RPC, Inc. — 2020 Form 10-K Summary
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2020; it is not a quarterly report. RPC (NYSE: RES) provides oilfield services and equipment, primarily in the United States, through Technical Services and Support Services. Technical Services generated about 93% of 2020 revenue. Approximately 75% of revenue related to oil activity and 25% to natural gas activity.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $598.3 million | $1,222.4 million |
| Operating loss | $309.6 million | $114.3 million |
| Operating margin | (51.8)% | (9.3)% |
| Net loss | $212.2 million | $87.1 million |
| Diluted loss per share | $1.00 | $0.41 |
| Cash from operating activities | $78.0 million | $209.1 million |
| Capital expenditures | $65.1 million | $250.6 million |
| Cash and cash equivalents at year-end | $84.5 million | $50.0 million |
- Cost of revenue was 80.4% of revenue, versus 75.2% in 2019; SG&A was 20.7%, versus 13.8%. The operating loss included $217.5 million of impairment and other charges, principally long-lived asset impairments.
- Operating cash flow less capital expenditures was approximately $12.9 million. Working capital was $348.8 million; total assets were $790.5 million and stockholders’ equity was $631.6 million.
- No revolving-credit borrowings or long-term debt were outstanding at year-end. The amended facility has a $100 million commitment and matures in 2023. The filing gives differing availability figures: $80.2 million in MD&A and $81.7 million in Note 9, reflecting differing stated letters-of-credit amounts.
- No common dividends were paid in 2020. The dividend suspension remains in effect, with no timetable for resumption.
Material changes versus 2019
- Revenue fell 51.1%, reflecting sharply lower activity and pricing amid the pandemic-driven oil-demand shock and oil-market disruption. Average U.S. rig count declined 53.8%; average oil and natural-gas prices fell 30.6% and 20.9%, respectively.
- Technical Services revenue declined 51.4%; Support Services revenue declined 45.6%. Both segments reported operating losses in 2020; Support Services had reported operating income in 2019.
- RPC recorded $204.8 million of long-lived asset impairment and $4.7 million of pension settlement loss, among other charges. Goodwill was not impaired. Property, plant and equipment, net, fell to $264.4 million from $516.7 million.
- Operating cash flow decreased by $131.2 million, while capital expenditures dropped by $185.6 million. Year-end cash increased to $84.5 million, partly supported by working-capital movements and tax refunds/receivables.
- Headcount declined to approximately 2,005 from 2,656 at year-end 2019 (the selected financial data elsewhere in the filing reports 2,700 for 2019).
Outlook, commentary and risks
- Management expected approximately $56 million of capital expenditures in 2021, mainly maintenance and selected dual-fuel equipment upgrades. RPC planned to limit fleet expansion until expected returns justify investment.
- Management said commodity-price increases entering 2021 encouraged customer activity, but expected near-term well-completion activity to remain weak and below prior cyclical peaks. It expected oil-directed drilling to remain the majority and natural-gas-directed activity to stay low.
- RPC cited pandemic and commodity-price uncertainty, customer access to financing, pricing and capacity competition, labor and input-cost increases, environmental and hydraulic-fracturing regulation, weather, international political and currency risks, and potential litigation, safety and insurance exposures. Further asset impairments may be required if conditions deteriorate.
- Management stated available cash and capitalization should meet requirements for at least 12 months and did not expect to need the revolver. The company was compliant with credit-facility covenants at year-end. The auditor issued an unqualified opinion on the financial statements and reported effective internal control over financial reporting.
- Routine legal proceedings and ongoing sales/use-tax audits were disclosed. Management did not expect the routine legal matters to have a material adverse effect; some tax-audit exposures could not be estimated.
Investor verification priorities
- Reconcile the credit-facility availability and letters-of-credit figures ($80.2 million versus $81.7 million) and confirm current borrowing capacity and covenant headroom.
- Review the assumptions supporting the $204.8 million long-lived-asset impairment and assess the risk of additional impairment; the audit identified asset and goodwill impairment valuations as critical audit matters.
- Assess whether cash generation can sustain maintenance investment if revenue and operating activity remain depressed; compare actual 2021 capital spending and activity with the stated outlook.
- Monitor collection quality, customer credit exposure, inventory reserves, and the recovery or use of tax receivables and carrybacks.
- Confirm the pension plan’s funded status and expected contributions: the filing’s narrative calls the plan over-funded in one passage, while Note 13 reports a $2.1 million shortfall of plan assets versus the projected benefit obligation.
- Track dividend-restoration decisions, commodity prices, pricing and labor/input-cost recovery, and any developments in federal leasing or other energy regulation.