RPC INC Q1 FY2025 earnings call

Ben Palmer discussed first quarter results, the acquisition of Pentel, and tariff-driven macro uncertainties. First quarter had stable revenues with some EBITDA growth. Worked to drive utilization with pricing concessions. Pentel acquisition: Total purchase price $245M; Pentel is a leading wireline perforation services provider serving blue-chip E&Ps in Permian Basin; expected EBITDA margins ~20% ± a few points; light integration focused on back-office support; aligns with strategic imperatives of improved margins, operational scale via M&A, high cash flow service lines, and blue-chip customer focus.

Technical services represented 94% of first-quarter revenues, down 1%; support services represented 6% of first-quarter revenues, up 1%. Top five service lines: Pressure pumping (40.1%), Downhole tools (28.2%), Coiled tubing (9.6%), Cementing (8.3%), Rental tools (4.6%). Pressure pumping revenues were essentially flat sequentially; all service lines in aggregate declined 1%. Non-pressure pumping service lines: Combined revenues down 1% sequentially; Downhole tools flat; Tubing down a few points; Cementing flat; Rental tools up ~7%. Pro forma 2024 revenues with Pentel acquisition: Pressure pumping 32%, Wireline 23% (up from 1%), Downhole tools 21%, Coil tubing 7%, Cementing 6%, others ~11%; Permian concentration up to ~60% of total revenues.

2025 capital spending projected $165-$215M inclusive of Pentel, mostly maintenance. Pentel closed after first quarter, no material impact on Q1 results; expected to be accretive to EPS and cash flow in 2025. CapEx for Pentel likely ~$20M annualized; lose interest on $170M cash portion and incur incremental interest on $50M seller note.

Tariff-driven macro uncertainties impacting equipment prices and industry capital spending discipline. Potential economic impact from tariffs and trade disputes increasing uncertainty, affecting oil prices and customer completion activities. Competition in frac market with smaller competitors struggling, potentially leading to asset sales and impact on supply and pricing.

Q: Thoughts on pressure pumping pricing conversations amidst market softness and lower oil prices?

A: Discussions are about give and take to reach a decent place for both parties, with customers responding to potential impacts and service companies trying to be accommodating while maintaining business.

Q: Capital allocation priorities and M&A criteria?

A: Prioritize accretive transactions, add to existing businesses with strong brands, exposure to larger customers for steady business, and service lines with good free cash flow.

Q: Pentel revenue starting point and capital allocation for M&A?

A: Pentel had ~$100M per quarter revenue in 2024; M&A criteria include accretive, strong brands, exposure to larger customers, and good free cash flow.

Q: Customer activity shift to workovers and visibility in frac business?

A: Watching for shift to workovers; frac business visibility varies by customer type, with semi-dedicated having more visibility than spot market.

Q: Older pumping equipment being sold by competitors and asset sales?

A: Rarely invest in used equipment; reallocate assets to other service lines; sell equipment to avoid reentering frac market.

Q: CapEx acceleration and M&A focus post-Pentel?

A: CapEx depends on market conditions; open to M&A opportunities in other basins as well as Permian, especially in natural gas basins via downhole tools.