| Diluted earnings (loss) per share | $0.03 | ($1.00) |
| Cash from operating activities | $47.7 million | $78.0 million |
| Capital expenditures | $67.6 million | $65.1 million |
- Revenue increased 44.6%, reflecting higher customer activity and pricing as activity recovered from COVID-19 disruptions. Technical Services revenue rose 46.5% to $815.0 million; Support Services revenue rose 19.3% to $49.9 million.
- Cost of revenue was 76.7% of revenue, compared with 80.4% in 2020, implying a 23.3% gross margin. Selling, general and administrative expense was 14.3% of revenue, down from 20.7%. Operating margin was approximately 1.9%; net margin was approximately 0.8%.
- Technical Services reported $24.4 million of operating income, compared with an $82.5 million loss in 2020. Support Services recorded a $5.7 million operating loss, versus a $6.7 million loss. Corporate costs were $13.3 million.
- Cash and cash equivalents were $82.4 million at year-end, versus $84.5 million a year earlier. Current assets were $492.0 million and current liabilities were $130.8 million.
- RPC had no borrowings under its $100 million revolving credit facility and was in compliance with its financial covenants. The filing reports $16.3 million of letters of credit in one liquidity discussion and $17.3 million in the debt note; stated facility availability likewise differs ($83.7 million versus $82.7 million).
- Total liabilities were $222.6 million, including a $20.2 million current finance-lease liability associated with a new pressure-pumping fleet. The filing reports no material off-balance-sheet arrangements.
Material changes and unusual items
- FY 2020 included $217.5 million of impairment and other charges, primarily long-lived asset impairments. No such charges were recorded in 2021. The 2020 net loss included $211.0 million of noncash charges, primarily impairment-related.
- Despite the return to profitability, operating cash flow fell by $30.2 million, mainly because accounts receivable increased by $91.1 million as activity recovered and working-capital needs rose.
- Interest expense increased to $1.9 million from $0.4 million, partly due to interest related to resolving a long-term vendor dispute and an indirect-tax audit assessment.
- The effective tax rate was 56.1%, versus 31.4% in 2020; management attributed the 2021 rate to low pretax income and unfavorable discrete tax adjustments.
- International revenue declined 13.0% to $31.2 million, or about 4% of total revenue, primarily due to lower activity in Algeria and Saudi Arabia, partly offset by Canada.
Outlook, risks and contingencies
- Management expected 2022 capital expenditures of approximately $120 million, mainly for equipment maintenance and selected growth opportunities. It reported a new Tier IV dual-fuel pressure-pumping fleet entering service in late 2021.
- Management viewed improving oil, natural gas and natural-gas-liquids prices, rising completions, and improved service pricing as supportive of near-term activity. It expected international revenue to remain below 10% of total revenue in 2022. These are forward-looking expectations, not guarantees.
- Management said cash and capitalization should meet requirements for at least the next 12 months and did not expect to need the revolving facility in the near term. The dividend remained suspended; resumption was expected to depend on earnings and financial condition, with no timetable.
- RPC initiated termination of its defined-benefit pension plan. It expected no cash contribution in 2022 and approximately $6.0 million in a final contribution in early 2023; termination could also produce a noncash settlement charge.
- Key risks include volatile commodity prices and customer spending, competition and pricing pressure, skilled-labor shortages and wage inflation, limited equipment/material suppliers, weather, COVID-19 effects, environmental and hydraulic-fracturing regulation, international political and currency risks, cybersecurity, and potential personal-injury, property-damage and pollution claims.
- The company disclosed ongoing sales and use tax audits with potential unfavorable outcomes that it could not currently estimate. Management considered a specific state tax assessment unlikely to cause a material loss; routine litigation was not expected to have a material adverse effect. Self-insurance liabilities were $21.9 million, within an estimated exposure range of $19.4 million to $24.5 million.
- Grant Thornton issued unqualified opinions on the financial statements and internal control over financial reporting; it reported no critical audit matters.
Investor verification priorities
- Confirm the revolving-facility letter-of-credit amount and availability: the filing gives conflicting figures of $16.3 million/$17.3 million and $83.7 million/$82.7 million.
- Review receivables and working-capital conversion as activity grows; net accounts receivable rose to $258.6 million from $161.8 million.
- Assess whether expected 2022 capital spending, equipment utilization and pricing translate into sustained operating cash flow and margins.
- Track pension-plan termination costs and timing, including the expected 2023 contribution and potential settlement charge.
- Monitor the outcome of sales and use tax audits, supplier and labor cost pressures, and the conditions for any dividend resumption.