RPC INC
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
RES$5.31-5.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-28.
0001558370-24-001993
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0001558370-25-001922
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 71 previous paragraphs and 77 current paragraphs.
18 unchanged; 27 reworded; 29 added; 26 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 13 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
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Presentation
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Several key trends discussed above in Item 1., Business, were key drivers of the Company’s results in 2024:
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Revenues during 2024 totaled $1.4 billion, a decrease of 12.5% compared to 2023. This decrease was primarily due to lower industry activity levels across service lines and competitive pricing. The Company’s pressure pumping revenues (largest service line within Technical Services) were the largest contributor to the revenue decrease.
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Operating Profit for 2024 was $97.5 million, a 60.2% decrease compared to the prior year. This decrease is primarily due to lower industry activity levels, competitive pricing and reduced fixed cost absorption.
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How We Evaluate Our Operations
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We use Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Adjusted EBITDA, Adjusted EBITDA margin and Free cash flow, all non-GAAP measures, to evaluate and analyze the operating performance of our businesses.
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We believe that EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Free cash flow are important indicators of performance. Adjusted EBITDA is defined as EBITDA, adjusted for unusual (income)/expenses. Adjusted EBITDA margin reflects Adjusted EBITDA as a percentage of revenues. Management believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin enable investors to compare the operating performance of our core business consistently over various time periods without regard to changes in our capital structure. Management believes that Free cash flow, which measures our ability to generate needed cash from
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business operations, is an important financial measure for evaluating RPC’s financial condition. Our definition of Free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures, since the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions.
Current report
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered as an alternative to net income/(loss), operating income/(loss), and related margins, or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America (GAAP). Similarly, Free cash flow should be considered in addition to, rather than as a substitute for GAAP presentation of net cash provided by operating activities, as a measure of our financial condition.
Current report
See Non-GAAP Financial Measures below for a reconciliation of EBITDA and Adjusted EBITDA to net income, and Adjusted EBITDA margin to net income margin, the most directly comparable financial measure calculated and presented in accordance with GAAP and a reconciliation of Free Cash Flow to Operating Cash Flow, the most directly comparable financial measure calculated and presented in accordance with GAAP.
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Results of Operations
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*Revenues.*Revenues of $1.4 billion for 2024 decreased 12.5% compared to 2023, with both Technical Services segment and Support Services segment revenues each declining. The decrease in revenues is primarily due to lower industry activity levels across service lines and competitive pricing. Revenues for pressure pumping, the Company’s largest service line, decreased 24%, while all other service lines combined decreased 2%.
Current report
Technical Services segment revenues of $1.3 billion for 2024 decreased 12.5% compared to the prior year. The decrease in Technical Services revenue was primarily due to a decrease in pressure pumping activity and price competition. The decline in pressure pumping, as well as lower revenues in coiled tubing, were partially offset by growth in cementing. Cementing revenue increased compared to 2023 as the Company benefitted from a full year of results from the mid-2023 acquisition of Spinnaker. Support Services segment revenues for 2024 decreased by 12.2% compared to the prior year, primarily due to lower activity levels within rental tools.
Current report
*Cost of revenues.*Cost of revenues decreased 4.9% to $1.0 billion for 2024 compared to the prior year. Cost of revenues decreased primarily due to reduced expenses consistent with lower activity levels, such as materials and supplies expenses and
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Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA was $233.0 million, and Adjusted EBITDA margin was 16.5% in 2024 compared to $374.4 million and 23.1% in 2023. The decline in 2024 was primarily due to lower revenues, associated negative operating leverage and fixed cost absorption.
Current report
*Cash provided by operating activities and Free cash flow.Cash provided by operating activities decreased to $349.4 million in 2024, from $394.8 million in 2023. Free cash flow *decreased to $129.5 million in 2024, from $213.8 million in 2023 primarily due to a decrease in cash provided by operating activities, driven by lower net income partially offset by favorable working capital changes. Free cash flow in 2024 was also impacted by an increase in capital expenditures.
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Non**-GAAP Financial Measures**
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Reconciliation of GAAP and non-GAAP Financial Measures
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Disclosed above are non-GAAP financial measures of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, and Free cash flow. These measures should not be considered in isolation or as a substitute for performance or liquidity measures prepared in accordance with GAAP.
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A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.
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Set forth below are reconciliations of these non-GAAP measures with their most directly comparable GAAP measures.
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Cash provided by operating activities for the year ended December 31, 2024, decreased by $45.4 million compared to the year ended December 31, 2023, primarily due to a decrease in net income, partially offset by favorable changes in working capital. Changes in working capital was a source of cash of $116.7 million for the year ended December 31, 2024, compared to a source of cash of $57.8 million in the same period last year. Changes in working capital was a significant source of cash in the current year primarily due to the following: a decrease of $47.9 million in taxes receivable including a $52.8 million federal tax refund received during the second quarter of 2024, coupled with a $48.0 million decrease in accounts receivable. The changes in accounts receivable and the other components of working capital were primarily due to the timing of payments and receipts.
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Cash used for investing activities for 2024 decreased by $40.2 million compared to 2023, primarily due to the purchase of Spinnaker during 2023 (as there were no acquisitions in 2024). Capital expenditures were $219.9 million for the year ended December 31, 2024, compared to $181.0 million for the year ended December 31, 2023. Capital investments during 2024 included the purchase of a Tier 4 dual fuel pressure pumping fleet, which replaced a Tier 2 diesel fleet. In addition, certain capital spending items were delayed from 2023 into 2024, which was a contributing factor to the year-over-year increase.
Current report
Cash used for financing activities for 2024 decreased by $11.0 million primarily due to a decrease in repurchases of the Company’s common shares in the open market. The Company paid $34.4 million in dividends and repurchased $9.9 million of common stock in 2024 compared to $34.6 million in dividends paid and $21.1 million of common stock repurchased in 2023.
Current report
In the fourth quarter of 2024, the Board of Directors approved the termination of the Supplemental Executive Retirement Plan (SERP). Pursuant to the Internal Revenue Service rules, participant balances will be distributed between 12 and 24 months after termination. The Company is currently evaluating its funding options and timing to distribute participant balances.
Current report
In the fourth quarter of 2024, the Company entered into a multi-year systems transformation program to upgrade our ERP and supply chain systems. We are currently in the early phases and expensed the majority of non-recurring costs incurred in 2024. We plan to continue the ERP implementation through a phased approach with costs being incurred over the next few years.
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We continue to monitor the supply and demand for our services and the competitive environment, including trends such as increasing customer preferences for lower emission and more efficient equipment. Increased asset efficiency in recent years of oilfield completion fleets, particularly in pressure pumping, has inherently contributed to oversupply in the OFS market. We believe that most of the feasible operating efficiency gains have been realized, but competition is expected to remain at a high level.
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Critical Accounting Estimates
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Impact of Recent Accounting Pronouncements
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Our key business and financial strategies are:
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In assessing the outcomes of these strategies and RPC’s financial condition and operating performance, management generally reviews periodic forecast data, monthly actual results, and other similar information. We also consider trends related to certain key financial data, including revenues, utilization of our equipment and personnel, maintenance and repair expenses, pricing for our services and equipment, profit margins, selling, general and administrative expenses, cash flows and the return on our invested capital. Additionally, we compare our trends to those of our peers. We continuously monitor factors that impact current and expected customer activity levels, such as the price of oil and natural gas, changes in pricing for our services and equipment and utilization of our equipment and personnel. Our financial results are affected by geopolitical factors such as political instability in the petroleum-producing regions of the world, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers’ drilling and production activities.
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Current industry conditions are characterized by oil prices which have risen from less than $20 per barrel in the second quarter of 2020 to approximately $73 per barrel early in the first quarter of 2024. While there are many factors influencing the price of oil, we
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believe that Russia’s invasion of Ukraine in the first quarter of 2022 destabilized global oil markets, causing prices to rise, while also increasing the attractiveness of the U.S. domestic oilfield due to its oil and natural gas reserves, political stability and downstream energy infrastructure. In response to these conditions, the U.S. domestic rig count has risen from a low of 244 in the third quarter of 2020 to 620 early in the first quarter of 2024. In addition, well completions have increased from 1,308 in the third quarter of 2020 to 2,850 in the fourth quarter of 2023.
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RPC believes that oil production in the United States has also become an increasingly important determinant of global oil prices, because the United States has grown to be the world’s largest producer of oil and is more flexible in its ability to increase or decrease drilling and production activities more rapidly than the state-owned oil companies which comprise OPEC membership. During the past several years, improved drilling and completion techniques have increased productivity and caused U.S. domestic oil production to rise to record production levels, reaching 13.2 million barrels per day in December of 2023. (source: U.S. Energy Information Administration).
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Customer activities directed towards natural gas drilling and production have been weak for many years because of the high production of shale-directed natural gas wells, the high amount of natural gas production associated with oil-directed shale wells in the U.S. domestic market, and relatively constant consumption of natural gas in the United States. One result of high natural gas production and steady demand has been a decline in the price of natural gas. The price of natural gas briefly rose to $9.56 per Mcf during the third quarter of 2022 as the market assessed the impact of European sanctions against Russian natural gas imports. However, the price of natural gas fell during the fourth quarter of 2022 and remained low throughout 2023 due to warm weather and the idling of a major liquified natural gas facility in the U.S. The price of natural gas early in the first quarter of 2024 was $2.92 per Mcf, which was approximately 35.1% lower than at the same time in 2023. The Company believes that despite the decline in price, the favorable long-term outlook for natural gas provided by the U.S. oil and gas industry is sufficient to encourage our customers to maintain their natural gas-directed exploration and production activities.
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Effective July 1, 2023, the Company acquired Spinnaker Oilwell Services, LLC (Spinnaker), a leading provider of oilfield cementing services in the Permian and Mid-Continent basins. The acquisition of Spinnaker expanded RPC’s cementing business from its presence in South Texas to basins in which we currently provide other services. See note titled Business Acquisition for additional information.
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Revenues during 2023 totaled $1.6 billion, a slight increase of 1.0% compared to 2022. This increase was primarily due to an increase in cementing revenues due to the Spinnaker acquisition, partially offset by a decrease in pressure pumping activity. Cost of revenues increased 0.1% compared to the prior year, consistent with the slight increase in revenues.
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Selling, general and administrative expenses during 2023 totaled $165.9 million, an increase of 11.7% compared to 2022. The increase was primarily due to costs related to the settlement of a vendor dispute during 2023 coupled with the incremental SG&A expenses from the recently acquired Spinnaker.
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The majority of the U.S. domestic rig count remains directed towards oil. During 2023, approximately 80% of the U.S. domestic rig count was directed towards oil, consistent with the prior year. We believe that oil-directed drilling will remain the majority of domestic drilling, and that natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near term. However, we believe that natural gas-directed drilling will increase in the future because of favorable long-term market dynamics. This projected higher demand for oil and natural gas should drive increased activity in most of the basins in which RPC operates.
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We continue to monitor the market for our services and the competitive environment, including the current trends and expectations with regard to environmental concerns and related impact on our equipment fleets. The growing efficiency in recent years with which oilfield completion crews are providing services is a catalyst for the oversupplied nature of the oilfield services market. We believe that most of the feasible efficiency gains have been realized, and a number of our smaller competitors have ceased operations. We expect demand for our services will remain consistent with 2023 levels during the near term.
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We have selectively upgraded our existing equipment to operate using multiple fuel sources and to take advantage of advances in technology and data collection. RPC continues to maintain and upgrade our current fleet capacity of revenue-producing equipment. We will remain highly disciplined about adding new incremental revenue-producing equipment capacity and will only expand if we believe the projected financial returns of such capital expenditures meet our financial return criteria. The Company is allocating capital to maintain the capacity of our pressure pumping fleet to offset anticipated future fleet retirements. During 2023 the Company placed into service a new pressure pumping fleet, replacing existing older equipment sent out for refurbishment. During 2024, the Company will be replacing a Tier 2 diesel fleet with a recently ordered Tier 4 dual-fuel fleet.
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Effective July 1, 2023, the Company acquired Spinnaker Oilwell Services, LLC (Spinnaker), a leading provider of oilfield cementing services in the Permian and Mid-Continent basins. The acquisition of Spinnaker expanded RPC’s legacy cementing business in South Texas to basins in which we currently provide other services. See the note titled Business Acquisition for additional information.
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*Revenues.*Revenues of $1.6 billion for 2023 increased 1.0% compared to 2022. Domestic revenues in 2023 increased 1.2% compared to the prior year. This increase was primarily due to an increase in cementing revenues due to the Spinnaker acquisition, partially offset by a decrease in pressure pumping activity. In addition to the growth in cementing, other service lines that contributed to revenue growth included coiled tubing, nitrogen, downhole tools and rental tools. International revenues in 2023 of $28.7 million
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decreased 12.0% compared to the prior year primarily due to acontinued emphasis on domestic rather than international expansion because of higher domestic activity levels and expected financial returns. During 2023, the average price of oil was 18.3% lower, and the average price of natural gas was 60.6% lower, both as compared to the prior year. The average domestic rig count for 2023 was 4.8% lower than the prior year.
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Technical Services segment revenues were $1.5 billion for both 2023 and 2022. Technical Services reported operating income of $245.9 million during 2023 compared to operating income of $281.6 million in the prior year. Support Services segment revenues for 2023 increased by 18.7% compared to the prior year, primarily due to higher activity levels within rental tools. Support Services reported operating income of $26.5 million for 2023 compared to operating income of $18.1 million for the prior year.
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*Pension settlement charges.*Pension settlement charges (non-cash) were $18.3 million during 2023. There was no pension settlement charge in the prior year. See note titled Employee Benefit Plans of the notes to the consolidated financial statements for more information.
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Cash provided by operating activities for the year ended December 31, 2023, increased by $193.5 million compared to the year ended December 31, 2022. Cash provided by operating activities for the year ended December 31, 2023, includes net income of $195.1 million, coupled with a favorable change in accounts receivable of $104.6 million, partially offset by unfavorable changes in
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other components of our working capital (accounts payable, inventories and taxes receivable) totaling $56.7 million. The net favorable changes in working capital were the result of decreased business activity levels during the fourth quarter of 2023 compared to the same period in the prior year.
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Cash used for investing activities for 2023 increased by $118.0 million compared to 2022, primarily due to cash paid for the acquisition of Spinnaker during the second quarter of 2023, coupled with an increase in capital expenditures primarily due to the timing of new equipment deliveries.
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Cash used for financing activities for 2023 increased by $22.6 million primarily due to an increase in cash dividends paid to common stockholders, coupled with repurchases during 2023 of the Company’s common shares on the open market and repurchases for taxes related to the vesting of employees’ restricted shares. These uses were partially offset by a decrease in cash paid for finance lease and finance obligations. The Company resumed dividend payments to common stockholders during the third quarter of 2022.
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During 2023, the Company’s Retirement Income Plan was fully terminated through a liquidation of the assets held in a trust and an additional cash contribution of $5.4 million.
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Fair Value Measurements
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The Company’s assets and liabilities measured at fair value are classified in the fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation. Assets and liabilities that are traded on an exchange with a quoted price are classified as Level 1. Assets and liabilities that are valued using significant observable inputs in addition to quoted market prices are classified as Level 2. The Company currently has no assets or liabilities measured on a recurring basis that are valued using unobservable inputs and therefore no assets or liabilities measured on a recurring basis are classified as Level 3. For defined benefit plan and Supplemental Executive Retirement Plan (SERP) investments measured at net asset value, the values are computed using inputs such as cost, discounted future cash flows, independent appraisals and market based comparable data or on net asset values calculated by the fund when not publicly available.
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Critical Accounting Policies and Estimates
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Recent Accounting Pronouncements
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RPC, Inc. (RPC) provides a broad range of specialized oilfield services primarily to independent and major oilfield companies engaged in exploration, production and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of Mexico, Rocky Mountain and Appalachian regions, and in selected international markets. The Company’s revenues and profits are generated by providing equipment and services to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells.
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RPC, Inc. provides a broad range of specialized OFS primarily to independent and major oilfield companies engaged in exploration, production and development of oil and gas properties throughout the United States, including the southwest, mid-continent, Gulf of America, Rocky Mountain and Appalachian regions, and in selected international markets. The Company’s revenues and profits are generated by providing equipment and services to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells.
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Income before income taxes was $256.2 million for 2023 compared to $289.6 million in 2022. Net income for 2023 was $195.1 million, or $0.90 earnings per share compared to net income of $218.4 million, or $1.01 earnings per share in 2022. 2023 net income included $18.3 million of non-cash pension settlement charges.
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Net income for 2024 was $91.4 million, or $0.43 earnings per share compared to net income of $195.1 million, or $0.90 earnings per share in 2023.
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The Company’s strategy of utilizing equipment in unconventional basins has continued. During 2023, capital expenditures totaled $181.0 million which included the purchase of a new Tier 4 dual-fuel equipment, coupled with capitalized maintenance and upgrades of our existing equipment.
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Cash flows from operating activities increased to $349.4 million in 2024 compared to $394.8 million in 2023. During 2024, capital expenditures totaled $219.9 million which included the purchase of a new Tier 4 dual-fuel fleet, coupled with capitalized maintenance and upgrades of our existing equipment.
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Cash flows from operating activities increased to $394.8 million in 2023 compared to $201.3 million in 2022. Change in working capital generated $57.8 million of cash in 2023, compared to a $122.5 million use of cash in the prior year primarily due to lower business activity levels in the fourth quarter of 2023 compared to the same period in the prior year. This increase in cash flow was partially offset by a decrease in net income, which included the non-cash pension settlement charges referenced above. As of December 31, 2023, there were no outstanding borrowings under our credit facility.
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As of December 31, 2024, there were no outstanding borrowings under our credit facility.
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*Cost of revenues.*Cost of revenues was $1.1 billion for 2023, unchanged compared to the prior year. In accordance with SAB Topic 11.B, cost of revenues presented on the Consolidated Statement of Operations excludes depreciation and amortization totaling $97.7 million for 2023, compared to $74.3 million in the prior year.
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maintenance and repairs expenses. These costs decreased less than the revenue decrease given the fixed nature of some of these costs, including labor, and the timing of maintenance and repairs. In accordance with SAB Topic 11.B, cost of revenues presented on the Consolidated Statements of Operations excludes depreciation and amortization totaling $120.6 million for 2024, compared to $97.7 million in the prior year.
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*Selling, general and administrative expenses.*Selling, general and administrative expenses increased to $165.9 million in 2023 compared to $148.6 million in the prior year. The increase was primarily due to costs related to the settlement of a vendor dispute coupled with the incremental SG&A expenses from the recently acquired Spinnaker business.
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*Selling, general and administrative expenses.*Selling, general and administrative expenses decreased to $156.4 million in 2024 compared to $165.9 million in the prior year. The decrease was primarily due to a decrease in variable expenses consistent with lower activity levels as well as lower incentive compensation.
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*Depreciation and amortization.*Depreciation and amortization increased 30.2% to $108.1 million in 2023, compared to $83.0 million in 2022. Depreciation and amortization increased due to capital expenditures in the past year coupled with amortization of acquired intangible assets expenses related to the acquired Spinnaker business.
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*Depreciation and amortization.*Depreciation and amortization increased 22.6% to $132.6 million in 2024, compared to $108.1 million in 2023. Depreciation and amortization increased due to capital expenditures in the past year, and to some extent from investments made during 2023 (2024 had a full year of depreciation of those assets versus a partial year in 2023). In addition to standard capital spending on repairs, maintenance, replacements, and upgrades, the Company purchased a Tier 4 dual fuel frac fleet in both 2023 and 2024. The incremental depreciation related to these investments was a key driver in the depreciation increase in 2024.
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Gain on disposition of assets, net. Gain on disposition of assets, net was $9.3 million in 2023 compared to a gain on disposition of assets, net of $8.8 million in 2022. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.
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Gain on disposition of assets, net. Gain on disposition of assets, net was $8.2 million in 2024 compared to a gain on disposition of assets, net of $9.3 million in 2023. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.
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*Other income, net.*Other income, net was $3.0 million in 2023 compared to other income, net of $1.1 million in the prior year.
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*Other income, net.*Other income, net was $2.9 million in 2024 compared to other income, net of $3.0 million in the prior year.
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*Interest expense and interest income.*Interest expense was $341 thousand in 2023 compared to $614 thousand in the prior year. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan costs. Interest income increased to $8.6 million compared to $1.2 million in the prior year due to a higher average cash balance coupled with higher investment yields.
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*Interest expense and interest income.*Interest expense was $724 thousand in 2024 compared to $341 thousand in the prior year. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan origination costs. Interest income increased to $13.1 million compared to $8.6 million in the prior year due to higher average cash balances.
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Income tax provision. Income tax provision was $61.1 million during the twelve months ended December 31, 2023, compared to $71.3 million tax provision for the same period in 2022. The effective tax rate was 23.9% for the twelve months ended December 31, 2023, compared to a 24.6% effective tax rate for the twelve months ended December 31, 2022. The decrease in the 2023 effective tax rate is primarily due to a beneficial discrete adjustment compared to a detrimental discrete adjustment in 2022.
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Income tax provision. Income tax provision was $21.4 million during 2024, compared to $61.1 million tax provision in the prior year. The effective provision rate was 18.9% for 2024, compared to a 23.9% effective provision rate for the prior year. The decrease in the effective tax rate in 2024 compared to the prior year is due to the strong impact of beneficial discrete adjustments on a decreased pretax income.
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*Net income and diluted earnings per share.*Net income was $195.1 million in 2023, or $0.90 diluted earnings per share, compared to net income of $218.4 million in 2022, or $1.01 diluted earnings per share.
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*Net income, net income margin and diluted earnings per share.*Net income was $91.4 million in 2024, or $0.43 diluted earnings per share, compared to net income of $195.1 million in 2023, or $0.90 diluted earnings per share. Net income margin was 6.5% for 2024, compared to 12.1% in 2023.
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The Company’s cash and cash equivalents were $223.3 million as of December 31, 2023, $126.4 million as of December 31, 2022, and $82.4 million as of December 31, 2021.
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The Company’s cash and cash equivalents were $326.0 million as of December 31, 2024, $223.3 million as of December 31, 2023, and $126.4 million as of December 31, 2022.
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The Company currently has a $100.0 million revolving credit facility that matures in June 2027 as recently amended. The facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. In the second quarter of 2023, the Company further amended the revolving credit facility. Among other matters, the amendment (1) extends the termination date for revolving loans from July 26, 2023 to June 22, 2027, (2) replaces LIBOR with Term SOFR as an interest rate option in connection with revolving loan borrowings and reduces the applicable rate margins by approximately 25.0 basis points at each pricing level, (3) introduces a 1.00% per annum floor for base rate borrowings, (4) permits the issuance of letters of credit in currencies other than U.S. dollars. As of December 31, 2023, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $16.6 million; therefore, a total of $83.4 million of the facility was available. The Company is currently in compliance with the credit facility financial covenants. For additional information with respect to RPC’s facility, see note in the consolidated financial statements titled Long-Term Debt.
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The Company currently has a $100.0 million revolving credit facility that matures in June 2027. The facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. The revolving credit facility includes a full and unconditional guarantee by the Company's 100% owned domestic subsidiaries whose assets equal substantially all of the consolidated assets of the Company and its subsidiaries. Certain of the Company’s minor subsidiaries are not guarantors. The Credit Agreement’s maturity date is June 22, 2027, and the interest rate is based on Term Secured Overnight Financing Rate (Term SOFR). In addition, the terms of the agreement have a 1.00% per annum floor for Base Rate borrowings and permits the issuance of letters of credit in currencies other than U.S. dollars. As of December 31, 2024, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $16.3 million; therefore, a total of $83.7 million of the facility was available. The Company is currently in compliance with the credit facility financial covenants. For additional information with respect to RPC’s facility, see note to the consolidated financial statements titled Long-Term Debt.
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Capital expenditures were $181.0 million in 2023, and we currently expect capital expenditures to be between $200 million and $250 million in 2024, which will be directed towards both capitalized maintenance of our existing equipment to improve efficiency and selected growth opportunities. The Company is allocating capital to maintain the capacity of its pressure pumping fleet to offset anticipated future fleet retirements. During 2024 the Company will be replacing a Tier 2 diesel fleet with a recently ordered Tier 4 dual-fuel fleet. The actual amount of capital expenditures in 2024 will depend primarily on equipment maintenance requirements, expansion opportunities, and equipment delivery schedules. During 2022, RPC made payments totaling $24.0 million for a pressure pumping fleet under a finance lease which was initiated in 2021.
Current wording
The Company currently expects capital expenditures to be between $150 million and $200 million in 2025 and to be directed towards both capitalized maintenance of our existing equipment and selected growth opportunities. The Company is allocating capital to maintain the capacity of our pressure pumping fleet to offset anticipated future fleet retirements and is evaluating future investments and options to further upgrade our equipment across the business.
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The Company has a stock buyback program to repurchase up to 49,578,125 shares in the open market, including an additional 8,000,000 shares authorized for repurchase by the Board of Directors in the second quarter of 2023. There were 2,469,056 shares repurchased on the open market during 2023 and 13,779,128 shares remained available to be repurchased under the current authorization as of December 31, 2023. The Company may repurchase outstanding common shares periodically based on market conditions and our capital allocation strategies considering restrictions under our credit facility. The stock buyback program does not have a predetermined expiration date. For additional information with respect to RPC’s stock buyback program, see note of the consolidated financial statements titled Cash Paid for Common Stock Purchased and Retired.
Current wording
The Company has a stock buyback program to repurchase up to 49,578,125 shares in the open market, including an additional 8,000,000 shares authorized for repurchase by the Board of Directors in 2023. There were 1,010,258 shares repurchased on the open market during 2024, and 12,768,870 shares remained available to be repurchased under the current authorization as of December 31, 2024. The Company may repurchase outstanding common shares periodically based on market conditions and our capital allocation strategies. The stock buyback program does not have a predetermined expiration date. For additional information with respect to RPC’s stock buyback program, see note to the consolidated financial statements titled Cash Paid for Common Stock Purchased and Retired.
Previous wording
The Company purchases its equipment and materials from suppliers who provide competitive prices and employ skilled workers from competitive labor markets. If inflation in the general economy increases, the Company’s costs for equipment, materials and labor could increase as well. In addition, increases in activity in the domestic oilfield can cause upward wage pressures in the labor markets from which it hires employees, especially if employment in the general economy increases. Also, activity increases can cause supply disruptions and higher costs of certain materials and key equipment components used to provide services to the Company’s customers. In recent years, the price of labor and raw materials increased due to higher oilfield activity and labor shortages caused by the departure of skilled labor from the domestic oilfield industry in prior years. These cost increases moderated during 2023 but remain high by historical standards.
Current wording
The Company purchases its equipment and materials from suppliers who provide competitive prices and employ skilled workers from competitive labor markets. If inflation in the general economy increases, the Company’s costs for equipment, materials and labor could increase as well. In addition, increases in activity in the domestic oilfield can cause upward wage pressure in the labor markets from which it hires employees, especially if employment in the general economy increases. Also, activity increases can cause supply disruptions and higher costs of certain materials and key equipment components used to provide services to the Company’s customers. In recent years, the price of labor and raw materials have increased. These cost increases have moderated but remain high by historical standards.
Previous wording
The current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity and can be impacted by economic developments as well as geopolitical disruptions, such as the continuing conflicts in the Middle East as well as Russia and Ukraine. RPC believes that oil prices remain above levels sufficient to motivate our customers to maintain drilling and completion activities.
Current wording
The current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity and can be impacted by economic and policy developments as well as geopolitical disruptions, such as the continuing conflicts in the Middle East as well as Russia and Ukraine. RPC believes that oil prices currently remain above levels sufficient to motivate our customers to maintain drilling and completion activities. Long-term, projected steady higher demand for oil and natural gas should drive increased activity in most of the basins in which RPC operates.
Previous wording
The Company’s obligations and commitments that require future payments include our credit facility, certain non-cancelable leases, purchase obligations, amounts related to the usage of corporate aircraft and other long-term liabilities. See note to the consolidated financial statements titled Leases for details regarding RPC’s lease obligations.
Current wording
The Company’s obligations and commitments that require future payments include certain non-cancelable leases, purchase obligations, amounts related to the usage of corporate aircraft, distribution related to SERP terminations, ongoing ERP implementation and other long-term liabilities. We expect to fund these obligations primarily through cash generated from our operations. See note titled Leases and note titled Employee Benefit Plans in the Notes to consolidated financial statements for additional details.
Previous wording
See note of the consolidated financial statements titled Related Party Transactions for a description of related party transactions.
Current wording
See note titled Related Party Transactions in the Notes to consolidated financial statements for a description of related party transactions.
Previous wording
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require significant judgment by management in selecting the appropriate assumptions for calculating accounting estimates. These judgments are based on our historical experience, terms of existing contracts, trends in the industry, and information available from other outside sources, as appropriate. Senior management has discussed the development, selection and disclosure of its critical accounting policies requiring significant judgments and estimates with the Audit Committee of our Board of Directors. The Company believes the following critical accounting policies involve estimates that require a higher degree of judgment and complexity:
Current wording
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require significant judgment by management in selecting the appropriate assumptions for calculating accounting estimates. These judgments are based on our historical experience, terms of existing contracts, trends in the industry, and information available from other outside sources, as appropriate. Senior management has discussed the development, selection and disclosure of its critical accounting estimates requiring significant judgments and estimates with the Audit Committee of our Board of Directors. The Company believes the following critical accounting estimates involve estimates that require a higher degree of judgment and complexity:
Previous wording
Credit loss allowance for accounts receivable — Substantially all of the Company’s receivables are due from oil and gas exploration and production companies in the United States, selected international locations and foreign, nationally owned oil companies. Our credit loss allowance is determined using a combination of factors to estimate the risk of uncollectibility so that our receivables are appropriately stated. Our established credit evaluation procedures seek to minimize the amount of business we conduct with higher risk customers. Our customers’ ability to pay is directly related to their ability to generate cash flow on their projects and is significantly affected by the volatility in the price of oil and natural gas. Credit loss allowance for accounts receivable is recorded in selling, general and administrative expenses. Accounts are written off against the allowance when the Company determines that amounts are uncollectible and recoveries of amounts previously written off are recorded when collected. Significant recoveries will generally reduce the required provision in the period of recovery, thereby causing credit loss allowance to fluctuate significantly from period to period. Recoveries were insignificant in 2023, 2022 and 2021. We record specific provisions when we become aware of a customer's inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer's operating results or financial position. If circumstances related to a customer change, our estimate of the realizability of the receivable would be further adjusted, either upward or downward.
Current wording
Credit loss allowance for accounts receivable — Substantially all of the Company’s receivables are due from oil and gas E&Ps in the United States, selected international locations and foreign, nationally owned oil companies. Our credit loss allowance is determined using a combination of factors to estimate the risk of uncollectibility so that our receivables are appropriately stated. Our established credit evaluation procedures seek to minimize the amount of business we conduct with higher risk customers. Our customers’ ability to pay is directly related to their ability to generate cash flow on their projects and is significantly affected by the volatility in the price of oil and natural gas. Credit loss allowance for accounts receivable is recorded in selling, general and administrative expenses. Accounts are written off against the allowance when the Company determines that amounts are uncollectible, and recoveries of amounts previously written off are recorded when collected. Significant recoveries will generally reduce the required provision in the period of recovery, thereby causing credit loss allowance to fluctuate significantly from period to period. Recoveries were insignificant in 2024, 2023 and 2022. We record specific provisions when we become aware of a customer's inability to meet its
Previous wording
The estimated credit loss allowance is based on our evaluation of the overall trends in the oil and gas industry, financial condition of our customers, our historical write-off experience, current economic conditions, and in the case of international customers, our judgments about the economic and political environment of the related country and region. In addition to reserves established for specific customers, we establish general reserves by using different percentages depending on the age of the receivables which we adjust periodically based on management judgment and the economic strength of our customers. The net credit loss allowance as a percentage of revenues ranged from 0.4% to 0.8% over the last three years. Increasing or decreasing the estimated general reserve percentage by 0.50 percentage points as of December 31, 2023, would have resulted in a change of $1.4 million in the recorded provision for current expected credit losses.
Current wording
The estimated credit loss allowance is based on our evaluation of the overall trends in the oil and gas industry, financial condition of our customers, our historical write-off experience, current economic conditions, and in the case of international customers, our judgments about the economic and political environment of the related country and region. In addition to reserves established for specific customers, we establish general reserves by using different percentages depending on the age of the receivables which we adjust periodically based on management judgment and the economic strength of our customers. The net credit loss allowance as a percentage of revenues ranged from 0.4% to 0.8% over the last three years. Increasing or decreasing the estimated general reserve percentage by 0.50 percentage points as of December 31, 2024, would have resulted in a change of approximately $1.1 million in the recorded provision for current expected credit losses.
Previous wording
Insurance expenses —The Company self-insures, up to certain policy-specified limits, certain risks related to general liability, workers’ compensation, vehicle and equipment liability. The cost of claims under these self-insurance programs is estimated and accrued using individual case-based valuations and statistical analysis and is based upon judgment and historical experience; however, the ultimate cost of many of these claims may not be known for several years. These claims are monitored, and the cost estimates are revised as developments occur relating to such claims. The Company has retained an independent third-party actuary to assist in the calculation of a range of exposure for these claims. As of December 31, 2023, the Company estimates the range of exposure to be from $12.6 million to $17.1 million. The Company has recorded liabilities as of December 31, 2023, of $15.5 million which represents management’s best estimate of probable loss.
Current wording
Insurance expenses — RPC self-insures certain risks related to general liability, workers’ compensation, vehicle, property, and employee health insurance costs, up to policy-specified deductible limits. For employee health insurance, RPC maintains stop-loss coverage to limit its financial exposure on high-cost claims. The estimated cost of claims under these self-insurance programs is accrued as incurred, though actual settlement may occur in future periods. These estimates may be adjusted over time based on claim developments. Any portion of outstanding claims expected to be paid beyond one year is classified as long-term accrued insurance expenses. These claims are monitored, and the cost estimates are revised as developments occur relating to such claims. The Company has retained an independent third-party actuary to assist in the calculation of a range of exposure for these claims. As of December 31, 2024, the Company estimates the range of exposure to be from $17.8 million to $22.3 million. The Company has recorded liabilities as of December 31, 2024, of $20.1 million, which represents management’s best estimate of probable loss.
Previous wording
Long-lived assets including goodwill—* * RPC carries a variety of long-lived assets on its balance sheet including property, plant and equipment and goodwill. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. Goodwill is the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed. The Company conducts impairment tests on goodwill annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate an impairment may exist. The Company completes a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. Assessment of goodwill impairment is conducted at the level of each reporting unit, which is the same as our reportable segments, Technical Services and Support Services, comparing the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. The fair value of each reporting unit is estimated using an income approach and a market approach. The income approach uses discounted cash flow analysis based on management’s short-term and long-term forecast of operating performance. This analysis includes significant assumptions regarding discount rates, revenue growth rates, expected profitability margins, forecasted capital expenditures and the timing of expected future cash flows based on market conditions. If the estimated fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is measured and recorded. For goodwill, there are no current events that indicate that these indefinite lived intangibles might be impaired but with the economic uncertainty, it is possible that circumstances could change that would result in the need for impairment testing.
Current wording
Long-lived assets including goodwill—* *RPC carries a variety of long-lived assets on its balance sheet including property, plant and equipment and goodwill. Impairment is the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. Goodwill is the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed. The Company conducts impairment tests on goodwill annually during the fourth quarter, or more frequently if events or changes in circumstances indicate an impairment may exist. The Company completes a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. Assessment of goodwill impairment is conducted at the level of each reporting unit. Technical Services and Support Services, comparing the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. The fair value of each reporting unit is estimated using an income approach and a market approach. The income approach uses discounted cash flow analysis based on management’s short-term and long-term forecast of operating performance. This analysis includes significant assumptions regarding discount rates, revenue growth rates, expected profitability margins, forecasted capital expenditures and the timing of expected future cash flows based on market conditions. If the estimated fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is measured and recorded.
Previous wording
Acquisition of business — In accounting for our acquisitions, we evaluate whether a transaction pertains to an acquisition of assets, or to an acquisition of a business. A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets and liabilities assumed on a relative fair value basis; whereas the acquisition of a business requires assets acquired and the liabilities assumed to be recognized at the acquisition date fair values, separately from goodwill. The excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed, is recorded as goodwill. The Company uses its best estimates and assumptions to accurately value assets acquired, and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable. However, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the business acquisition date, the Company may have to record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of a business acquisition’s measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations.
Current wording
Acquisition of business — In accounting for our acquisitions, we evaluate whether a transaction pertains to an acquisition of assets, or to an acquisition of a business. A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets and liabilities assumed on a relative fair value basis; whereas the acquisition of a business requires assets acquired and the liabilities assumed to be recognized at the acquisition date fair values, separately from goodwill. The excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed, is recorded as goodwill. The Company uses its best estimates and assumptions to accurately value assets acquired, and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable. However, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the business acquisition date, the Company may have to record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.
Previous wording
See note of the consolidated financial statements titled Significant Accounting Policies, which is incorporated herein by reference for a description of recent accounting standards, including the expected dates of adoption and estimated effects on results of operations and financial condition.
Current wording
See note titled Significant Accounting Policies in the Notes to the consolidated financial statements, which is incorporated herein by reference for a description of recent accounting standards, including the expected dates of adoption and estimated effects on results of operations and financial condition.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report — wording carried from elsewhere
financial obligations, such as in the case of bankruptcy filings or deterioration in the customer's operating results or financial position. If circumstances related to a customer change, our estimate of the realizability of the receivable would be further adjusted, either upward or downward.
Current report — wording carried from elsewhere
Upon the conclusion of a business acquisition’s measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the Consolidated Statements of Operations.