RPC, Inc. Q3 FY2025 earnings call

Key Points - Third quarter results showed sequential revenue improvement with increases in pressure pumping, coiled tubing, and downhole tools. - Service lines other than pressure pumping were 72% of total revenues in Q3 with a 3% sequential increase. - Thru-Tubing Solutions' downhole tools revenues rose 5% sequentially, with strength in Rocky Mountain and Southeast regions. - Thru-Tubing's A10 downhole motor is effective in longer laterals, driving market share gain. - Cudd Pressure Control's business increased 1% during the quarter; Cudd Energy's pressure pumping activity improved but a fleet was laid down in October. - Received a new 100% natural gas frac pump and have another on the way. - Focus on less capital-intensive service lines while being prudent with pressure pumping investments.

In the third quarter, Technical Services, representing 94% of total revenues, was up 6%. Support Services, making up 6% of total revenues, was up 4%, led by rental tools. Top service lines: Pressure pumping was 27.9%, wireline 23.5%, downhole tools 23.5%, coiled tubing 9.5%, cementing 5.4%, and rental tools 4.2%, accounting for 94% of total revenues. Revenues increased 6% to $447.1 million compared to Q2.

Guidance - Full year 2025 capital spending expected to be between $170 million to $190 million, related to maintenance, asset purchases, and IT upgrades. - Fourth quarter plan to liquidate terminated supplemental executive retirement plan, expecting a net cash distribution of approximately $8 million but incurring a one-time discrete increase in effective tax rate. - Adjusted diluted EPS was $0.09 in Q3; adjusted EBITDA was $72.3 million, up from $65.6 million with adjusted EBITDA margins increasing to 16.2%.

Risks - Near-term risks from oil price volatility and market uncertainty impacting the operating environment. - Effective tax rate was higher due to nondeductible portion of acquisition-related employment costs and a provision to tax return adjustment, with ongoing impact from differences in accounting and tax treatments of these costs.

Q: Wanted to start with kind of fourth quarter outlook, especially with oil price volatility and market uncertainty.

A: Ben says they're comfortable with Q4 but uncertain about impacts into Q1, remaining flexible and prepared to react.

Q: Asked about pivoting away from pressure pumping given it's capital-intensive.

A: Ben states pressure pumping is a lower percentage of total revenues, focusing on less capital-intensive service lines but keeping pressure pumping going prudently.

Q: Inquired about the A10 downhole motor's differentiation and why customers are migrating towards it.

A: Ben explains it's more effective with longer laterals, better for drillout and efficiency, benefiting both RPC and customers in terms of time and efficiency.