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What Does RPC's (RES) Q3 Earnings Beat Mean for the Industry?

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  • RES

RPC, Inc. RES recently reported strong third-quarter results backed by higher activity levels in all the service lines and improved pricing. This is encouraging for oilfield service providers as the industry upcycling is creating a favorable space for the companies. In the last few quarters, oilfield service providers incurred massive losses, courtesy of decreased upstream activities. Also, intense competition in the domestic market to capture the shrunken upstream capital left limited room for oilfield service companies to charge premium prices. As such, pricing improvements witnessed by RPC in the third quarter can be viewed as a major positive indicator for the upcoming quarters.

Other companies in the industry including Ranger Energy Services, Inc. RNGR, Liberty Oilfield Services Inc. LBRT and Nine Energy Service, Inc. NINE are expected to be able to increase their product pricing if the current market improvement persists. This will likely give their bottom lines a boost in the coming quarters.

Nevertheless, increased activity levels will also push operating costs and expenses higher for oilfield service providers. Resultantly, strong management from the industry players is needed to protect their bottom lines. RPC, with its technological improvements, is well positioned to tame the rising costs in the foreseeable future.

RPC’s Q3 Results

The company reported adjusted earnings of 2 cents per share for third-quarter 2021, beating the Zacks Consensus Estimate of 1 cent and comparing favorably with the year-ago loss of 9 cents.

Total quarterly revenues were $225.3 million, which beat the consensus mark of $216 million. The top line also significantly improved from the year-ago figure of $116.6 million.

Segmental Performance

Operating profit in the Technical Services segment totaled $8.3 million against a loss of $24.9 million in the year-ago quarter. The improvement can be attributed to higher activity levels in most of the service lines and improved pricing.

Operating loss in the Support Services segment came in at $55,000, narrower than the unit’s operating loss of $3.8 million in the year-ago quarter. The upside was caused by increased activities.

Total operating profit for the quarter was almost $8 million, significantly improving from the year-ago loss of $31.8 million. Average domestic rig count was 500 for the September-end quarter, reflecting a 96.9% increase from the year-ago level. Average oil price for the quarter was $70.53 per barrel. The same for natural gas was $4.39 per thousand cubic feet.

Cost and Expenses

Cost of revenues increased from $100.9 million in third-quarter 2020 to $170.6 million. Selling, general and administrative expenses marginally decreased to $31.4 million from the year-ago figure of $32.4 million.

The increased cost of revenues was mainly due to higher expenses related to increased activity levels, fuel costs and others.

Financials

RPC’s total capital expenditure for the September-end quarter of 2021 amounted to $19 million.

As of Sep 30, the company had cash and cash equivalents of $80.8 million, down sequentially from $121 million reported in the second quarter. Nonetheless, it managed to maintain a debt-free balance sheet.

View

Its new Tier IV dual-fuel pressure pumping fleet came online during third quarter-end in the Permian Basin. This is expected to boost the company’s utilization rate and profits in the coming quarters. For 2021, RPC reiterated its capital expenditure guidance of $65 million.


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