RPC, Inc. — Q1 2022 Form 10-Q Summary
Business context and period: RPC provides oilfield services, primarily in the United States, through Technical Services and Support Services. This unaudited filing covers the three months ended March 31, 2022; comparisons are with Q1 2021 unless stated otherwise. Amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $284.6 million | $182.6 million |
| Operating income (loss) | $23.0 million | $(10.5) million |
| Net income (loss) | $15.1 million | $(9.7) million |
| Diluted EPS | $0.07 | $(0.05) |
| Operating cash flow | $8.2 million | $9.3 million |
| Capital expenditures | $19.1 million | $11.8 million |
- Revenue increased 55.9%, reflecting higher customer activity, improved pricing, and a larger pressure-pumping fleet in service. U.S. revenue rose 59.0% to $275.3 million; international revenue declined 4.0% to $9.3 million.
- Technical Services revenue was $266.3 million and operating income was $21.8 million, versus an operating loss of $5.8 million. Support Services revenue was $18.3 million and operating income was $2.8 million, versus an operating loss of $2.9 million.
- Cost of revenues rose 42.8% to $208.8 million, slower than revenue growth. Cost of revenues fell to 73.4% of revenue from 80.1%; SG&A declined to 12.7% of revenue from 16.8%. Operating margin was approximately 8.1%, versus approximately negative 5.8%.
- Cash from operations was slightly lower despite the return to profitability, mainly due to working-capital needs from increased activity. Capital expenditures exceeded operating cash flow by approximately $10.8 million.
Balance sheet, debt, and liquidity
- At March 31, 2022, cash was $73.2 million, total current assets were $517.2 million, and current liabilities were $139.2 million. Cash declined $9.2 million from year-end 2021.
- Total liabilities were $233.4 million and stockholders’ equity was $657.8 million. RPC had no borrowings under its $100 million revolving credit facility; $16.3 million of letters of credit left $83.7 million available. The company reported compliance with facility covenants.
- Finance lease liabilities included $22.7 million current; the filing also describes $24 million of expected finance-lease payments in 2022, including a $20 million final payment in Q3.
Outlook, commentary, and risks
- Management expects approximately $115 million of 2022 capital expenditures, mainly for maintenance and selected growth opportunities. It said existing cash and capitalization should provide liquidity for at least the next twelve months and did not expect to need the revolver.
- Management viewed higher oil and gas prices and improving drilling and completion activity as favorable, and expected near-term improvement in the competitive market. It noted, however, that service-market oversupply, operational efficiency gains, commodity-price volatility, geopolitical events, customer activity, and competition could affect results. Higher labor, fuel, materials, and equipment costs may also pressure margins; management said passing these costs through to customers is not assured.
- The defined-benefit pension plan is expected to terminate in early 2023. RPC expects a final cash contribution of $6–$7 million and anticipates a pre-tax, noncash settlement charge; the unamortized plan loss was approximately $23.2 million at quarter-end, subject to change.
- Sales and use tax audits are ongoing. The company said a material loss on a specific assessment was remote, but other unfavorable outcomes may not currently be estimable. Ordinary-course litigation was not expected to have a material adverse effect.
- Common dividends have been suspended since 2019; management said resumption is expected subject to earnings, financial condition, and other factors, but provided no timetable. Management also cited the potential impact of COVID-19, oil and gas prices, OPEC actions, Russia-Ukraine-related supply constraints, weather, regulation, and international operations.
Important facts for investors to verify
- Whether activity and pricing gains persist, and whether higher costs can continue to be passed through to customers.
- How planned 2022 capital spending and the $20 million Q3 finance-lease payment affect cash and liquidity.
- The timing, cash contribution, and final settlement charge associated with the pension plan termination.
- Developments in sales and use tax audits, and any changes to the company’s stated assessment of potential losses.
- Whether the board resumes dividends or uses the remaining share-repurchase authorization; no open-market repurchases occurred during the quarter.