RPC Reports 1st Quarter 2009 Financial Results
RPC has announced its unaudited results for the first quarter ended March 31, 2009. RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international markets.
For the quarter ended March 31, 2009, revenues decreased 10.6 percent to $176,271,000 compared to $197,227,000 in the first quarter last year. Revenues decreased compared to the prior year due to lower equipment utilization and more competitive pricing in most of our service lines. Operating profit for the quarter declined 67.0 percent to $8,397,000 compared to $25,441,000 in the prior year. Net income was $4,466,000 or $0.05 diluted earnings per share, compared to $14,757,000 or $0.15 diluted earnings per share last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) declined by 23.1 percent to $40,560,000 compared to $52,760,000 in the prior year.
Cost of revenues was $109,970,000, or 62.4 percent of revenues, during the first quarter of 2009, compared to $117,670,000, or 59.7 percent of revenues, in the prior year. The decrease in these costs was due to the variable nature of several of these expenses, including fuel and materials and supplies. As a percentage of revenues, cost of revenues increased because of lower pricing for our services, higher maintenance and repairs expenses and negative leverage from direct personnel costs. Selling, general and administrative expenses decreased by 2.5 percent in the first quarter of 2009 to $27,606,000 from $28,317,000 in the prior year. This decrease was due primarily to lower incentive compensation and the impact of cost control measures. As a percentage of revenues, however, these costs increased to 15.7 percent in 2009 compared to 14.4 percent last year. Depreciation and amortization increased to $32,020,000 during the quarter, compared to $27,326,000 last year, due to capital expenditures made during the last year. Interest expense decreased from $1,471,000 last year to $594,000 in 2009 due to reduced interest rates and a lower average balance on RPC's revolving credit facility.
"During the first quarter of 2009 RPC began to experience the dramatic impact of declining domestic activity and lower commodity prices that began in the latter part of 2008," stated Richard A. Hubbell, RPC's President and Chief Executive Officer. "Many of our customers delayed their drilling and completion activities due to low commodity prices, unfavorable opinions about the economy, or lack of financing due to the unstable credit markets. The average domestic rig count during the first quarter was 1,344, a 24.1 percent decrease compared to the same period in 2008. The price of natural gas decreased 47.6 percent, and the price of oil decreased 55.5 percent during this period compared to the prior year. RPC's revenues decreased by less than these industry benchmarks due to some capacity increases and our presence in several of the unconventional drilling areas in the domestic market. Although the rig count declined during the quarter, almost 57 percent of the wells that were drilled were unconventional. This is a higher percentage than last year, and is an indication of relatively higher activity in this type of drilling.
"We continue to see indications during the second quarter that the oil and gas industry is in the midst of a harsh cyclical downturn. We continue to focus on managing our direct costs, and we have started reducing our overhead as well. Our capital expenditures were $19.5 million during the quarter, as we focus on maintaining a conservative balance sheet and investing only in those projects which have acceptable financial returns in this subdued operating environment. The balance on our revolving credit facility at the end of the quarter was $132.5 million, a $42 million decrease compared to the end of 2008. We will continue our cost reduction and capital conservation efforts as we continue in this cyclical downturn," concluded Hubbell.
Summary of Segment Operating Performance
RPC's business segments are Technical Services and Support Services.
Technical Services includes RPC's oilfield service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer's well. These services are generally directed toward improving the flow of oil and natural gas from producing formations or to address well control issues. The Technical Services segment includes pressure pumping, coiled tubing, hydraulic workover services, nitrogen, downhole tools, surface pressure control equipment, well control, and fishing tool operations.
Support Services includes RPC's oilfield service lines that provide equipment for customer use or services to assist customer operations. The equipment and services offered include rental of drill pipe and related tools, pipe handling, inspection and storage services and oilfield training services.
Technical Services revenues declined 10.7 percent for the quarter compared to the prior year, impacted by competitive pricing and lower equipment utilization. Support Services revenues decreased by 10.0 percent during the quarter compared to the prior year because of decreased activity in the rental tool service line, which is the largest service line within Support Services. Operating profit decreased in Technical and Support Services segments due to lower revenues and higher costs and expenses as a percentage of revenues.