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RPC Inc  (NYSE:RES)
Q1 2019 Earnings Call
April 24, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and thank you for joining us for the RPC Incorporated, First Quarter 2019 Financial Earnings Conference Call. Today's call will be hosted by Rich Hubbell, President and CEO and Ben Palmer, Chief Financial Officer. Also, present is Jim Landers, Vice President of Corporate Finance.

At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time to queue up for questions. I would like to also advise, this conference call is being recorded.

Jim will get us started by reading the forward-looking disclaimer.

Jim, please go ahead sir.

Jim Landers -- Vice President, Corporate Finance

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 2018 10-K and other public filings that outline those risks. All of which can be found on RPC's website at www.rpc.net.

In today's earnings release and conference call, we'll be referring to EBITDA, which 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're also required to use EBITDA to report compliance with financial covenants under our revolving credit facility.

Our press release issued today and our website contain reconciliations of this non-GAAP financial measure to net income, which is the nearest GAAP financial measure. Please review that disclosure, if you're interested in seeing how it's calculated. If you've not received our press release for any reason, 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.

Richard A. Hubbell -- President, Chief Executive Officer, Director

Thank you Jim. This morning, we issued our earnings press release for RPC's first quarter of 2019. Our activity levels declined compared with the previous quarter because of seasonal weakness and inconsistent customer activity levels. We believe that the pressure pumping -- the market continues to be over-supplied because of the increasing efficiency achieved by completion of service providers. Within our businesses, other than pressure pumping our activity levels were in line with the sequential changes in the rig count and completion activities in the US domestic oilfield.

Our CFO, Ben Palmer will review our financial results in more detail, after which I will have a few closing comments.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Thank you Rick. For the first quarter, revenues decreased to $334.7 million compared to $436.3 million in the prior-year. Revenues decreased compared to the same period of the prior year, due to lower pricing and lower activity levels within our RPC' s pressure pumping service line.

EBITDA for the first quarter was $40.8 million compared to $103.7 million for the same period last year. Operating profit for the prior year was $60.8 million, compared to an operating loss of $2.2 million in the first quarter of 2019.

For, the first quarter of 2019, RPC reported no earnings per share, compared to $0.24 diluted earnings per share in the prior year. Cost of revenues during the first quarter of 2019 was $252.4 million or 75.4% of revenues compared to $295.6 million or 67.7% of revenues during the first quarter of 2018.

Also, revenues decreased consistent with lower activity levels, due to lower materials and supplies expenses within RPC's pressure pumping service line as well as lower maintenance and repair and fuel expenses.

Cost of revenues as a percentage of revenues increased due to lower revenues and labor cost that are relatively fixed in the short term. Selling, general and administrative expenses were $45.4 million in the first quarter, compared to $43.8 million last year.

Depreciation and amortization expense was $42.5 million during the first quarter of 2019, an increase of 13.4% compared to $37.5 million in the prior year. Our Technical Services segment revenues for the quarter decreased 25.1% compared to the same quarter in the prior year.

Operating profit in the first quarter of 2018 was $65 million compared to an operating loss of $4.5 million in the current quarter. These decreases were due to lower pricing and lower activity within our pressure pumping service line. Our Support Services segment revenues for the quarter increased 19.1% and operating profit improved to $3.1 million compared to an operating loss of $905,000 in the same period last year. On a sequential basis, RPC's first quarter revenues decreased 11.2% to $334.7 million from $376.8 million in the fourth quarter. Revenues decreased due to lower pricing and lower activity levels. Cost of revenues during the first quarter of 2019 decreased $22 million or 8%, primarily due to decreases in materials and supplies expenses.

As a percentage of revenues, cost of revenues increased 2.6 percentage points from 72.8% in the fourth quarter to 75.4% in the current quarter. This is due to lower revenues and labor cost inefficiencies, resulting from lower activity levels.

SG&A expenses were $45.4 million during the first quarter of the current year compared to $40 million in the prior quarter, due in part to higher employment costs, primarily payroll taxes. RPC had a $2.2 million operating loss during the first quarter of 2019 compared to $19.7 million operating profit in the prior quarter. Our EBITDA decreased from $61.7 million in the prior quarter to $40.8 million in the current quarter. RPC's pressure pumping fleet remains unchanged at approximately 1.5 million hydraulic horsepower.

Our first quarter 2019 capital expenditures were $62.3 million and we currently estimate 2019 capital expenditures to be approximately $280 million. At the end of the first quarter, our cash balance was $113 million and we continue to have no outstanding debt.

And with that, I'll turn it back over to Rick for some closing remarks.

Richard A. Hubbell -- President, Chief Executive Officer, Director

Ben, thank you. As we begin the second quarter, moderately higher oil prices and resolution of recent Permian Basin takeaway capacity concerns should provide positive catalyst for near-term marketing opportunities -- market opportunities. With continued focus on increasing our operating efficiencies and providing quality services, we can improve the value we provide to our customers. Yesterday RPC's Board of Directors approved a quarterly dividend of $0.05 per share.

Thank you for joining us for RPC's conference call this morning.

At this time, we will open up the lines for your questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And your first question will come from Connor Lynagh with Morgan Stanley.

Connor Lynagh -- Morgan Stanley -- Analyst

Thanks. Good morning.

Jim Landers -- Vice President, Corporate Finance

Hey Connor.

Connor Lynagh -- Morgan Stanley -- Analyst

Was wondering, if you guys could talk about, obviously, pressure pumping was probably weighing on margins in the first quarter here. I'm wondering, if you could talk about how the profitability was in that business relative to the rest of Technical Services and then just how we could expect that to trend as we move through the year here?

Jim Landers -- Vice President, Corporate Finance

Connor, this is Jim. It weighed on revenue and it also weighed on profitability. So, as we -- as we alluded to, as we've discussed, the rest of technical services kind of move with the rig count. So, pressure pumping did have profitability issues, partially offset by lower cost of materials and supplies, sand cost declined during the quarter, so that was a positive. But in general, pressure pumping weighed on profitability, we don't disclose that service line's bottom line in our disclosure.

Going forward, at this point the March exiting run rate would tell you that the second quarter looks better -- March was the best month of the quarter, measurably so, but we have very little visibility right now. So, a number of our customers have engaged us to do things and had job slowdowns for various reasons. So, we just don't have a lot of -- we don't have a lot of visibility. So, things look better in second quarter, but a real lack of visibility at this time.

Connor Lynagh -- Morgan Stanley -- Analyst

That's fair. I mean, if we use the fourth quarter as sort of a mark here, do you think you'll be in line, better than between first quarter and fourth quarter. Could you just sort of frame that?

Jim Landers -- Vice President, Corporate Finance

Second quarter looks a little bit better than fourth quarter Connor, and that we're going out on a limb saying that, but yes, a little bit better than fourth quarter for second quarter.

Connor Lynagh -- Morgan Stanley -- Analyst

Understood. Yeah, understood. That's helpful. And maybe just a high level one here. There has been some concern that your fleet is relatively sub-optimal for the market today. Can you just frame how you think about the asset strategically?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Connor, this is Ben. In terms of our pressure pumping fleet, we have talked about that we are adding a couple of fleets during 2019. We have equipment available today that we call 21 fleets. I expect you're right there. The new equipment we're adding is certainly newer, higher spec, able to more efficiently lower maintenance, perform the type of work we and others are interested in pursuing and executing. We would expect -- we've been going through a process where we're making decisions about abilities to repurpose some of the older pumps, and I would expect by the time we get to the end of the year, we're still going to be talking about that we look at our fleet as something around 21 fleet. So, despite the fact that we're adding pumps that comprise two fleets, I expect the fleet number will stay relatively unchanged.

So, from that perspective, we are upgrading our overall fleet with those additions and some of the other projects -- initiatives that we've been working on, doing some investments to upgrade some of our older or not brand new equipment to bring it up to higher specs as well. So, we are, we are improving the capability of the fleet and focusing our efforts on the equipment that is capable of working for the more intense activities and basins.

Connor Lynagh -- Morgan Stanley -- Analyst

Okay. If I could just follow-up on that, and I'll turn it back here. Just beyond the replacement that you're doing this year, how long of a replacement cycle do you see within the equipment? How do you think that if you exit with 21 fleets this year, how much more do you need to do in the upgrade cycle?

Jim Landers -- Vice President, Corporate Finance

Well, that's a reasonable question. We've talked about in the last couple of years that, where we may be unique among some of our like-sized peers that we are focusing on maintaining our financial strengths, and we are in this business and we're in the pressure pumping business and we're going to continue to invest relatively regularly.

We talked -- again, we talked about that over the last couple of years, so I think we will continue to invest in terms of picking a number now in terms of how that replacement or upgrade cycle will go. We don't have definitive plans at this point in time. Obviously, we're in a difficult period and the decision that we made last year to add to fleets we're adding, we still feel good about that. We think that, even despite the current environment we think that's the right long-term decision, but that decision was made months ago right, and the markets continue to evolve and change, and I expect to continue -- it will continue to do the same.

So, that's something we will continue to review. But, we'll continue to invest in the business at some level, we're not going to let the business decline or go in disrepair. Our equipment that we have that's targeted work is in good shape, well-maintained and we'll continue to do that, that's been our long-term strategy and we'll stick with that.

Connor Lynagh -- Morgan Stanley -- Analyst

Understood. Thanks a lot.

Jim Landers -- Vice President, Corporate Finance

Sure.

Operator

Our next question will be from Praveen Narra from Raymond James.

Praveen Narra -- Raymond James -- Analyst

Good morning, guys. I guess, if I could ask a -- if I could ask a quick follow-up to Connor's question on the 2Q number, was that revenues higher or do we think EBITDA could be higher than what it was in the 4Q?

Jim Landers -- Vice President, Corporate Finance

Praveen, this is Jim. The question that I heard was revenue. And so the answer is that it was revenue. EBITDA same answer.

Praveen Narra -- Raymond James -- Analyst

Okay. Great. And I guess, if I heard correctly it sounded like CapEx is higher than your prior expectations, I heard $280 million. Can you frame for us, what's driving that, is it higher utilization of equipment for the year or higher expectation is it, is it something else. I guess, what's driving the change?

Jim Landers -- Vice President, Corporate Finance

Well, it may be higher than what we talked about during the call last time, but it's consistent with what we had in our 10-K. So, it's what has been put out there. I would -- and it's not really that large of a difference. One thing we did that we were able to pick up a few additional brand new pressure pumping equipment at a significant discount.

So, we pursued that opportunity, again, given our capital position we were able to do that and are glad that we took those steps. So, we -- again, we're investing for the future, in the long term. A lot of the things that are in process were put in place some time ago and but much of it is under our control. You know, I'm sure it will come up about the dividend reduction that we put in place this quarter and we again, we think that's the prudent thing to do in the short term, it doesn't necessarily signal that we think that, obviously, we're still paying a dividend and we manage that over time.

And there's always opportunity, based on our results and our capital strength. We could change that dividend -- again we could adjust it again upwards as the results allow us so that's where we are.

Praveen Narra -- Raymond James -- Analyst

Right. I guess, if I can ask one more. In terms of staffing levels, it sounds like you guys are maintaining or at least it appears that way, you guys are maintaining a little bit more staffing than the current environment calls for. One, is that correct, and then two, is that a strategy you guys are kind of employing in preparation for an uplift or how do you guys think about it?

Jim Landers -- Vice President, Corporate Finance

Praveen, this is Jim. That's true to a degree. We have more staff than we need right this moment, for this moment's activity level, but we have well maintained fleets ready for opportunities and new equipment coming, labor is always an issue in the oilfield. So we are trying to think long-term about our staffing levels and that leads to a few more employees than we would need right this moment. That's correct.

Praveen Narra -- Raymond James -- Analyst

Okay, perfect. Thank you very much guys.

Jim Landers -- Vice President, Corporate Finance

Thanks Praveen.

Operator

Next question will be from Scott Gruber from Citigroup.

Scott Gruber -- Citigroup -- Analyst

Yes. Good morning.

Jim Landers -- Vice President, Corporate Finance

Hi Scott.

Scott Gruber -- Citigroup -- Analyst

So, just a question on some of the drivers around the 2Q rise in revenue and EBITDA, which sounds promising. How many fleets did you have active in 1Q on the frac side, how many do you have active today; how many do you think you have active in 2Q and where do you think you'll exit 2Q. Just think about the ramp and the number of active fleets and what you're seeing there?

Jim Landers -- Vice President, Corporate Finance

Sure. Scott, this is Jim. We, as we discussed in our Q4 call, we ended the fourth quarter with 16 active fleets and that is a good average to think about for first quarter. We have 21 fleets ready to go, mechanically sound and ready to go, but we had 16 manned fleets during the quarter.

We think based on how the frac calendar looks, we might get another fleet active sometime in the middle of second quarter. So, perhaps next month in May and again, back to the earlier comment that we don't have much visibility that is kind of all the visibility we have right now.

Scott Gruber -- Citigroup -- Analyst

Yeah. And what do you see on the pricing side right now? It sounds like the deterioration is slowing, one of your larger peers is still calling for a sequential headwind in 2Q versus 1Q will be a one that is shrinking. What do you guys see on the pricing front?

Jim Landers -- Vice President, Corporate Finance

Right now, we do think the rate of decline is slowing. We know anecdotally that if we miss a job because of pricing, it's not by as much as it was October/November of last year.

Scott Gruber -- Citigroup -- Analyst

Got it. And then, just thinking about the dividend to EBITDA improvement in 2Q, CapEx is up some from your previous guidance. Do you have a line of sight to getting to free cash positive in the second half of the year or do you need to see improvement in pricing to get there?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

We believe that we will manage the business, certainly in the long term to be free cash flow positive. Our goal, at this point is to be free cash positive for 2019. There are a number of levers that we can push and pull to get there. So, that is our expectation that even after, yes, we will be cash flow positive this year.

Scott Gruber -- Citigroup -- Analyst

And that will be before the dividend or after the dividend?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

It will certainly before and we would expect afterward as well.

Scott Gruber -- Citigroup -- Analyst

Okay, great. Thanks for the color.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Thanks, Scott.

Operator

Thank you. Our next question will be from Tommy Moll with Stephens Inc.

Tommy Moll -- Stephens Incorporated -- Analyst

Good morning, thanks for taking my question.

Jim Landers -- Vice President, Corporate Finance

Sure Tommy.

Tommy Moll -- Stephens Incorporated -- Analyst

So, you mentioned a couple of times that the oversupplied condition in the pressure pumping market results partly from increasing efficiency. Can you talk about -- maybe, if you're looking at the relationship between crews to rig -- frac crews to drilling rigs, where you think we are now, how you think that has trended in recent quarters and any rate of change you see going forward? I presume that's what you were referencing in your comments on efficiency. So, anything you can do to enlighten us there would be appreciated.

Jim Landers -- Vice President, Corporate Finance

Sure Tommy, this is Jim. A simple frac demand model and empirical data would have told you that a year or so ago that ratio was two point something. Let's call it 2.5 or 2.6:1. Today, in the Permian, based on data that probably all of us on this call could look at, that number looks more like 3.5 or 3.6:1. There is a lot of increasing efficiency. As many of us know, with the advent and the growth -- the advent of and the growth in zipper fracs and the 24-hour work, just all the efficiency that has accrued from that.

If there's a positive now, and if you're a pressure pumper, that can only go on for so long. You can't increase the amount of zipper frac work that you do, internally (ph) , you can't work more than 24 hours a day. So, that rate of increase is certainly decreasing and may have topped out. But that change in ratio of drilling rigs to frac crews has really driven oversupply beyond and made the market oversupplied sooner than most of us would have thought.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

And I'll add onto that, this is Ben that of course there's a lot of discussion about equipment being worn out to the extent with that level of efficiency and utilization. So that's certainly a positive for the group over time if the attrition rate is higher than people expect -- have expected or if they're experiencing higher attrition rates.

So, that's not something that we count on, but we think that too is a trend they both have to work together. A lot of people are working harder and harder and more and more equipment is going to wear out quicker and that together with a lot of disruptions in the market, with a lot of the M&A activity and things like that there's -- those disruptions may actually be opportunities for us, I believe.

Tommy Moll -- Stephens Incorporated -- Analyst

Thank you. As a follow-up. I wanted to shift to the dividend. When you were thinking through with the Board where to set the new level; was there a payout you had in mind in terms of net income or maybe more appropriately for this year free cash flow base, just given the growth CapEx that you have planned or otherwise, what was -- what was the philosophy on deciding where to land with the new dividend policy?

And then going forward, as the market improves how should we think about the process there, to the extent you would come back and raise it at some point?

Jim Landers -- Vice President, Corporate Finance

Well, I think, to be honest, there wasn't a complex algorithm that we ran to make that decision. I think we just felt that it was a prudent decision, given where we were to cut it, it's something that typically we don't -- people don't like a lot of volatility in the dividend, but we kind of look at it over the full year. If the year improves going forward, there's every opportunity to increase it. We have, in many of the last several years, paid a year-end special dividend.

So, whatever adjustments we need to make to whatever we think the appropriate payout is for the full year could be factored into that year-end special dividend. So, we just felt that it was near term prudent thing to do to give us some cushion in the current environment. We obviously have borrowing capacity, if we needed it. We don't expect that we're going to, but that's another cushion that's available to us.

So, like I said, it was not any sort of complex decision. We've historically paid out as many other traditional dividend paying companies anywhere from 20% to 30% plus of our earnings over time and I expect over time that'll be where we'll end up. And we are shareholder return focused in many ways, we bought back a little stock during the first quarter, paying a dividend regularly. So, we've been doing all those things for many years and we're continuing to do that, but also managing the balance sheet and the financial strength and our condition and ability to continue to invest prudently in the business over time and not -- we're going to do that -- continue to do that more steadily over time.

Tommy Moll -- Stephens Incorporated -- Analyst

Okay. Thank you. That's all from me.

Jim Landers -- Vice President, Corporate Finance

Thanks Tommy.

Operator

Our next question will be from Chase Mulvehill with Bank of America Merrill Lynch.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Hey, good morning.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Good morning.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Good morning Ben. I guess, I'm trying to understand the 2Q guide just a little bit better. And so, if we just kind of stripped it down a little bit and just tried to -- the implied uplift of EBITDA for fleet, if I'm doing the math right, it looks like you're expecting about a $5 million to $6 million of annualized EBITDA per fleet uplift, we think about 2Q versus 1Q. Can you confirm that for us?

Jim Landers -- Vice President, Corporate Finance

Chase, this is Jim, that's hard to confirm. If we could maybe approach it from another direction, again we said several times on the call that we have no visibility right now, but if we take March results and what we know about the second quarter calendar, that's where our qualitative assessment about revenue and potential EBITDA for Q2 comes from.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

And I agree with that Chase, it's Ben. When Jim talked earlier about and he's right the visibility it is not as long-term as we would like it to be, but it is true in reviewing with operations, the FRAC calendar it is certainly more full for the second quarter and thus Jim's qualitative comments on the second quarter. But, reasonable question, but difficult to quantum (ph) .

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Okay. And maybe I can, I can kind of approach it this way, when we think about January, February, March you said like March was the best month. From an EBITDA per fleet, if we looked at March versus January, maybe can you talk to the difference between how March was -- what the run rate looked like for March versus January?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Chase, this is Ben. We would really not like to get to inter-quarter, we'll just say that January, February were not very good at all and March was much better

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Okay. All right. That will work there. Last one, I'll turn it back over. I guess with 100,000 horsepower as kind of replacement as we kind of roll forward throughout the year, as we roll into 2020 and I know that it's really early, but should we just kind of, in our model, kind of think about continued replacement CapEx as we go forward or is kind of this 100,000 horsepower -- you feel good with your fleet as you exit the year?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

I think for our long-term model. Yeah, I think that sort of spending by year would be appropriate. Now, that would not roll up to the 280 or so that we're projecting because there were other CapEx in there for coiled tubing and things like that, that are -- not necessarily, at this point in time, expect it to be as routine as the pressure pumping. So, with that as the reasonable, I think long term assumption at this very point in time.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Okay. All righty. I'll turn it back over. (ph) Very good Ben. Thanks Jim.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Thanks Chase.

Operator

Thank you. Our next question will be from Vebs Vaishnov with Howard Weil.

Vebs Vaishnov -- Howard Weil -- Analyst

Hey thank you for taking my question. Just, was there anything one-time thing in 1Q that reduced the pressure pumping profitability?

Jim Landers -- Vice President, Corporate Finance

Well, one may have noticed that SG&A was low-high. There were a number of unusual things there that would have flowed through, some of it directly, but some of it indirectly into pressure pumping. We had a couple of legal litigation type accruals. We have a higher 401(k) match for our employees that flowed through. There were -- we have been investing some in information technology, that did flow through and hit the quarter and those investments are for a variety of reasons were that's some initiatives where we're upgrading our network and we're looking at some new collaboration and data analysis tools that helps us both on the well site, but also in office automation with things like recruiting and job proposals and gathering data to well site, it's going to help us, but help our customers as well.

So that too added somewhat to the first quarter cost. As you know, the SG&A was about $45 million in the first quarter, it was $40 million in the fourth quarter. The fourth quarter had some -- had probably "positive adjustment". So, it's kind of a difficult comparison. So, probably the run rate is probably somewhere between $43 million and $44 million going forward for SG&A. So, some of those things would have naturally flowed through to pressure pumping. But, the biggest issue of course was the revenues and the utilization and efficiency of our fleet.

Vebs Vaishnov -- Howard Weil -- Analyst

Got it. And fair to say, obviously the pressure pumping drove the decline and that's expected to show the most improvements from 1Q to 2Q. How are the other businesses like ThruTubing, coiled tubing working and if you could, please, also give the breakdown for the revenues?

Jim Landers -- Vice President, Corporate Finance

Sure. Vebs, this is Jim again. Let's go ahead and do the revenue breakdown. So, this is for the quarter and as a percentage of consolidated revenues, pressure pumping was 44.2%. ThruTubing Solutions, our second biggest service line was 32.8%, coiled tubing was 6%, rental tools 4.2% and nitrogen 3.4%.

Just, I mean, a 30,000 foot view of the other businesses, they're all moving with -- certainly with the rig count, there was a slight sequential decline. ThruTubing continues to perform well because of some innovative products. Coiled tubing, we are adding some new units this year, the first of which will be delivered in May. So, coiled tubing could have been better, but we have good expectations for it this year, as it has new -- as it gets new and higher capacity units for long-linked lateral completions.

So, the Canadian spring break-up kind of impacts us in ThruTubing a bit. But the other businesses are just moving with what we know of as the well completion count in the US domestic market -- the markets we operate in and of course the rig count. So, pressure pumping was the service line that moved our results this quarter.

Vebs Vaishnov -- Howard Weil -- Analyst

All right. That's very helpful, thank you for taking my questions.

Jim Landers -- Vice President, Corporate Finance

Sure Vebs. Thanks.

Operator

Our next question will be from Ken Sill with SunTrust Robinson.

Ken Sill -- SunTrust Robinson -- Analyst

Hi, thanks. Good morning. So, a lot of the questions have been asked and answered, but there's always more to know. So, one thing you had talked about last quarter is moving to more dedicated fleets, and I was wondering where do you guys stand now in terms of exposure to spot versus dedicated fleets of the 16 that are marketed right now?

Jim Landers -- Vice President, Corporate Finance

Ken, this is Jim. That number -- that percentage has not changed much, if any, I would say that about 70% of our pressure pumping fleets which are currently active are dedicated. And as we've all discussed, but can't repeat it too many times I guess, in today's market dedicated gives you some ability to look at your utilization and plan for your logistics that sort of thing, but there are no take or pay economics, and pricing does move with the market. So, it is a handshake agreement that a customer has some work planned and if they do that work if it's not -- if things don't impact it because of other service -- mine issues or various other things, then we will do that work. So, it's not a guarantee of utilization, it's just a guarantee that the customer will give us the work that they have when they have it.

But, to answer your question, about 70% of our pressure pumping fleets are dedicated at this time.

Ken Sill -- SunTrust Robinson -- Analyst

Yes. And kind of follow-up there I mean. So, pricing is not firm and it moves with time. You indicated that you're not -- when you lose business to lower spot, it's not by as much. I guess the implication is that you're still walking away from some super low price business?

Jim Landers -- Vice President, Corporate Finance

Yes, certainly. We lose bids every day and I won't say we're happy to do it, but we realize that's the right solution.

Ken Sill -- SunTrust Robinson -- Analyst

Yeah. And going back to the attrition thing, I mean you know Halliburton was talking about attrition is going to balance the market, you guys mentioned that GE adding two fleets a year out of 21 fleet business seems reasonable. So, I guess it depends on where pricing is, but is pricing at a level where you could support keeping a fleet around for 10 years at current levels, or is there a point where five, six, seven years in, you just can't justify rebuilding and replacing it to keep it going?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Ken, this is Ben. There's obviously a lot of dynamics that go into that analysis as the market cycles and pricing and utilization moves -- a reasonable question, but the intensity of the -- we'll know more over the coming years, the intensity obviously has really picked up -- the intensity and the utilization overall for our industry, if there's one. Our utilization has been not what we want it to be. So, our equipment has not been wearing out as much as we would ideally like it to be at this point in time. So, I think those dynamics and whether it's new equipment, upgrading equipment, replacing parts and there's a lot of things we're doing, other initiatives, we have around understanding our maintenance and repairs better and how our equipment is performing, and how we might execute the jobs to manage our M&R -- reduce our M&R calls, there's a lot of things that go into that and everybody's working real hard to create those additional cost efficiencies for us, which ultimately will inure to the customer but also so to us. But, this industry has been through a lot in the last several years.

A lot of cost, relationships and dynamics going on and we're working real hard, every day, again putting some of these other tools in place for us to understand our cost even better and understand the data that our equipment is able to produce and provide to us, so that we can understand, again, better how to configure the equipment and execute jobs and again ultimately manage our costs and maximize our profitability.

Ken Sill -- SunTrust Robinson -- Analyst

Okay. And then one final question, how much of your sand volumes were internally sourced this quarter?

Richard A. Hubbell -- President, Chief Executive Officer, Director

Ken, it was 58% of the sand we used this quarter was provided by us.

Ken Sill -- SunTrust Robinson -- Analyst

And is that sand going mostly to Permian or is it going mostly to other regions as Permian local sand picks up?

Richard A. Hubbell -- President, Chief Executive Officer, Director

Hard to say. And there wasn't a big change in Permian sand in the first quarter.

Ken Sill -- SunTrust Robinson -- Analyst

Okay, great. Thank you.

Richard A. Hubbell -- President, Chief Executive Officer, Director

Thanks.

Operator

Thank you. Our next question will be from Marc Bianchi with Cowen.

Marc Bianchi -- Cowen -- Analyst

Thank you.

Richard A. Hubbell -- President, Chief Executive Officer, Director

Good morning Marc.

Marc Bianchi -- Cowen -- Analyst

Good morning. I was hoping to talk a little bit more about the progression in first quarter. I think, we certainly are and I'd suspect some investors are scratching their head thinking, your fleets in the fourth quarter were about 18, you were down to 16 in first quarter and then talking about maybe adding one here in the second quarter, but your profitability has really swung around quite a bit. I'm wondering, if there was some really inefficiencies -- you kind of alluded to it in the press release commentary during the first part of the first quarter and maybe that sort of resolved itself, maybe it was just a pad or two that were just inefficient for you. Maybe, you can talk through it qualitatively like that, just to give us some more comfort in the exit rate profitability and how you can kind of deliver the second quarter above fourth quarter, even with one or two fewer fleets?

Jim Landers -- Vice President, Corporate Finance

Marc, this is Jim. We'll try to tell you everything that's useful. It was a slow start to the year with people not -- coming back late from the holidays, not being in a hurry, not getting their budgets, all the things that -- all the things that we say, many first quarters of most years. There was some weather impact as well.

And we, you know as we have the balance sheet strength, not to lay people off and to keep equipment maintained and be ready to go when times get better. So, we had some serious labor inefficiencies in the first two months of the year. I won't say that those labor inefficiencies have been completely solved or were completely solved in March, but we had -- we just had a lot of inefficiencies in January and February. You cannot, fire people tomorrow and hire them or other new people back three weeks from now, and I honestly think, even if we knew then what we know now, we still would have kept things in place and kept equipment maintained and ready to go during those first two months of the year. So, it was just unfortunate.

March was better, again, qualitatively. We've put some money to the bottom line in March and again very little visibility, but we certainly see March continuing for the next -- for the next few months as far as we know. The frac calendar is fuller, more full, and if things just looked better and if that doesn't give enough comfort, I understand that we may just have to wait till second quarter earnings before we can get a whole -- can get everybody a whole lot more comfortable for where we are.

Marc Bianchi -- Cowen -- Analyst

Sure, sure, that's helpful perspective for us. For the customers and the work that you've picked up here toward the end of the first quarter, and what you see into the second. How would you characterize that and we can make our own assumptions about what happens in the back half. But, if it's large programs with big public E&Ps that have a plan for the remainder of the year, maybe we'd feel one way about the duration of that business versus it being smaller players that are responding to the commodity price and maybe you're going to complete one or two more wells and then go away in the back half of the year. Is there any kind of color you can provide there?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Well, this is Ben. I would say that we have heard or the numbers indicate some of the private players are getting more busy with increase in the commodity price, whether that's sustainable or not, we don't know, but that should be a net positive for us. And I would say, in terms, of the increase in activity that we're seeing at this point is not -- not a lot of these high volume completions oriented large E&Ps, but I think that's our opportunity, that's what we're working on.

We're working on trying to secure much more of that work and again I think with a lot of this -- the M&A activity and a lot of what's going on in the industry, I expect there'll be more disruptions and again I think that presents given our current position I think that presents opportunities -- more relative opportunities for us maybe for -- than for some other people in the market.

Marc Bianchi -- Cowen -- Analyst

Great. Well, thanks for the comments. I'll turn it back.

Jim Landers -- Vice President, Corporate Finance

Thank you Marc.

Operator

Thank you. Our next question will be from George O'Leary from Tudor Pickering Holt & Company.

George O'Leary -- Tudor Pickering Holt & Company -- Analyst

Good morning guys.

Jim Landers -- Vice President, Corporate Finance

Good morning.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Hey George.

George O'Leary -- Tudor Pickering Holt & Company -- Analyst

Just a question on the utilization side, thinking through maybe a couple of ways you guys can possibly frame that either hours pumped, stages pumped or sand volumes pumped per month, any framing of how that trended throughout the quarter and maybe March versus January or March versus Q4 averages just might be helpful for us to think about efficiencies and utilization throughout the quarter?

Jim Landers -- Vice President, Corporate Finance

Right. George, this is Jim again. I'm not sure I have that right at my fingertips in terms of operational metrics, stages -- stages per month, I'm not sure we have that in front of us.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

I'm sorry, it's not quantitative, but again, March was much stronger than January and February.

Jim Landers -- Vice President, Corporate Finance

Yes.

George O'Leary -- Tudor Pickering Holt & Company -- Analyst

Sure. That's helpful. And then maybe, just thinking about the way Q1 played out in that pressure pumping business. Can you say whether the -- I think if we get back to Q4, there were some hope that maybe utilization will be better quarter-on-quarter, the way it sounds like today, but didn't materialize for a number of different reasons, weather included. But, what was the bigger pain point in the first quarter? Was it pricing, which -- seems like the pressure has abated there or was it utilization?

Jim Landers -- Vice President, Corporate Finance

George, it was a bit of both. It was the story of customers just not being in a hurry to get back to work in January, so that's a utilization issue and pricing just continues to be

a tough fight. So actually, pricing did decline a bit in the first quarter, although we've said that, that pressure has abated, pricing did decline in the first quarter.

George O'Leary -- Tudor Pickering Holt & Company -- Analyst

And then, maybe just one more if I could. It seemed like in April based on what you have seen so far, and I realize we're not fully at the end of the month yet that utilization is actually up over March or were you guys implying that March is a good month and April looks kind of flattish with March?

Jim Landers -- Vice President, Corporate Finance

More of the latter. April looks flat to March.

George O'Leary -- Tudor Pickering Holt & Company -- Analyst

Alright. I will leave it there. Thanks for the color guys.

Jim Landers -- Vice President, Corporate Finance

Okay. George, thank you.

George O'Leary -- Tudor Pickering Holt & Company -- Analyst

Thank you.

Operator

Our next question will be from Mike Urban from Seaport Global.

Mike Urban -- Seaport Global -- Analyst

Thanks. Good morning guys.

Jim Landers -- Vice President, Corporate Finance

Good morning Mike.

Mike Urban -- Seaport Global -- Analyst

So, wanted to dig in a little bit on the continued strategy and move toward the dedicated fleets, at a high level makes absolute sense, just better visibility, better ability to manage your utilization, which as we saw from your results is a clear driver of profitability, but you know at the same time everybody would like to do that.

Everybody wants to work with a big, efficient operators with visible programs. How do you convince a customer to do that? How do you win that work, what's your value prop relative to your competitors in doing that?

Jim Landers -- Vice President, Corporate Finance

Mike, it's Jim. We do have a lot of good programs in place. We are known as a high-quality provider. We are buying new equipment and it appears that not many of our peers are buying new equipment.

We are putting a lot of confidence in the new, continuous-duty high-horsepower pressure pumping equipment that we bought in 2018 and are continuing to take more delivery of in 2019.

We have some high capacity pumps, one of which is going to be shown at OTC next month. So, you can go, since you're in Houston and take a look at it, and we feel like that increased efficiency and less downtime, which we believe will benefit us and our customers is a way to win work, as well as just season management and that type of thing.

So, there's no magic bullet, there's no patented process that' s going to win pressure pumping work for us, but we're just going to get in there and work and talk about our new equipment and our processes in place and just you know, with -- commodity prices are constructive. As Ben has mentioned, there seems to be a lot of churn among our larger customers in terms of who's going to own whom and who's going to operate where and that sort of frothiness always can provide opportunities for you -- for us or for someone. So, that is our best answer at this time.

Mike Urban -- Seaport Global -- Analyst

Got you. And then, how do you think about the decision to put a fleet -- a replacement to dedicated fleet with a customer? Is that always better just because the utilization is much higher and then the visibility is much higher, or is there a situation where you say, hey, we will keep this fleet in the spot market and that's the better answer. And I guess, that's just kind of taking the other side of that last question, I mean since everybody kind of does want to be a dedicated provider. You know, you guys have the scale, you have the balance sheet to maybe be a little more opportunistic and kind of be the large high-quality spot provider -- maybe that is a differentiated strategy. So, I guess the question is, how do you think about the decision, whether to keep a fleet in the spot market or move it to a dedicated customer?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Well, other things equal, we'd rather be dedicated if we believe that the long-term profitability contribution dollars of having that fleet dedicated will work for us. It's more than just pricing per stage, you know, per se. We have to look at the job design, what sort of proppant they're using, what's the wear and tear, what's the projected wear and tear on our equipment is going to be, what pressures and pump rates are we using that tells you a lot about your wear and tear -- potential wear and tear and then also trying to look at the customers' drilling program and see how much confidence we have that the, you know, two or three pads I'm just making them up hypothetically, but two or three pads they have for us which ought to last nine months or a year.

How likely is that to get done in a timely basis that will ensure us good or, you know, give us confidence about good utilization. I mean that's kind of what you think about -- to get something tied up and dedicated work where it's going to be hard on the equipment, and you may not get good utilization is not a situation we want to be in. So, you just have to weigh those factors.

Mike Urban -- Seaport Global -- Analyst

Got it, thanks. And then if I could sneak in just a quick housekeeping follow-up. Do you have the revenue percentage number for snubbing, was that material in the quarter?

Jim Landers -- Vice President, Corporate Finance

It was not material, it was about -- it was the same as in the prior quarter and the prior year. Roughly, it was about 1% of revenues.

Mike Urban -- Seaport Global -- Analyst

Okay, great that's all from me. Thank you.

Jim Landers -- Vice President, Corporate Finance

Okay. Thanks Mike.

Operator

Thank you. Our next question will be from John Watson with Simmons Energy.

John Watson -- Simmons Energy -- Analyst

Hey, good morning guys.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Good morning.

John Watson -- Simmons Energy -- Analyst

Other than continuous duty pumps, are there other specs within frac that your customers are interested in or specs that you're considering as you're adding new equipment?

Jim Landers -- Vice President, Corporate Finance

Pumps and the continuous-duty components I guess we define those here as engines and transmissions that work or that have more durability to them, smaller footprint is important but not ultimately important but that's important as well. That might be all that's worth discussing on this call right now.

John Watson -- Simmons Energy -- Analyst

Okay. Okay, great. Thanks Jim. And you and others are adding large diameter coil equipment as we have talked about, can you give us an update on the coiled tubing pricing environment and your expectations for how that might trend moving forward?

Jim Landers -- Vice President, Corporate Finance

Hard to have empirical data because we don't have those new large diameter coiled tubing units in the market, yet. I mean, I think, one, I know one was delivered in April, so we'll know soon, but we do believe there is a market for those large diameter coiled tubing units which can go out 10,000 feet, 12,000 feet. We also think that there are not that many players in the -- from the ground up built large diameter coiled tubing units. So, we think that there is a good market for us there in terms of revenue per running foot charges that we expect. I mean, we have some internal analysis to justify the capital expenditure, but we don't have any empirical data to share with you.

John Watson -- Simmons Energy -- Analyst

Sure. Okay. So, part of the uplift for Q2 is more coiled tubing equipment, is that fair to say?

Jim Landers -- Vice President, Corporate Finance

Some of it, a small percentage of it is. What we think is going to be better for us is just constructive commodity prices and some better pressure pumping utilization. Again, back to that March exiting run rate following through into second quarter. It's what we think is going to drive our results, a little more in second quarter than other things.

John Watson -- Simmons Energy -- Analyst

Right. Makes sense. Thanks for squeezing me in guys, I appreciate it.

Jim Landers -- Vice President, Corporate Finance

Sure John.

Operator

Thank you. Our next question will be from Chuck Minervino with Susquehanna.

Chuck Minervino -- Susquehanna -- Analyst

Hi, good morning.

Jim Landers -- Vice President, Corporate Finance

Hey Chuck.

Chuck Minervino -- Susquehanna -- Analyst

Just wanted to touch on the 2Q qualitative color a little bit more. It just seems to get to some of the -- and I understand it's very fluid right now, but to kind of get back to a little bit above 4Q levels on both the revenue and the EBIT side, you got to do pretty good growth in the revenues, which I think is very possible with the utilization bump. My question really was, it looks to me like the incremental margins need to be kind of in that 50%, maybe 50% plus range

And I guess I just wanted to ask, I guess historically we're a little bit more used to seeing those types of incrementals when you're getting pricing as well. Is it -- am I right about that kind of number, and I guess maybe it's because 1Q just had a lot of noise in it, and very low utilization so, there's like a little bit of a benefit from that. But, can you just help me understand like can you get those types of incremental margins when you're not really getting pricing?

Jim Landers -- Vice President, Corporate Finance

Chuck, this is Jim your point's a good one. However, I wouldn't say that first quarter had noise in it so much as extremely under underutilized resources. So, the incrementals on underutilized resources, which you don't have to add to with incremental revenue should be -- should be pretty good. I mean are the incrementals 40% or 50% something like that? We just do not have the visibility to tell you right now. You're also making good point that pricing certainly gooses your incrementals a good bit. So...

Chuck Minervino -- Susquehanna -- Analyst

Okay. Okay. I guess you're right, maybe noise wasn't the right word, but the point of lower utilization in 1Q I guess was what really kind of impacted. And then just a second question on, the decision to potentially bring another fleet out, can you just talk around some of the thought process there?

I guess, maybe one thought would had been, if you kind of see pricing get to a certain point or maybe you believe that the utilization will be at such a level that that's a good return decision. Can you just talk a little bit about that?

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

This is Ben. What we talked about, as we made the decision several months ago to order this new fleet, and I think it's part of our regular -- at this point in time our regular routine addition to the fleet to enhance and upgrade and knowing that attrition is an issue and it has been quite a while since we've retired many, or in some cases any or almost -- there have been very few retirements that we've had, and I think it's time to -- that we'll be doing that. So again, that decision was made sometime ago. We're in this business, we think it's going to be a good business, we think...

obviously this is a very difficult time right now. Operationally returns are not good, right now, in this particular timeframe. But, I think it will. I think it will shake out. Higher oil prices, equipment attrition and all those things. I mean, somehow it is -- nothing's ever 100% certain in business, but we think it's -- obviously, we think it's a prudent investment and we're set to work real hard to manage our costs and get our activity levels up and do what we have to do to manage our results and generate cash and return capital to shareholders.

Chuck Minervino -- Susquehanna -- Analyst

Got it. Thank you guys.

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Thanks.

Operator

Thank you. And our next question will be from Jud Bailey from Wells Fargo.

Jud Bailey -- Wells Fargo -- Analyst

I wanted to follow-up on one of the earlier lines of questioning. If I'm doing the math right, your pressure pumping revenue, I think was down about 19% sequentially. Could you give us any color? Do you have the numbers there on what was volume and what was price, like what was stage count down quarter-over-quarter and then how much was probably average pricing? What were the kind of the contributing factors there?

Jim Landers -- Vice President, Corporate Finance

Jud, this is Jim. Majority of it was price. About 80% of the decline related to price, the rest -- they have a 20% related to utilization.

Jud Bailey -- Wells Fargo -- Analyst

Okay, thanks. And was there any port -- how do we think about any movement in self-sourcing of sand, was that much of a factor?

Jim Landers -- Vice President, Corporate Finance

It actually was not -- our customers sourced more of the sand in first quarter than they did in fourth quarter and that's just a tactical customer mix kind of answer, but the fact that the price of sand declined, muted the revenue and contribution impact that, that would have had. So, kind of a kind of a strange. You have some puts and takes during the quarter on that one.

Jud Bailey -- Wells Fargo -- Analyst

Okay, all right. And then my follow-up is just thinking about the second quarter, based on the quarterly -- or I'm sorry, the monthly progression in the first quarter and maybe how April is shaping up, is it reasonable to think about your stage count or proppant pumped in the second quarter being up mid to high single-digits, does that strike you as a reasonable objective based on kind of what you're seeing today. Just trying to think about how to think about the second quarter from an activity standpoint.

Jim Landers -- Vice President, Corporate Finance

Yes. If your question is first quarter to second quarter. It's a quarterly question? The answer is yes. That's reasonable. Yeah.

Jud Bailey -- Wells Fargo -- Analyst

Okay. All right. I'll turn it back.

Operator

Thank you. And I'd now like to turn the call back to our presenters for closing remarks.

Jim Landers -- Vice President, Corporate Finance

Thank you Carrie. We appreciate everyone calling in and listening and the questions. Look forward to seeing a lot of you soon and talking to a lot of you soon.

Have a good day. Bye-bye.

Operator

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.

Duration: 62 minutes

Call participants:

Jim Landers -- Vice President, Corporate Finance

Richard A. Hubbell -- President, Chief Executive Officer, Director

Ben M. Palmer -- Vice President, Chief Financial Officer and Corporate Secretary

Connor Lynagh -- Morgan Stanley -- Analyst

Praveen Narra -- Raymond James -- Analyst

Scott Gruber -- Citigroup -- Analyst

Tommy Moll -- Stephens Incorporated -- Analyst

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Vebs Vaishnov -- Howard Weil -- Analyst

Ken Sill -- SunTrust Robinson -- Analyst

Marc Bianchi -- Cowen -- Analyst

George O'Leary -- Tudor Pickering Holt & Company -- Analyst

Mike Urban -- Seaport Global -- Analyst

John Watson -- Simmons Energy -- Analyst

Chuck Minervino -- Susquehanna -- Analyst

Jud Bailey -- Wells Fargo -- Analyst

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