• Revenue: Decreased 7% to $338 million.
• Technical Services Revenue: Decreased 8%, representing 93% of total revenue.
• Support Services Revenue: Increased 7%, representing 7% of total revenue.
• Pressure Pumping Revenue: 38.4% of total revenue, down 12%.
• Downhole Tools Revenue: 29% of total revenue.
• Coiled Tubing Revenue: 8.8% of total revenue.
• Cementing Revenue: 8% of total revenue.
• Rental Tools Revenue: 5.2% of total revenue.
• Cost of Revenues: Decreased by $14.8 million to $247.5 million, a 6% decrease.
• SG&A Expenses: $37.7 million, slightly up from $37.4 million.
• Diluted EPS: 9 cents, down from 15 cents in the previous quarter.
• EBITDA: $55.2 million, down from $68.5 million.
• EBITDA Margin: Decreased 240 basis points to 16.4%.
• Operating Cash Flow: $70.7 million.
• Free Cash Flow: $19 million after capex of $51.7 million.
• Year-to-Date Operating Cash Flow: $255.2 million.
• Year-to-Date Free Cash Flow: $75.7 million after capex of $179.5 million.
• Dividends Paid: $8.6 million.
• Cash Position: $277 million at quarter end.

• Warning! GuruFocus has detected 7 Warning Signs with CNX.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• RPC Inc (NYSE:RES) has a strong cash position of $277 million, providing flexibility for strategic investments.
• The company is committed to upgrading its fleet, particularly focusing on Tier Four G GPS assets, which have solid demand and better visibility with dedicated customers.
• RPC Inc (NYSE:RES) is exploring innovative technologies, such as a new downhole motor and a proprietary solution to reduce reliance on bridge plugs, which have shown promising results.
• The company is actively pursuing M&A opportunities to grow its non-pressure pumping service lines, aiming for a more balanced portfolio.
• Despite challenging market conditions, RPC Inc (NYSE:RES) expects strong cash flow for the year, with a robust trailing two-year average.

Negative Points

• The pressure pumping business is facing significant headwinds, with a 12% decline in revenues due to competitive pricing pressures and ample supply in the market.
• The company experienced a tangible negative impact from E&P consolidation, losing a meaningful customer to a competitor.
• RPC Inc (NYSE:RES) had to take cost-cutting measures, including headcount reductions, to align with current demand and market conditions.
• Free cash flow is down from 2023, impacted by challenging industry conditions and timing benefits from the previous year.
• The company does not anticipate significant pricing improvements in the frac market for 2025, indicating continued pressure on margins.

Q & A Highlights

Q: Can you expand on the advances in downhole technology and the opportunities it presents, particularly in California? A: The California opportunity involves coiled tubing for plug and abandonment work, leveraging steerable tool technology. Our frac technology improvements involve delivering pods downhole more effectively, potentially replacing bridge plugs. This technology offers significant benefits, and we are optimistic about its market potential, with ongoing tests and customer interest.

Q: How is the bid-ask spread in M&A evolving, especially with pressure on smaller operators? A: The bid-ask spread has compressed somewhat as private valuations align more with public ones. However, we haven't engaged with a large enough sample to definitively say it's narrowing. The market is adjusting, and we are observing these changes.

Q: What is your willingness to use cash for acquisitions, and are sellers open to taking stock? A: We have flexibility due to a strong cash position and balance sheet. While cash is often preferred by private sellers, stock can be a fit in some cases. We aim to be prudent with our stock, considering its value to us.

Q: Regarding the frac side, if the US completion market remains stable, what is the optimal fleet size for RPC? A: If stability persists, the fleet size would be lower than the previous 10 or 11 fleets. We are committed to the frac market but aim to rebalance our portfolio. The optimal size is still under consideration as we plan for the future.

Q: How do you view the '25 pricing dynamics in the frac market? A: We are not expecting significant pricing improvements in '25. We are positioning ourselves to capitalize on any positive changes but remain prudent. Market discipline and potential improvements in the natural gas market could help, but we are not relying on it.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.