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Edited Transcript of RES earnings conference call or presentation 26-Apr-17 1:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 RPC Inc Earnings Call

ATLANTA Apr 28, 2017 (Thomson StreetEvents) -- Edited Transcript of RPC Inc earnings conference call or presentation Wednesday, April 26, 2017 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ben M. Palmer

RPC, Inc. - CFO, VP and Treasurer

* James C. Landers

RPC, Inc. - VP of Corporate Finance

* Richard A. Hubbell

RPC, Inc. - CEO, President, Director, CEO of Marine Products Corporation, President of Marine Products Corporation and Director of Marine Products Corporation

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Conference Call Participants

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* Chase Mulvehill

* Daniel Jon Boyd

BMO Capital Markets Equity Research - Oilfield Services Analyst

* George Michael O'Leary

Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director, Oil Service Research

* John Matthew Daniel

Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service

* Kenneth Irvin Sill

SunTrust Robinson Humphrey, Inc., Research Division - MD and Senior Oilfield Services Analyst

* Marc Gregory Bianchi

Cowen and Company, LLC, Research Division - MD

* Matthew Johnston

Nomura Securities Co. Ltd., Research Division - VP

* Praveen Narra

Raymond James & Associates, Inc., Research Division - Analyst

* Robert James MacKenzie

Iberia Capital Partners, LLC, Research Division - MD of Equity Research

* Ryan Ward

* Scott Andrew Gruber

Citigroup Inc, Research Division - Director and Senior Analyst

* Thomas Curran

FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst

* Waqar Mustafa Syed

Goldman Sachs Group Inc., Research Division - VP

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Presentation

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Operator [1]

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Good morning, and thank you for joining us for RPC, Inc.'s First Quarter 2017 Financial Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO; and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Finance. (Operator Instructions) I would like to advise everyone that this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [2]

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Thank you, and good morning. Before we begin our call today, I want to remind you that in order to talk about our company, we're going to mention a few things that are not historical facts. Some of the statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks. I'd like to refer you to our press release issued today, along with our 2016 10-K and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net. I also need to tell you that in today's earnings release and conference call, we have discussed and will be referring to EBITDA. EBITDA is a non-GAAP measure of operating performance. RPC uses EBITDA as a measure of operating performance, because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. We are also required to use EBITDA to report compliance with financial covenants under our credit facility. Our press release today and our website provide a reconciliation of EBITDA to net income, the nearest GAAP financial measure. Please review that disclosure if you're interested in seeing how it's calculated. If you have not received our press release for any reason and would like one, please visit our website at www.rpc.net for a copy. I will now turn the call over to our President and CEO, Rick Hubbell.

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Richard A. Hubbell, RPC, Inc. - CEO, President, Director, CEO of Marine Products Corporation, President of Marine Products Corporation and Director of Marine Products Corporation [3]

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Thanks, Jim. This morning we issued our earnings press release for RPC's first quarter of 2017. Industry conditions continued to improve throughout the first quarter of 2017, and the average U.S. domestic rig count has more than doubled over the last 10 months. RPC's financial results improved as demand for our services increased resulting in higher activity levels and slightly better pricing. Our disciplined approach and long-term view during the industry downturn prepared us to meet our customers' increased demand with well-maintained equipment, experienced crews and efficient logistical processes. Our CFO, Ben Palmer, will review our financial results in more detail, after which, I'll have a few closing comments.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [4]

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Thank you, Rick. For the first quarter, revenues increased to $298.1 million compared to $189.1 million in the prior year. Revenues increased due to higher activity levels, increasing service intensity and improved pricing in our Technical Services segment. EBITDA for the first quarter increased to $46.4 million compared to negative $14.1 million for the same period last year due to higher revenues and improved profitability. Operating profit for the quarter increased to $1.6 million compared to an operating loss of $75.1 million in the prior year. Our diluted earnings per share were $0.02 compared to $0.15 loss per share in the prior year. Current quarter diluted earnings per share includes $0.01 per diluted share compared to the adoption of a new accounting pronouncement related to share-based payment awards.

Cost of revenues increased from $161.3 million in the first quarter of the prior year to $216.2 million in the current year, due primarily to increased activity. Cost of revenues as a percentage of revenues decreased from 85.3% in the prior year to 72.5% due to improved pricing for our services and efficiencies resulting from higher activity levels, primarily within our Technical Services segment.

Selling, general and administrative expenses decreased from $43.5 million in the first quarter of the prior year to $37.2 million this year, primarily due to lower bad debt expense and employment costs during the quarter. In addition, during the first quarter of 2016, we recorded a nonrecurring contingent professional fee of $2 million. SG&A expenses as a percentage of revenue decreased from 23% last year to 12.5% this year, due to lower expenses and improved leverage of higher revenues over fixed costs.

Depreciation and amortization were $44.7 million during the first quarter of 2017, a decrease of 26.3% compared to $60.6 million in the prior year due to minimal capital expenditures. Net gain on disposition of assets was $1.5 million in the first quarter of 2017 compared to $1.3 million in the first quarter of the prior year. Our Technical Services segment revenues for the quarter increased 63.1% compared to the first quarter of the prior year.

Operating profit increased to $9.2 million compared to an operating loss of $63.3 million in the prior year. Revenues and operating profit increased due to improved pressure pumping activity. Our Support Services segment revenues for the quarter decreased 12.5% and operating losses improved 21.3% compared to the first quarter of the prior year, due primarily to cost control measures.

Now I'll discuss our sequential results. RPC's first quarter revenues increased 34.9% to $298.1 million from $221 million in the prior quarter. Cost of revenues during the first quarter of 2017 increased by $43.2 million or 25% due to higher activity levels. Cost of revenues as a percentage of revenues improved from 78.3% in the prior quarter to 72.5% this quarter due to pricing improvements and operational leverage from higher activity levels.

Selling, general and administrative expenses during the first quarter of 2017 increased by $1.3 million or 3.7% compared to the prior quarter due to higher employment costs, primarily payroll taxes, partially offset by lower bad debt expense. SG&A expense as a percentage of revenues decreased from 16.2% in the prior quarter to 12.5% this quarter due to higher revenues over relatively fixed costs.

RPC's consolidated operating results improved $33.8 million to $1.6 million operating profit in the first quarter from a $32.2 million operating loss in the prior quarter. EBITDA improved $30.8 million from $15.7 million in the prior quarter to $46.5 million in the first quarter.

Our Technical Services segment generated revenues of $286.2 million, 36.5% higher than revenues of $209.6 million in the prior quarter. This was due to increases in pressure pumping activity. Operating profit was $9.2 million compared to an operating loss of $26.2 million in the prior quarter. Our operating margin in this segment improved to 3.2% of revenues. Revenues in our Support Services segment was $11.9 million compared to $11.4 million in the previous quarter. Operating loss decreased to $5.2 million compared to $6.7 million in the prior quarter.

As of the end of the first quarter, RPC's pressure pumping fleet totaled 927,000 hydraulic horsepower, of which approximately 70% is manned and available to work compared to 50% at the end of the prior quarter. RPC's total headcount increased 10.3% during the first quarter. Our first quarter 2017 capital expenditures were $11.7 million, and we expect 2017 capital expenditures to be directed primarily towards maintaining rather than growing our fleet. With that, I'll now turn it back over to Rick for some closing remarks.

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Richard A. Hubbell, RPC, Inc. - CEO, President, Director, CEO of Marine Products Corporation, President of Marine Products Corporation and Director of Marine Products Corporation [5]

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Ben, thank you. Since last year, RPC has consistently stated it would only reactivate idle equipment when market pricing and customer demand improve to acceptable levels. This threshold was reached, and late in the first quarter, we reactivated a portion of our idle pressure pumping equipment. While we are encouraged by recent improvements in the operating environment and our overall financial results, we remain cautiously optimistic and continue to focus on not overextending ourselves in a volatile industry. I'd like to thank you for joining us on the conference call this morning. And at this time, we will open up the lines for your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Ken Sill with SunTrust Robinson Humphrey.

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Kenneth Irvin Sill, SunTrust Robinson Humphrey, Inc., Research Division - MD and Senior Oilfield Services Analyst [2]

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Kind of a two-part question here. So you started reactivating idle capacity late in Q1. How much of that, if any, was available during the quarter and accounted? How much did capacity increase account for the revenue growth versus just improved utilization or pricing?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [3]

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Ken, this is Ben. Actually very little. So what we were able to do was really add employees and be able to increase the usage on the capacity that was already there. So it was repeating it. Most of the addition was very, very light in the quarter and contributed very little.

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Kenneth Irvin Sill, SunTrust Robinson Humphrey, Inc., Research Division - MD and Senior Oilfield Services Analyst [4]

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So kind of as a baseline, you got 70% active versus 50%, which is a 40% increased available capacity. I don't know that you guys would expect to see pressure pumping revenues go up that much Q1 to Q2, that would be an awful big jump.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [5]

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Yes. That would not be something that we would want to say here.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [6]

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Something less than that.

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Kenneth Irvin Sill, SunTrust Robinson Humphrey, Inc., Research Division - MD and Senior Oilfield Services Analyst [7]

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And then just a housekeeping question out of the way. Could you give us the breakdown of revenue in Technical Services?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [8]

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Sure, Ken, absolutely. This is Jim. So what I'm about to tell everyone is the percentage of consolidated RPC revenues accounted for by our largest service lines. So as a percentage of consolidated RPC revenue for the first quarter, pressure pumping was 61.4% of revenues; Thru Tubing Solutions was 17.6% of revenues; coiled tubing was 7.2% of revenues; nitrogen services were 2.9% of revenues; and rental tools, which is in our Support Services segment was 1.8% of revenues. Thanks, Ken.

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Operator [9]

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We'll move to our next question from Rob MacKenzie with Iberia Capital.

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Robert James MacKenzie, Iberia Capital Partners, LLC, Research Division - MD of Equity Research [10]

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I wanted to ask about the equipment you've reactivated. And what has the cost been to date on a capital standpoint? And whether or not you're reactivating some of your older equipment or the brand new equipment you delivered at the end of the last cycle, but never put in the field?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [11]

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Rob, this is Ben. In terms of the cost, again, you saw that our capital expenditures were only $11.7 million. So it's very, very minimal. And actually to be honest, so small, I mean, we didn't go out and cumulate to be able to give the specific number. It's close to what we expected. As we said, we worked hard to try to maintain the equipment, both when we're working during the prior strong period and through till now. So very, very minimal CapEX. And really, I mean, [obviously], that didn't show up in the numbers as well. So we're very pleased with that. And what we have reactivated to date is really more of the older equipment. We have not reactivated any of the new equipment yet.

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Robert James MacKenzie, Iberia Capital Partners, LLC, Research Division - MD of Equity Research [12]

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Okay. And your current plan is still to reactivate all the idle equipment sometime this year?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [13]

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Rob, this is Jim. Yes. As -- assuming, logistical capacity is there for us, crews work, customer demand is there, acceptable pricing, yes, we intend to continue reactivating idle pressure pumping equipment and get it all done actually by the end of third quarter is our plan at this time.

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Robert James MacKenzie, Iberia Capital Partners, LLC, Research Division - MD of Equity Research [14]

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Okay. And then if you could help us a little on the cost front. Obviously, we all know about the inflationary pressures the industry is facing. You guys seemed to have managed those pretty well this quarter. Give us your take on how you expect to see that roll through the P&L in the second quarter and beyond at this stage?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [15]

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Well we didn't incur too much in the way of raw materials cost increases during the first quarter. We expect that cost increases will accelerate some in the coming months, last-mile transportation, all that sort of thing. And we just -- because we're in the spot market presuming things, we don't even internally have a great projection of what we think cost increase is going to be, but we do want to tell you that we are going to price any cost increases into our proposals for new work, number one, and that we'll know what those cost increases are before we price things, which I guess is the other side of the same coin.

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Robert James MacKenzie, Iberia Capital Partners, LLC, Research Division - MD of Equity Research [16]

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And along those lines, could you refresh on how much of your equipment, is it all on spot pricing? Or do you have some on term now?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [17]

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Rob, this is Ben. It's all still spot, spot pricing.

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Operator [18]

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Our next question will come from Marc Bianchi with Cowen.

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Marc Gregory Bianchi, Cowen and Company, LLC, Research Division - MD [19]

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If I'm doing my arithmetic correctly, it seems like pressure pumping revenue was up 68% sequentially. One, is that correct? And two, maybe back towards the earlier question, can you break out how much of that was due to activity improvements and how much was due to pricing improvement?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [20]

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Marc, this is Jim. Your math is correct. And a little more of the -- a little more than 50% of the revenue increase was due to pricing -- I'm sorry, was due to activity increases and a little -- less than half of that revenue increase was due to pricing. So more than half was activity, less than half was pricing.

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Marc Gregory Bianchi, Cowen and Company, LLC, Research Division - MD [21]

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Okay. And I guess, it seemed like the profitability progression throughout the quarter was accelerating, and kind of curious where the exit rate was relative to the average in terms of profitability. If you can help us with that?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [22]

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Well, this is Ben. I guess, what we will say is that March was the best month of the quarter. I guess, beyond that to try to quantify, probably don't want to get into that level of detail. But certainly, there has been progression each month for the last several months. So the work that we did in March was priced late last year and into the first couple of months of the first quarter. And it has continued to progress. And as I said, March was the best month of the quarter.

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Marc Gregory Bianchi, Cowen and Company, LLC, Research Division - MD [23]

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Okay. I suppose if I think about the pricing improvement progression from here, you had a lot of -- a combination of what would seem like cost recovery pricing and then also net pricing. As you go forward from here, do you anticipate to get a lot more net pricing improvement? Or is it more just a matter of cost recovery as we go forward? And how do you see that playing out over the next 2 quarters?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [24]

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This is Ben, again. I would say, very difficult to quantify, maybe one way to say it, Jim indicated the plans and our activities around trying to get everything reactivated by the end of the third quarter, subject to adequate demand and pricing and things like that. One way to respond to the question is, are we pleased with the level of profitability that we generated in the first quarter with pressure pumping? I would say on a relative basis, yes, but not on an absolute basis. So it does -- I would say it needs to continue to get better, if we're going to have all of the equipment reactivated and staffed by the end of the third quarter.

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Marc Gregory Bianchi, Cowen and Company, LLC, Research Division - MD [25]

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Okay. I guess, just last one. If I think about the fleet reactivation that you've done, how many of those crews that have been reactivated now are actually working, kind of maybe once a week, they all have work during the week?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [26]

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I would say all of the crews are working -- all of the crews, which have equipment, so crews and equipment together, that assemblage of assets are working every week. We are highly utilized.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [27]

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And reactivated has been working.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [28]

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Yes.

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Operator [29]

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We'll take our next question from Jim Wicklund with Crédit Suisse.

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Unidentified Analyst, [30]

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This is [Jake] on for Jim. I guess, first question here. How much of your equipment that's working today is on 24-hour versus daylight?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [31]

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There's lot of different ways to address that. What we would say is that the amount of revenue generated in the first quarter for 24-hour work was somewhere around 85%.

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Unidentified Analyst, [32]

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Around 85%, okay, great. And then, I guess, on pricing. Could you quantify at all how much pricing is up today relative to the beginning of the year? And then related, how much more pricing would you need from current levels to support new builds? You're talking about being -- having everything reactivated by the end of the third quarter, it doesn't seem like that's too far off.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [33]

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Jake, this is Jim. From the end of the year, end of 2016 to the end of first quarter, pricing was probably up 30% to 35%. And as we've discussed, we are reactivating our idle equipment, and that is a good financial proposition right now for new build to go out and build -- buy build new equipment today. Pricing would have to take another leg up, and we'd have to be confident about the duration of it. So it's another good increase that we'll have to have before we build new equipment.

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Unidentified Analyst, [34]

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Another 20%, 25%, is that fair?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [35]

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We haven't begun to look at it yet. We've got to get comfortable with the sustainability, and we got to get the idle equipment reactivated, and we'll worry about it then.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [36]

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I would say that's at the bottom end of the range of pricing increase.

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Unidentified Analyst, [37]

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Okay. And then last one for me. You mentioned before the intention of all your equipment reactivated by the end of 3Q. Is that based on a broader macro view or on specific conversations with customers in your view into their demand?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [38]

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More like specific conversation. That's not a macro call on oilfield or anything else. It's just the whole collection of customer conversations we're having right now indicates that there is demand for our services.

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Operator [39]

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Our next question will come from Scott Gruber with Citi.

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Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [40]

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Given the reactivation plan with industry growth concentrated in the Permian, is it fair to assume that you plan to transport additional fleet down into the Permian, is that correct? And if so, how much?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [41]

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Scott, this is Jim. We don't have firm plans on time line or exact destination. Your hypothesis about the Permian is correct. More equipment will go there. But we're seeing demand in some other areas too. So exactly where all this equipment goes as it's reactivated, we don't know and aren't prepared to disclose right now. We're looking at it.

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Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [42]

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Got it. If we kind of work forward on the hypothesis that the Permian continues to grow, and I was just down there couple of weeks ago, and seems like a safe assumption for the next few quarters. Do you feel like you have a distinct advantage as a large established player in the Permian? I'm just thinking about, if you're going to add incremental crews in the region, hiring, sand sourcing, equipment maintenance. If the Permian continues to grow, can you think that's a material advantage for RPC?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [43]

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Yes, we've long believed that there are economies of scale within the basin due to enhanced logistical capabilities, the ability to move crews around, we have 5, I believe, pressure pumping locations throughout the Permian. And so we have flexibility to borrow equipment, borrow crews, use maintenance, that sort of things. So there is definitely an advantage to scale within the basin. So that weighs on that decision. That impacted the decision.

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Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [44]

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Do you think you would ever get to the point where you have a pricing advantage within the basin versus companies that are trying to add additional crews into the basin as the whole supply chain gets tight?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [45]

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This is Ben. Pricing advantage...

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Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [46]

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When thinking about the risk associated -- if the supply chain gets really tight, thinking about the risk associated with transplant crews into the basin, crews and equipment?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [47]

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We got it. If supplies get tight, that will be bad for everybody, but it will be less bad for us than for a new entrant in the basin. We've seen that repeatedly where people come to the basin during times of tight supply and realize that they need logistical capacity that they don't have. So that speaks to operational execution and profitability, doesn't necessarily speak to pricing. I'm not sure we have an answer to pricing, because we have to know how rational our peers are going to be.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [48]

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Well, that's right. That's some help. That's kind of what I was going to say. We may have superior pricing only because some of the competition doesn't understand their costs or they're trying to get market share or whatever. And so they're bidding lower than we would bid. So is that better pricing or is that which is getting what we feel like we can get -- that we need to get and somebody else is willing to bid lower. So is that better pricing, I don't know.

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Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [49]

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It'll show up in the margins. That's makes a lot of sense. And just on Thru Tubing, where do margins sit today for the business? And how should we think about the outlook?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [50]

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We don't disclose margins among our different businesses. But you know as pretty well, Scott, traditionally Thru Tubing Solutions has had good margins and good financial returns, which we care about. And you asked about Thru Tubing, right?

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Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [51]

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Yes.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [52]

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Yes. Okay.

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Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [53]

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Is it still lagging -- is it lagging frac today?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [54]

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Yes, the information we've disclosed would indicate that it's growth is lagging frac. They -- we disclosed things -- we said some things in our press release about shortages of skilled personnel. The oilfield is short of skilled personnel. And you see it throughout the completion space. And Thru Tubing Solutions has been impacted by that, both within their own business and waiting on other partners to get things done, because they had a lack of skilled personnel. So that's what's holding Thru Tubing back right now.

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Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [55]

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So is there a line of sight to Thru Tubing moving back to its normal accretive margins position?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [56]

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Line of sight in this dynamic environment is not a very long line of sight. But we do think that it's positioned to improve as it has in the past. The fundamentals about Thru Tubing Solutions remain in place, for sure.

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Operator [57]

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Our next question will come from George O'Leary with TPH & Co.

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George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director, Oil Service Research [58]

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Just wanted to ask one out there following on Scott's question on the Thru Tubing Solutions, maybe coming at it from a slightly different direction. Just want to clarify, are the revenues lagging because lack of personnel, but the margins -- I'm not looking for any absolute margin color, but margin is still holding in relatively resiliently in that business. You called out good pricing on pressure pumping and downhole tools. And I assume, a portion of that is related to the Thru Tubing Solutions, if not all of it on the downhole tools sides. But just a little more color there would be awesome.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [59]

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Yes, now the -- Thru Tubing's margins traditionally has held much better across cycles, and that's true. Last quarter Thru Tubing was relatively better than other service lines. Pressure pumping grew, obviously, as illustrated proved revenues and some of the incrementals were obviously very strong in pressure pumping. But Thru Tubing continues to hold in quite nicely, and they did have some incremental improvement, which is not quite as dramatic as pressure pumping in this particular quarter. But as Jim said, I mean, Thru Tubing still -- the fundamentals and everything are still there. One comment I'll make that we've talked about and maybe this is, well we say hope is not a strategy, but we historically have seen that in downcycles and this last downcycle, pressure pumping was more significantly impacted before coiled tubing and before things like downhole tools. So what we were hoping is, maybe there's that lag here coming back out. Pressure pumping has picked up first. We hope that we're going to see some of the other services like coiled tubing and downhole tools will pick up here soon. And that delay up and down in past cycles has been 3, 4 months. So maybe we'll see some pickup here soon in those particular service lines.

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George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director, Oil Service Research [60]

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Okay, that's very helpful color. And then maybe just one more from me. You touched on a little bit in your answer where you mentioned coiled tubing and then that flows through in the -- to Thru Tubing Solutions as well, but are you guys seeing -- running into any instances where you're able to go in and pump a job and then you don't have the skilled labor and the access to folks to actually then mill out the plugs and then get behind that job. So you're actually fracking the well, but not truly finishing the completion because you cannot go in and mill out the plugs. Is any of that occurring in the field? Is that part of why we're hearing about completions lagging the drill bit?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [61]

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George, this is Jim. That's -- I don't believe we have any cases of that. There may be -- there are definitely completions probably lagging drill bit as you say, but we don't think -- what you seem to be describing there is an incomplete completion, if I can use that phrase, and we don't know of those happening at this point.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [62]

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Well, but I think we have heard anecdotes of some of downhole tools and perhaps coiled tubing being delayed because frac crews were not available. Thus, the increased demand for pressure pumping, but some of our other service lines have been slowed a bit at times. There are examples where that's happened. I wouldn't say this, but a large, large percentage of the driver of why it may be lagging, but there are instances where some of the work for some of the other services have been delayed because frac crews weren't available.

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Operator [63]

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Our next question will come from Daniel Boyd with BMO Capital Markets.

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Daniel Jon Boyd, BMO Capital Markets Equity Research - Oilfield Services Analyst [64]

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A lot of good color already given to me. I will try to just hone in on maybe what the next quarters look like. So pressure pumping revenue up 68% this quarter, was up 47% in the fourth quarter, and now you're really ramping up the capacity adds still, 40% this quarter, another 40% in 3Q. And given the momentum in pricing, I guess, I'm struggling with why at least pressure pumping revenues wouldn't be up in excess of what your capacity additions are? So maybe you'll help me understand the progression?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [65]

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Dan, this is Jim. There are just a lot of moving pieces. We knew the oilfield will eventually get better, we just didn't know when. That's why we have been prepared with this equipment. Your scenario is a very plausible one, as are others. And we don't know internally even the pace of reactivation right now, and pricing is on a spot market basis. And customers have been dragging their feet on price increases. So when you put all that in the mix, it makes for very difficult forecasting. So...

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Daniel Jon Boyd, BMO Capital Markets Equity Research - Oilfield Services Analyst [66]

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Okay. But a scenario of similar sequential growth is plausible based on what you see here late April?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [67]

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Sure.

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Daniel Jon Boyd, BMO Capital Markets Equity Research - Oilfield Services Analyst [68]

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Okay, okay. And then on the incremental margin side, I mean, this is one thing that, I think, being in the spot market has definitely given you guys an advantage versus others just also in the shape of and quality of your equipment. But we've seen operating margins at least in Technical Services in sort of the mid to high 40s range. Is there any reason to expect that to change at least over the next couple of quarters?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [69]

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No.

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Operator [70]

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Our next question comes from Waqar Syed with Goldman Sachs.

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Waqar Mustafa Syed, Goldman Sachs Group Inc., Research Division - VP [71]

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I just wanted to get a sense on the incremental margins. You had pretty strong incremental margins in Technical Services, around 46%. Rest of the industry peer group has been in that 20% or below kind of range. Understanding the reactivation cost has not been there for you guys, do you think you can keep that 46% kind of margins into the second quarter as well? Do you expect some letup there?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [72]

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Waqar, this is Jim. Forecasting is very difficult right now. But we do think the incrementals that we posted and reported during first quarter can be continued in the second quarter. Pressure pumping pricing, leading-edge pricing is good. We've seen a follow-through from results we had in -- we posted in the first quarter. And we think, as Ben outlined earlier, things like coiled tubing tend to follow pressure pumping. So there should be some incremental margins to come from coiled tubing activity and perhaps Thru Tubing and some other things. So we think those are plausible.

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Waqar Mustafa Syed, Goldman Sachs Group Inc., Research Division - VP [73]

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Now if you assume 70% is roughly about 650,000 hydraulic horsepower that's been reactivated, how many crews does it -- is that both horizontal and vertical?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [74]

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The crews flex -- Waqar, I think if I heard your question, with the people we have hired and rehired and our working force in the field right now, it kind of depends, it's somewhere between 3 and 5 crews that we have today, additional crews, that we didn't have at the end of the year.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [75]

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And your question, I think you asked about horizontal versus vertical. And again, it's -- the vast majority is still horizontal.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [76]

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Yes, exactly. Yes. Thank you, Ben.

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Waqar Mustafa Syed, Goldman Sachs Group Inc., Research Division - VP [77]

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Great. And could you tell us how many or what percentage of the crews are in Permian versus in other areas? Where they're located?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [78]

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Waqar, for competitive reasons and other things, we'd rather not give you down to too many decimal points, but let me just try qualitatively. Right now, as a percentage of active horsepower at RPC, active hydraulic horsepower, a little more than half is in the Permian. And #2 behind that is East Texas between 15% and 20%, again, I'm giving a range. Right behind that is South Texas, which is a little bit less than what we have in East Texas. In the Mid-Continent, we have between 10% and 14% of our equipment and crews working. And then in the Bakken, as you know, that's our smallest location. We've got somewhere between 4% and 6% of our equipment and crews working in the Bakken. That's the most detail we're comfortable giving right now.

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Waqar Mustafa Syed, Goldman Sachs Group Inc., Research Division - VP [79]

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No, I appreciate that, that's pretty helpful. And then just one final question on service intensity. Are you seeing stabilization in service intensity per well? Or are you still seeing that pickup month over month?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [80]

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Service intensity continues to grow, has continued to grow during first quarter.

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Operator [81]

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We'll take our next question from Praveen Narra with Raymond James.

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Praveen Narra, Raymond James & Associates, Inc., Research Division - Analyst [82]

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I guess, just to think about the sand side a little bit more. In terms of the sand that you guys use for your jobs, how much of that was produced at the Chippewa Sand.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [83]

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In the -- around 20%.

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Praveen Narra, Raymond James & Associates, Inc., Research Division - Analyst [84]

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Okay. I guess, as we think of that moving forward, is that something that should move higher as we kind of have gone to an increased usage of that? Or is that about where you should have stick?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [85]

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Yes. Praveen, it might move a little bit higher, but the sand mine capacity -- the sand mine that we own, it's capacity is limited, and the use of sand is growing. So we think of our internal source of sand more as a strategic opportunity. It's an ability to perhaps get jobs done when we couldn't get them done otherwise and filling gaps and that kind of thing. So it's more -- it has more of a strategic value than saying it's going to supply x% of our sand needs and x% being a big number.

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Praveen Narra, Raymond James & Associates, Inc., Research Division - Analyst [86]

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Right, right. Okay. So and then, I guess, if we go back to the pricing questions. In terms of the pricing differences you're seeing on planned out work versus quick call-out work. Could you give us a sense of what that gap could be?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [87]

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Praveen, I'm not sure we see a distinction there. We don't have contracts in the sense that we all think about them in the industry, don't yet anyway. And there's -- we don't have any empirical data that says that a rush job where somebody calls us to work tomorrow has better pricing, because we actually can't do those jobs, and we are scheduling pretty far out.

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Praveen Narra, Raymond James & Associates, Inc., Research Division - Analyst [88]

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I guess, could you give us a sense of how far out in account you're looking at now? And then at the same point kind of that willingness to sign long-term contracts, both on your end as well as the customers?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [89]

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Second part of the question is easier to answer. Pricing is not good enough yet to sign long-term contracts. The first part of that, we are certainly booked out for a few months at this point.

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Operator [90]

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We'll move next to Matthew Johnston with Nomura.

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Matthew Johnston, Nomura Securities Co. Ltd., Research Division - VP [91]

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Have you received any inbound increase from your customers yet for pressure pumping work in 2018?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [92]

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No.

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Matthew Johnston, Nomura Securities Co. Ltd., Research Division - VP [93]

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Okay. And then how should we think about working capital build for the rest of this year?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [94]

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As what our revenues do, depends on what the activity levels are.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [95]

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You could take your revenue forecast and put a DSO on it. And that would be a decent proxy for working capital requirements, I think.

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Matthew Johnston, Nomura Securities Co. Ltd., Research Division - VP [96]

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Okay, fair enough. And then last quick one for me. G&A as a percent of revenue going forward, how should we think about that evolving?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [97]

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This is Ben. We don't at this point anticipate any significant increase in SG&A. We're not looking at any additional facilities. We're not rapidly adding support type of personnel. So I believe, we have the opportunity. We hope that very soon we'll be able to be talking about there will be some additional employment costs around incentive comp and things like that. But in terms of absolute addition of many employees, we think we have a pretty good base in employees to be able to only slightly increase the SG&A expense, but a much, much lower pace than we expect revenue to grow.

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Operator [98]

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Our next question will come from John Daniel with Simmons & Company.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [99]

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I may have missed it, and if I did, I apologize. But Jim, could you tell us what the active horsepower was at the end of the quarter? What it was as an average for the quarter? And where you exited year-end?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [100]

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Yes, sure. Ben mentioned it in terms of percentages, but...

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [101]

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This was at quarter-end, not average, but...

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James C. Landers, RPC, Inc. - VP of Corporate Finance [102]

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Yes, at quarter-end. At quarter-end, about 670,200 hydraulic horsepower was active compared to about 450,000 at the end of fourth quarter. It's -- a simple average doesn't work, because the horsepower that was activated during the quarter was activated at the very end and revenue contribution from it was basically 0. And average doesn't work from that point of view.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [103]

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But you did say 3 to 5 additional crews out today versus year-end. I mean, did they go to work in month of March?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [104]

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Yes. They actually went to work on equipment. So utilization of equipment was able -- we accomplished increased equipment utilization due to more crews, more and more towards 24-hour in utilizing the equipment that we had in place.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [105]

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Okay. So, all right. I'm confused. I just want to make sure 670,000 active at the end of the quarter, 3 to 5 additional crews, but it sounds like those crews, those -- that incremental horsepower you put out, call it 220, in terms of staffing, did my math correctly here or not? 120, 120, excuse me. That basically did not work much in the first quarter, is that fair?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [106]

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That is fair. Correct.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [107]

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Okay. Got it. And then is there any -- and there's coiled tubing, let me jump into that real quick, the revenues were down. Just outlook on that segment. Why would that be down when the rig count is up 20-ish percent? Some color there would be appreciated.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [108]

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Some lack of skilled personnel. We have focused more on recruiting, screening, hiring and training in pressure pumping than we have in some of the other service lines. And it's hard -- it's harder to find -- well, entry-level coiled tubing people do not exist. It takes about 6 months to train a ground hand, and that's what we think. So that's just been slow to ramp up, because it's been more difficult to get people who are working and generating revenue for you.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [109]

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You feel comfortable saying more personnel as opposed to something wrong with the actual service, with coiled tubing as a service line.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [110]

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Yes, yes. Correct. I mean, there's been a lot of discussions, as you know, about dissolvable plugs and things like that. But coiled tubing's results for the first quarter don't relate to it being disintermediated. It was just the tactical issues of personnel and the fact that, as Ben mentioned, coiled tubing lags pressure pumping, both down and up.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [111]

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Pricing hasn't improved as much as pressure pumping. So we're not as enthusiastic about doing a lot of that work -- as enthusiastic about doing a lot of that work in the current -- at pricing levels.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [112]

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Fair enough. I mean, the segment did grow fast in the rig count last quarter. So I'm just...

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James C. Landers, RPC, Inc. - VP of Corporate Finance [113]

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No, it's a great question.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [114]

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Chippewa Sand, are you guys expanding capacity at that mine?

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [115]

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I would say, we're expanding production, not capacity.

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Operator [116]

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We'll take our next question from Ryan Ward with Heikkinen Energy Advisors.

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Ryan Ward, [117]

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I have my question answered already. Thanks guys.

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Operator [118]

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We will move then to Tom Curran with FBR Capital Markets.

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Thomas Curran, FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst [119]

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Ben or Jim, when it comes to the pipeline of private pumpers and equipment being chopped around, how have valuations evolved over the past few months? Specifically, how has the asking price per unit of horsepower evolved relative to the range that we've seen the public pumper reading per se?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [120]

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Tom, this is Jim. It's a good question. We actually haven't seen any private pressure pumpers come to market, that's -- this is just an RPC answer, in the past few months. They've all been going public. So there's no data point.

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Thomas Curran, FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst [121]

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That's interesting. So that pipeline of the companies that (inaudible) books on or received inbound calls about, that's pretty much dried up, Jim?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [122]

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Yes.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [123]

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For us, yes.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [124]

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Yes, for us.

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Thomas Curran, FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst [125]

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Interesting. And then as you look to executing the remainder of your planned reactivation program through 3Q, which of the costs you're struggling the most to manage, if you're going to surprise the upside? Seems like it would be the most likely culprit, and in trying to manage that source of inflationary pressure, what advantages do you have in this upcycle that you didn't in the last time?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [126]

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I don't know, Tom. I mean, it's difficult in a competitive business. If we have any real issues in the next few months, I mean, it's sort of the usual suspects. We have had some great success recruiting skilled personnel in the pressure pumping business. We've had some nice success there. That can't last forever. So there might be a negative surprise from a cost inflation point of view on crews. One thing that we are doing right now is being more mindful of our margins. And so we're -- we're being a lot more judicious with things like relo and accommodations, living accommodations and things like that. So that's one thing we've gotten a little bit smarter on. We feel like there is a big supply of proppant. We're not worried about the existence of proppant that our customers want to use, but at some point, just as in past cycles, either last-mile transportation or something on the rails is going to get difficult. In terms of how we might be better this time than last, we certainly understand logistics better now than we did in the last upcycle. But it's hard to know what you don't know. So we've just got to -- we've got to be nimble and try to anticipate those things.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [127]

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I think one thing I'll add, this is Ben, I think with the process we've gone through in this downcycle, I think we are much better positioned. Things are not as volatile. We're much better positioned from the standpoint of understanding our costs and how to price our jobs and how we're executing and where we need to make changes to be more consistent with our results. The locations we're operating in now, we've been for an extended period of time. If you were to go back to the early innings of the prior cycle, we were opening up new locations in basins we had not operated in before. So I think the consistency and quality of our results across many service lines, but pressure pumping, in particular, will be more, again, of a higher quality, more consistent and better, all things being equal. Maybe not better than the absolute we were able to generate at points in the prior cycle, but all things being equal, we will be better off from that perspective.

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Thomas Curran, FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst [128]

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And then lastly, on infrastructure and logistics, a two-part question there. First, on the M&A front, have you seen any change in terms of frequency or price with regards to inquiries about the Chippewa mine, in terms of taking it off your hands, any attempts to persuade you to sell it? And then on the other side, are you reconsidering your current degree of vertical integration for infrastructure and logistics, ranging from simply perhaps within your railcar fleet, increasing the percentage of cars you own, to something perhaps more drastic such as purchasing more transloading facilities your terminals have? Just curious for an update on both of those.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [129]

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Tom, this is Jim. Maybe I can answer -- well, I will answer the second part of the question first. No real changes here on our desires about vertical integration. It's -- we're happy where we are. We want to be as -- we want -- we don't want to be asset intensive on things that are not our core competency. And owning a lot of real estate when demand may change in another area is not one of them. Transload facilities, you can lease those. So that -- we're a little bit more flexible with transload facilities. It's certainly a commitment and it's something you have to think about and do, but it's not a huge capital commitment or a huge long-term financial commitment. Regarding selling Chippewa, if we had any discussion about selling Chippewa, those will be confidential. So -- I don't think you'll see us selling Chippewa any time soon.

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Ben M. Palmer, RPC, Inc. - CFO, VP and Treasurer [130]

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I will also say, this is Ben, around vertical integration is that we've, I think, learned at RPC obviously and throughout my career that, I think it's important to stick to what you know and competition seems to fix a lot of things. This industry is able to fix shortages in supply pretty damn quickly, all the way up and down the value chain from [product], finding new reserves, drilling, producing, last-mile logistics, coming up with new logistical facilities, transloads. If the demand is there, they're going to be people who are expert and have the right kind of capital available to make those things available to us to be more a leased versus an own transaction and that is definitely our -- that's kind of -- will continue to be our first preference and not try to become vertically integrated. We know that this industry will continue to be volatile. It will go up and down. We're here for the long-term. So we are not trying to create the best -- the most -- the best and the absolute best in the 9 in any game. We want to play well the whole game, not just 1 or 2 innings out of 9. So we'll try to keep it simple and focus on what we know and work on our relationships with our outside vendors, and we think that's -- that will continue to serve us well in the long run.

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Thomas Curran, FBR Capital Markets & Co., Research Division - SVP and Senior Research Analyst [131]

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You're not alone in that [line] feedback. It's a interesting strategic debate emerging about which model will prove most effective for post cycle returns.

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Operator [132]

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(Operator Instructions) We will hear next from Chase Mulvehill with Wolfe Research.

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Chase Mulvehill, [133]

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So I guess the first thing, and I apologize if this has been discussed. But on the sand pricing impact for you guys in the first quarter, how much of a negative impact was that in the first quarter? And do we have any contracts that roll as we get into 1Q -- or as we get into 2Q? If you could talk to that just a little bit.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [134]

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Chase, we had no negative margin impact from sand price increases during the quarter. Sand price increases were minimal. We have a minimal amount of contractual obligation to buy sand. We have really been on the spot market with sand. We have some handshake agreements with vendors to insulate us from price increases during the first quarter, we had those. We certainly appreciate that, but they appreciate the fact that we paid our bills during the downturn. So that's the benefit of paying your bills during a bad time when nobody else can. People do remember that during an upcycle. So going forward, we're just going to have to manage it. We're disciplined on our pricing. So -- we don't put forth a pricing proposal or firm pricing proposal where we don't know the cost of our raw materials. So it's just going to have to be that continued grind upwards where we're looking at cost increases and factoring that in with the customer. That's why we're judicious in how we're unlimbering -- taking out of the stack (inaudible) equipment. Kind of the best answer we can give right now.

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Chase Mulvehill, [135]

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Okay, all right. And then I think when John was asking some questions, I think you said -- did you say you added 3 to 4 or 3 to 5 crews in the first quarter and was this all on 24-hour work?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [136]

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Most of it was. Why we said -- the reason we said 3 to 5 is that it's flexible. And we're trying to be as good as we can with the workforce in terms of being efficient. So yes, 3 to 5 and think of them all as 24-hour, if you want to.

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Chase Mulvehill, [137]

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Okay. All right. And so where -- I think you gave some numbers about the end of the first quarter where horsepower was. Where do you expect horsepower to be at the end of 2Q? And when are you fully deployed with all of your horsepower in your fleet?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [138]

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We're not sure, we'd rather not say. Our best estimate right now is that if things continue as they have, we'll be fully deployed by the end of third quarter. And that is really the best estimate we can give people right now.

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Chase Mulvehill, [139]

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Okay. All right. And so what are the lead times on new builds? If you're fully deployed by third quarter, what are the lead times on new builds? When do you need to decide to add equipment?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [140]

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Since we're not adding -- since we're not ordering any, we don't exactly know, but our channel checks indicate at least 6 months for getting the complete kit, that's the pressure pumping fleet. At least 6 to 9 months. At least 6 months, maybe as much as 9.

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Chase Mulvehill, [141]

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Okay. All right. And then what were your frac stages up in the first quarter?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [142]

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We didn't disclose.

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Chase Mulvehill, [143]

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Okay. And so what about average horsepower per fleet? Where do you stand for your fleet and then kind of how does that compare over 2 years ago?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [144]

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Just a summarized answer is that an average fleet for us is around 45,000 hydraulic horsepower at this point. We have a couple of pressure pumping yards that do smaller jobs, acid work, that sort of thing that have smaller fleets. We have some that are larger. In general, fleet sizes are growing because of the longer duration of jobs, not that you need more equipment. The need for equipment is not a function of time as you know, but you do have more redundancy, that kind of thing. So average fleet size has probably grown 10% to 20% over the past couple of years.

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Chase Mulvehill, [145]

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Have you all looked at how much horsepower is required as a function of the amount of frac sand you pump. I'm just trying to think about metric here that would correlate horsepower demand and the amount of frac sand we're pumping.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [146]

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I don't think those conversions actually work. You're missing a bridge there. The amount of hydraulic horsepower that you need relates to the pressure at the well head and the pump rate. And so the amount of proppant actually doesn't really figure into that when there is a correlation. But it's hard to make that correlation exactly.

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Chase Mulvehill, [147]

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Okay, last one on acquisitions. Are you thinking about acquisitions any differently? Are there -- is there anything out there that looks attractive at this point? If you could just talk to that a little bit?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [148]

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Well we keep looking. We're always receptive to ideas. It's the same group of ancillary services we'd be interested in. I think with the capital markets being what they are right now, these things are priced to perfection. So they're priced to a high multiple of either 2014 EBITDA or 2018 EBITDA. And so with the execution risk, due diligence risk, that sort of thing, that's keeping a lot of transactions from getting done probably.

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Operator [149]

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We'll take our final question from John Daniel with Simmons & Company.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [150]

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I got to come back to some modeling stuff, and if you don't want to answer, that's fine, but I got to try.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [151]

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Go for it. You are a persistent man. We salute you for it.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [152]

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You got to try. Okay. So for the nonfrac businesses, I'm focused and say Thru Tubing, coiled and rental. Given that there was, whatever we call, a lag this quarter in Q1, would you expect the revenue growth for those 3 businesses to be more in line with what the rig count grew at in Q1, as we go forward into Q2? Or is it something that...

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James C. Landers, RPC, Inc. - VP of Corporate Finance [153]

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For coiled -- you asked about the other 3. So for coiled tubing and Thru Tubing Solutions, we would, in general, agree with that concept. Rental tools is a little bit different. We talked about service intensity and all these things that are going on, but the rig count is still only 800. So there is still, we believe, a real excess supply of rental tools that are used for drilling on the market. So we believe that the rental tool business relating to drill pipe is going to lag and probably is sort of some inelastic demand, I guess. So it's going to be a while before that catches up.

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [154]

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Okay, fair enough. Another one, modeling one here. If we assume, we may assume, average horsepower, call it 450 in Q1. Can I know you put some stuff out later, call it 450,000 horsepower per fleet, call it 9 to 10 fleets. That assumes revenue per fleet of maybe $15 million to $20 million a quarter. If you start extrapolating here, Jim, and say you get 4 incremental fleets, maybe 5, in Q2 versus Q1, I'm assuming that pricing is a little bit higher in Q2 versus Q1. Is that unreasonable to think that your frac revenues are in excess of $250 million in Q2?

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James C. Landers, RPC, Inc. - VP of Corporate Finance [155]

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No, John, the math works, but it depends on the pace of reactivation and that kind of thing. So...

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John Matthew Daniel, Simmons & Company International, Research Division - MD and Senior Research Analyst, Oil Service [156]

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Okay. But I mean, but you did have those 4 fleets reactivated effective April 1, more or less.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [157]

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Yes. Yes, that's right.

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Operator [158]

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And with that being our final question, I'd like to turn the conference back over to Jim Landers for any additional or closing remarks.

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James C. Landers, RPC, Inc. - VP of Corporate Finance [159]

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Okay. Operator, thank you. And, everybody, thank you for your questions. I would like to amplify one earlier answer that we gave, not change it, but just amplify it. There was an earlier question about completions being slowed down and perhaps that pressure pumping was working, but the other completion services work. I just want to amplify the fact that there are no incomplete completions. And it's at the customers' discretion. So the customer will either have everything lined up, and we'll do the completion job or they will say, we don't have everything lined up. But we never do pressure pumping and then leave before the completion is done. So that was just a final clarifying point. I appreciate everybody's attention, and we'll talk to you soon. Have a good day.

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Operator [160]

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As a remainder to our callers, today's conference will be replayed on www.rpc.net within 2 hours following the completion of today's call. We do thank you all for your participation. Have a wonderful day.