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RPC, Inc. Reports Fourth Quarter and Year-End 2013 Financial Results

ATLANTA, Jan. 29, 2014 /PRNewswire/ -- RPC, Inc. (NYSE: RES) today announced its unaudited results for the fourth quarter and year ended December 31, 2013.  RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States, and in selected international markets. 

For the quarter ended December 31, 2013, revenues increased 3.6 percent to $487.0 million compared to $469.9 million in the fourth quarter of 2012.  Revenues increased compared to the prior year due to higher activity levels in several of our major service lines, greater service intensity, and a larger fleet of revenue-producing equipment, partially offset by lower pricing for our services as compared to the prior year. Operating profit for the fourth quarter decreased to $64.5 million compared to operating profit of $89.3 million in the same period for the prior year, principally because of lower pricing for our services.  Net income was $37.6 million or $0.17 diluted earnings per share, compared to $55.4 million or $0.26 diluted earnings per share in the same period of 2012.  Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by 18.0 percent to $119.4 million compared to $145.6 million in the prior year. [1]

Cost of revenues during the fourth quarter of 2013 was $318.9 million, or 65.5 percent of revenues, compared to $279.4 million, or 59.5 percent of revenues, in the prior year.  Cost of revenues increased primarily due to higher materials and supplies expenses and employment costs associated with higher activity levels.  Cost of revenues as a percentage of revenues increased primarily due to competitive pricing for our services.

Selling, general and administrative expenses were $45.5 million in the fourth quarter of 2013, compared to $44.7 million in the same period of the prior year, and were approximately equal percentages of revenue each year.  Depreciation and amortization decreased slightly to $54.3 million during the quarter compared to $55.3 million in the fourth quarter of 2012.

For the twelve months ended December 31, 2013, revenues decreased 4.3 percent to $1.86 billion compared to $1.95 billion last year.  Net income decreased to $166.9 million or $0.77 earnings per diluted share, compared to net income of $274.4 million or $1.27 earnings per diluted share in 2012.  EBITDA decreased 25.6 percent, from $659.5 million in 2012 to $490.8 million in 2013. 1

"RPC's financial results during the fourth quarter of 2013 reflect continued high activity levels and growing service intensity in many of the domestic oilfield basins in which we operate," stated Richard A. Hubbell, RPC's President and Chief Executive Officer. "Our higher activity levels generated a modest revenue improvement compared to the fourth quarter of last year and strong sequential revenue performance, given the fourth quarter's weather and holiday impacts.  The average U.S. domestic rig count during the fourth quarter was 1,757, a 2.9 percent decrease compared to the same period in 2012, and a decrease of less than one percent compared to the third quarter of 2013.  The average price of natural gas during the fourth quarter was $3.83 per Mcf, a 14.0 percent increase compared to the prior year, and an 8.2 percent increase compared to the third quarter of 2013.  The average price of oil during the quarter was $97.39 per barrel, a 10.6 percent increase compared to the prior year and an 8.4 percent decrease compared to the third quarter of 2013.  The average price of benchmark natural gas liquids was $1.19 per gallon during the fourth quarter of 2013, a 34.1 percent increase compared to the fourth quarter of 2012, and a 16.1 percent increase compared to the third quarter of this year.  The unconventional rig count, an important indicator of the demand for RPC's services, increased by 3.5 percent compared to the prior year, and during the fourth quarter of 2013 represented 76.7 percent of U.S. domestic drilling activity.  Our revenues trended in line with these overall industry indicators, and we were pleased that the market prices of natural gas and natural gas liquids increased during the fourth quarter.

"RPC continues to benefit from higher completion service intensity.  On a sequential basis, our revenues declined by less than one percent in spite of holidays and winter weather which negatively impacted our revenues by approximately three percent.  However, continued competitive pricing and the transition from our remaining contractual work to the spot market served to depress our operating margin compared to the prior quarter and prior year.  The current conditions in the U.S. domestic market continue to be characterized by a large number of service companies competing for long-duration, service-intensive completion work.  The efficient nature of these projects can also exacerbate the equipment oversupply situation in our industry, which negatively impacted us during the quarter as well.

"During the fourth quarter, we invested $41.8 million in maintenance and growth capital expenditures.  Our total capital expenditures during 2013 were $201.7 million, a decline of $127.2 million or 38.7 percent compared to $328.9 million during 2012.  The balance on our syndicated credit facility at the end of the quarter was $53.3 million, a slight increase compared to $51.4 million at the end of the third quarter but a decline of $53.7 million or 50.2 percent compared to the end of the fourth quarter of 2012.  We continue to scrutinize our near-term financial returns in light of the competitive environment and our inconsistent profitability.  As always, we are dedicated to maintaining our financial strength through the domestic oilfield cycles," concluded Hubbell. 

Summary of Segment Operating Performance

RPC's business segments are Technical Services and Support Services.

Technical Services includes RPC's oilfield service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer's well.  These services are generally directed toward improving the flow of oil and natural gas from producing formations or to address well control issues.  The Technical Services segment includes pressure pumping, coiled tubing, hydraulic workover services, nitrogen, downhole tools, surface pressure control equipment, well control, and fishing tool operations.

Support Services includes RPC's oilfield service lines that provide equipment for customer use or services to assist customer operations.  The equipment and services offered include rental of drill pipe and related tools, pipe handling, inspection and storage services and oilfield training services.

Technical Services revenues increased 4.3 percent for the quarter compared to the prior year due to a job mix characterized by higher service intensity and increased use of raw materials in pressure pumping, the largest service line within this segment.  Support Services revenues decreased 4.8 percent during the quarter compared to the prior year principally due to lower pricing in the rental tool service line, which is the largest service line within this segment.  Operating profit in both Technical and Support Services declined due to more competitive pricing.  In Technical Services, operating profit also declined due to higher materials and supplies expenses.  


[1] EBITDA is a financial measure which does not conform to generally accepted accounting principles (GAAP).  Additional disclosure regarding this non-GAAP financial measure is disclosed in Appendix A to this press release.

 

(in thousands)


Three Months Ended December 31



Twelve Months Ended December 31



2013


2012



2013


2012











Revenues:










    Technical services

$

453,523

$

434,795


$

1,729,732

$

1,794,015

    Support services


33,458


35,147



131,757


151,008

Total revenues

$

486,981

$

469,942


$

1,861,489

$

1,945,023

Operating Profit:










    Technical services

$

65,439

$

85,621


$

276,246

$

420,231

    Support services


6,862


9,380



26,223


45,912

    Corporate expenses


(4,093)


(4,454)



(17,685)


(17,654)

    Loss on disposition of assets, net


(3,706)


(1,240)



(9,371)


(6,099)

Total operating profit

$

64,502

$

89,307


$

275,413

$

442,390

Interest Expense


(257)


(289)



(1,822)


(1,976)

Interest Income


346


5



419


30

Other Income, net


617


1,031



2,260


2,175











Income before income taxes

$

65,208

$

90,054


$

276,270

$

442,619











 

RPC, Inc. will hold a conference call today, January 29, 2014 at 9:00 a.m. ET to discuss the results of the fourth quarter.  Interested parties may listen in by accessing a live webcast in the investor relations section of RPC, Inc.'s website at www.rpc.net.  The live conference call can also be accessed by calling (888) 430-8691 or (719) 325-2435 and using the access code #1860661.  For those not able to attend the live conference call, a replay of the conference call will be available in the investor relations section of RPC, Inc.'s website (www.rpc.net) beginning approximately two hours after the call. 

RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest, Appalachian and Rocky Mountain regions, and in selected international markets.  RPC's investor website can be found at www.rpc.net.

Certain statements and information included in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including all statements that look forward in time or express management's beliefs, expectations or hopes.  In particular, such statements include, without limitation, our plans to maintain our financial strength during the challenging competitive environment and through the cycles in the domestic oilfield.  These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RPC to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Such risks include changes in general global business and economic conditions; drilling activity and rig count; risks of reduced availability or increased costs of both labor and raw materials used in providing our services; the impact on our operations if we are unable to comply with regulatory and environmental laws; turmoil in the financial markets and the potential difficulty to fund our capital needs; the potentially high cost of capital required to fund our capital needs; the impact of the level of unconventional exploration and production activities may cease or change in nature so as to reduce demand for our services, the ultimate impact of current and potential political unrest and armed conflict in the oil-producing regions of the world, which could impact drilling activity; adverse weather conditions in oil or gas producing regions, including the Gulf of Mexico; competition in the oil and gas industry; an inability to implement price increases; risks of international operations; and our reliance upon large customers.  Additional discussion of factors that could cause the actual results to differ materially from management's projections, forecasts, estimates and expectations is contained in RPC's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2012.

For information about RPC, Inc., please contact:

Ben M. Palmer
Chief Financial Officer
(404) 321-2140
[email protected]

Jim Landers
Vice President, Corporate Finance
(404) 321-2162
[email protected] 

 


RPC INCORPORATED AND SUBSIDIARIES



































CONSOLIDATED STATEMENTS OF OPERATIONS  (In thousands except per share data)











Periods ended December 31, (Unaudited)

Fourth Quarter


Twelve Months





2013



2012


% BETTER
(WORSE)




2013



2012


% BETTER
(WORSE)



REVENUES


$

486,981


$

469,942


3.6

%


$

1,861,489


$

1,945,023


(4.3)

%


COSTS AND EXPENSES:




















Cost of revenues



318,900



279,407


(14.1)




1,178,412



1,105,886


(6.6)



Selling, general and administrative expenses


45,544



44,691


(1.9)




185,165



175,749


(5.4)



Depreciation and amortization



54,329



55,297


1.8




213,128



214,899


0.8



Loss on disposition of assets, net



3,706



1,240


(198.9)




9,371



6,099


(53.6)



Operating profit 



64,502



89,307


(27.8)




275,413



442,390


(37.7)



Interest expense



(257)



(289)


11.1




(1,822)



(1,976)


7.8



Interest income



346



5


N/M




419



30


N/M



Other income, net



617



1,031


(40.2)




2,260



2,175


3.9



Income before income taxes



65,208



90,054


(27.6)




276,270



442,619


(37.6)



Income tax provision 



27,565



34,673


20.5




109,375



168,183


35.0



NET INCOME 


$

37,643


$

55,381


(32.0)

%


$

166,895


$

274,436


(39.2)

%










































EARNINGS PER SHARE 




















   Basic


$

0.18


$

0.26


(30.8)

%


$

0.77


$

1.28


(39.8)

%


   Diluted


$

0.17


$

0.26


(34.6)

%


$

0.77


$

1.27


(39.4)

%






















AVERAGE SHARES OUTSTANDING



















     Basic 



214,871



215,328






215,504



215,241





     Diluted 



216,269



216,662






216,733



216,796

























 

RPC INCORPORATED AND SUBSIDIARIES












CONSOLIDATED BALANCE  SHEETS






At December 31, (Unaudited)


(In thousands)



2013



2012

ASSETS






Cash and cash equivalents

$

8,700


$

14,163

Accounts receivable, net


437,132



387,530

Inventories


126,604



140,867

Deferred income taxes


14,185



5,777

Income taxes receivable


5,720



4,234

Prepaid expenses 


9,143



10,762

Other current assets


3,441



4,494

  Total current assets


604,925



567,827

Property, plant and equipment, net


726,307



756,326

Goodwill 


31,861



24,093

Other assets


20,767



18,917

  Total assets

$

1,383,860


$

1,367,163







LIABILITIES AND STOCKHOLDERS' EQUITY






Accounts payable

$

119,170


$

109,846

Accrued payroll and related expenses


36,638



32,053

Accrued insurance expenses


6,072



6,152

Accrued state, local and other taxes


5,002



7,326

Income taxes payable


-



6,428

Other accrued expenses


1,170



2,706

  Total current liabilities


168,052



164,511

Long-term accrued insurance expenses


10,225



10,400

Notes payable to banks


53,300



107,000

Long-term pension liabilities


21,966



26,543

Other long-term liabilities


8,439



4,470

Deferred income taxes


153,176



155,007

  Total liabilities


415,158



467,931

Common stock 


21,899



22,014

Capital in excess of par value


-



-

Retained earnings


956,918



891,464

Accumulated other comprehensive loss


(10,115)



(14,246)

  Total stockholders' equity


968,702



899,232

  Total liabilities and stockholders' equity 

$

1,383,860


$

1,367,163







 









































Periods ended December 31, (Unaudited)


Fourth Quarter


% BETTER
(WORSE)




Twelve Months


% BETTER
(WORSE)






2013



2012





2013



2012
























Reconciliation of Net Income to EBITDA



















Net Income


$

37,643


$

55,381


(32.0)

%


$

166,895


$

274,436


(39.2)

%


Add:




















    Income tax provision



27,565



34,673


20.5




109,375



168,183


35.0



    Interest expense



257



289


11.1




1,822



1,976


7.8



    Depreciation and amortization



54,329



55,297


1.8




213,128



214,899


0.8



Less:




















    Interest income



346



5


N/M




419



30


N/M



EBITDA


$

119,448


$

145,635


(18.0)

%


$

490,801


$

659,464


(25.6)

%






















EBITDA PER SHARE




















    Basic


$

0.56


$

0.68


(17.6)

%


$

2.28


$

3.06


(25.5)

%


    Diluted


$

0.55


$

0.67


(17.9)

%


$

2.26


$

3.04


(25.7)

%


 

SOURCE RPC, Inc.

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