RPC, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparison is Q1 2022 unless noted. RPC provides specialized oilfield services, primarily in the United States, through Technical Services and Support Services.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $476.7 million | $284.6 million | +67.5% |
| Operating income | $90.7 million | $23.0 million | +293.6% |
| Net income | $71.5 million | $15.1 million | +374.2% |
| Diluted EPS | $0.33 | $0.07 | Up $0.26 |
| Cash from operations | $132.5 million | $8.2 million | +$124.3 million |
| Capital expenditures | $65.3 million | $19.1 million | +$46.2 million |
Operating margin was approximately 19.0%, compared with 8.1%; net margin was approximately 15.0%, compared with 5.3% (calculated from reported figures). Cost of revenues fell to 64.0% of revenue from 73.4%, while SG&A declined to 8.9% from 12.7% of revenue. Improved pricing, higher activity and a larger active pressure-pumping fleet supported results; costs also rose with activity and higher input prices.
Segments: Technical Services revenue was $452.0 million, up 69.7%, and operating income was $103.5 million versus $21.8 million. Support Services revenue was $24.7 million, up 35.0%, and operating income was $6.6 million versus $2.8 million. U.S. revenue rose 70.5% to $469.4 million; international revenue declined 21.5% to $7.3 million.
Cash, liquidity and capital
- Cash and cash equivalents were $177.9 million at March 31, up from $126.4 million at year-end. Operating cash flow benefited from higher earnings and favorable working-capital movements, including collections and a tax-receivable reclassification.
- Investing activities used $61.0 million, primarily reflecting $65.3 million of capital expenditures. Financing activities used $20.0 million, including $8.7 million of dividends and $11.3 million of share repurchases.
- No borrowings were outstanding on the $100 million revolving credit facility; $82.6 million was available after $17.4 million of letters of credit. RPC reported compliance with its covenants. Total liabilities were $260.1 million; these included operating lease liabilities, and the filing reports no revolving-credit borrowings.
- Current assets were $719.6 million and current liabilities $158.5 million. RPC said existing cash and capitalization should meet liquidity needs for at least 12 months and that it did not expect to draw on the facility.
Material changes, outlook and risks
- A $17.4 million non-cash pension settlement charge reduced operating income. RPC completed an annuity purchase as part of terminating its defined-benefit plan and contributed $4.0 million; it expected an additional approximately $820,000 non-cash charge and $1.2 million contribution in Q2, with full termination expected that quarter.
- Management expects 2023 capital expenditures of $250–$300 million, mainly for maintenance and upgrades, fleet replacement and selected growth opportunities. It described near-term demand and competitive conditions as improving, while emphasizing disciplined additions of revenue-producing capacity. No specific earnings or revenue guidance was provided.
- Management cited oil and gas prices, customer activity, geopolitical developments, weather, competition, inflation and the ability to pass through cost increases as factors that could affect results. International revenue is expected to remain below 10% of consolidated revenue in the foreseeable future.
- The company resumed quarterly dividends: $0.04 per share was paid in Q1, and a further $0.04 dividend was declared after quarter-end. The board also authorized 8 million additional repurchase shares after quarter-end, bringing the remaining authorization to 15,115,820 shares.
- RPC disclosed ongoing sales and use tax audits; it considered a material loss on a specific assessment remote and recorded no loss. It stated that ordinary-course litigation was not expected to have a material adverse effect. Most cash is held at one financial institution in amounts exceeding FDIC insurance limits.
Important facts for investors to verify
- Whether higher service pricing, activity and fleet utilization persist, particularly if commodity prices or customer spending weaken.
- Whether planned capital expenditures remain within the $250–$300 million outlook and deliver expected returns, while supporting cash generation.
- Completion and final costs of the pension-plan termination, including the expected Q2 contribution and settlement charge.
- Developments in sales and use tax audits, and the concentration of cash deposits above FDIC-insured limits.
- Future dividend and repurchase decisions, which management says depend on industry conditions, earnings, financial condition and other factors.