RPC, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2021. RPC provides specialized oilfield services, primarily in the United States, through Technical Services and Support Services. Amounts below are in U.S. dollars.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $225.3 million | $116.6 million | $596.7 million | $449.7 million |
| Operating income (loss) | $8.0 million | $(31.8) million | $(3.8) million | $(288.0) million |
| Net income (loss) | $5.3 million | $(16.4) million | $(5.1) million | $(202.0) million |
| Diluted EPS | $0.02 | $(0.08) | $(0.02) | $(0.95) |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $26.4 million | $131.4 million |
- Q3 cost of revenues was $170.6 million, or 75.7% of revenue, versus 86.5% a year earlier. SG&A was $31.4 million, or 14.0% of revenue, versus 27.8%. The filing attributes improved cost ratios primarily to higher activity and better absorption of relatively fixed costs.
- For the first nine months, cost of revenues was 77.5% of revenue versus 80.7%; SG&A was 15.3% versus 21.7%. Depreciation and amortization fell to $53.8 million from $77.5 million.
- Technical Services generated Q3 revenue of $211.8 million and operating income of $8.3 million. Support Services revenue was $13.5 million and the segment recorded a $0.1 million operating loss.
Financial position and liquidity
- At September 30, 2021, cash was $80.8 million, total assets $826.6 million, and total liabilities $195.9 million. Current assets were $457.9 million and current liabilities $120.7 million.
- RPC had no borrowings under its $100 million revolving credit facility, which matures in July 2023. After $17.7 million of letters of credit, $82.3 million remained available; the company reported compliance with facility covenants.
- Nine-month operating cash flow of $26.4 million was below the prior-year $131.4 million, mainly reflecting a $71.7 million increase in accounts receivable. Capital expenditures were $44.9 million; investing cash outflow was $29.1 million. Cash declined $3.7 million from year-end 2020.
- A new Tier IV dual-fuel pumping fleet was accounted for as a finance lease, adding $21.7 million of right-of-use assets and current lease liabilities. This is distinct from bank borrowings.
Changes, outlook, and risks
- Q3 revenue rose 93.3% year over year as activity increased across service lines and pricing improved slightly in several larger lines. The comparison reflects unusually depressed Q3 2020 activity during the COVID-19 downturn. Domestic revenue increased 96.0%; international revenue increased 32.0% to $7.6 million.
- Nine-month revenue increased 32.7%, but RPC remained slightly loss-making. The prior-year period included $207.2 million of impairment and other charges; there were none in the first nine months of 2021.
- Management estimated 2021 capital expenditures, excluding lease-financed equipment, at approximately $65 million, mainly for maintenance and selected growth opportunities. It described commodity-price increases and recovering customer activity as supportive, and expected near-term service-market conditions to improve. These are forward-looking expectations, not earnings guidance.
- During Q3, RPC recorded a $4.5 million estimated liability to resolve a long-term vendor dispute: $3.3 million was charged to cost of revenues and the remainder to interest expense. Management also cited an approximately $2.3 million CARES tax credit as a partial offset to Q3 costs. Sales and use tax audits continue; the company said a material loss was remote for a notified assessment, though the amount could not be reasonably estimated.
- Key risks include oil and gas prices and customer spending, COVID-19 and broader economic conditions, competition and limits on passing through cost increases, labor and supply-chain inflation, weather, regulation, geopolitical events, and international operations. Management said it had sufficient liquidity for at least 12 months and did not expect to need the revolver.
- The common dividend remained suspended, with no resumption timetable. No open-market shares were repurchased during the nine months. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the recovery in customer activity, pricing, and utilization continues, particularly in Technical Services.
- Whether accounts receivable growth converts to cash and operating cash flow improves.
- Actual 2021 capital spending, including lease-financed fleet commitments, compared with the approximately $65 million estimate.
- Developments in sales and use tax audits and other contingencies, as well as the impact of labor and supply-cost inflation.
- Future dividend and repurchase decisions, given the suspended dividend and remaining buyback authorization.