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DATE
Thursday, July 24, 2025 at 9 a.m. ET
CALL PARTICIPANTS
President and Chief Executive Officer — Ben Palmer
Vice President and Chief Financial Officer — Mike Schmidt
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RISKS
Pressure pumping experienced a more than 200% increase in third-party nonproductive time, resulting in operational inefficiencies.
The effective tax rate was unusually high primarily due to the acquisition-related employment costs associated with the Pintail acquisition, with expectations for continued elevated rates through the life of those costs.
The market overall remains "very competitive," and management stated it is "cautious regarding the second half of the year given the reduction in rig activity over the last several weeks."
Intense wireline pricing pressure led to the expectation of "slightly lower EBITDA margins than previously communicated."
TAKEAWAYS
Total Revenues: up 26% sequentially, driven by a full quarter of Pentel acquisition impact.
Revenues Excluding Pentel: Down 3% sequentially (excluding Pintail revenues), reflecting legacy line performance absent the acquisition.
Technical Services Revenue: Comprised 94% of total revenues.
Support Services Revenue: Accounted for 6% of total revenues; up 14% sequentially.
Largest Service Lines Revenue Mix: Pressure pumping 25.9%, wireline (mostly Pentel) 24.7%, downhole tools 23.7%, coiled tubing 8.5%, cementing 6.6%, and rental tools 4.3% (sum reflects all major segments).
Pentel Contribution: $99 million revenue, representing 23% of total revenues.
Downhole Tools Revenue: Up 6% sequentially, with particular strength in Northeast and Rocky Mountain regions, reflecting increased adoption of ThruTubing Solutions' A10 motor and unplugged products.
Coiled Tubing Revenue: Up 12% sequentially; delivery of the largest U.S. unit took place in late June.
Rental Tool Revenue: Up 17% sequentially, partially attributed to weather impacts.
SG&A Expenses: $40.8 million; representing 9.7% of revenue, due to cost leverage and IT initiatives.
Adjusted Diluted EPS: $0.08, reflecting $0.03 in adjustments entirely related to acquisition employment costs.
Adjusted EBITDA: $65.6 million, up from $48.9 million in the previous quarter; margin increased 90 basis points sequentially to 15.6%.
Operating Cash Flow: $92.9 million;Free Cash Flow: $17.6 million after $75.3 million CapEx; Year-to-date free cash flow was negatively impacted by a large customer prepayment received in Q4 2024.
Cash Balance and Debt: $162 million in cash, $50 million seller finance note payable, undrawn $100 million revolving credit facility at quarter end.
Capital Spending Guidance: $165–$215 million expected for 2025, including Pentel for nine months; focused on maintenance and opportunistic purchases plus IT upgrades.
Effective Tax Rate: 41.3%, anomalously high due to non-deductible acquisition costs; full-year effective tax rate expected in the mid-thirties percent range.
SUMMARY
RPC, Inc.(RES -0.42%) management emphasized the operational and financial impact from the Pentel acquisition, stating that it diversified revenue streams and improved cash flow while also introducing elevated non-deductible costs that increased the effective tax rate. The shift to more dedicated customer relationships in pressure pumping led to less spot market exposure but contributed to a service mix with lower material revenue content and ongoing operational inefficiencies. Results highlighted sequential gains in nonpressure pumping service lines such as coiled tubing, downhole tools, and rental tools, supported by targeted investments and strong customer uptake for differentiated products. Management articulated continued strategic selectivity in M&A and capital allocation given the backdrop of competitive pricing, rig activity reductions, and global macro uncertainty.
President Palmer said, "we are cautious regarding the second half of the year given the reduction in rig activity over the last several weeks."
Vice President Schmidt noted, We expect our full-year effective tax rate to be in the mid-thirties, reflecting ongoing acquisition-related costs.
The acquisition-related employment costs are expected to recur at similar quarterly levels for three years, impacting future reported profitability and cash tax rates.
Management communicated that future guidance on the Pentel segment will not be provided, increasing forecast uncertainty for that unit.
INDUSTRY GLOSSARY
Pressure Pumping: Oilfield service involving high-pressure injection of fluids for hydraulic fracturing or well stimulation.
Simul Frac: Simultaneous hydraulic fracturing operations on multiple wellbores within a pad to enhance efficiency.
Twin Frac: Technique where two wells are fractured at the same time using shared equipment; generally improves equipment utilization.
ThruTubing Solutions: RPC subsidiary specializing in downhole tools, referenced for its A10 motor and unplugged product lines.
Unplugged Technology: Downhole solution by ThruTubing Solutions designed to minimize the need for bridge plugs and reduce drill out time.
Full Conference Call Transcript
Ben Palmer: Thanks, Mike, and thank you for joining our call this morning. Today, we will talk about our second quarter results, which incorporate a full quarter of the recent Pentel acquisition. In addition, we will share our views about the impacts we are seeing from increasing macro geopolitical uncertainties, which were prevalent during the quarter. Second quarter results reflect a sequential improvement due to the full quarter impact of our Pentel acquisition. While many of our legacy service lines saw modest revenue increases, pressure pumping continued to experience a challenging environment. Pressure pumping was negatively impacted by lower industry activity overall but also by weather, third-party nonproductive time, and customer calendar delays.
We saw more than a 200% increase in third-party nonproductive time. This was most pronounced in June. This combined with customer delays resulted in operational inefficiencies. Pressure pumping is now primarily deployed with dedicated customers. This customer shift has increased our mix of simul frac and twin frac operations, which generally requires additional equipment and less cut spot materials. The market overall remains very competitive, and we are cautious regarding the second half of the year given the reduction in rig activity over the last several weeks. Our 2025 plans include the test of a 100% natural gas pressure pumping unit as part of our strategy to evaluate alternative technologies.
Our first unit is expected to be deployed in the third quarter. Nonpressure pumping service lines represented 74% of total revenues during the second quarter. Revenues without the contribution of Pintail were up 7%. We saw revenue growth in downhole tools, foil tubing, rental tools, and our tubular services. Downhole tools revenues were up 6% sequentially. We saw particular strength in our Northeast and Rocky Mountain regions, which is a testament to ThruTubing Solutions' broad geographic exposure. Thru Tubing Solutions' A10 motor and unplugged products continue to gain early traction in the market. We believe the new A10 motor has resulted in incremental share gains through our already robust market position.
The A10 motor is gaining a lot of traction and has been utilized by more than 50 customers today. The product really demonstrates its value on longer laterals, wells, that need higher flow rates. Turning to our unplugged technology, we had multiple demonstrations the quarter with customer use expanding. We are still very much in the early adopter and testing phase of this product's life cycle. But we are pleased with this performance and feedback we've received thus far. Recall, this product reduces the need for bridge plugs and drill out time in a well. Achieves highly effective stage isolation. Oil tubing was up 12% sequentially.
And in late June, we took delivery of the largest coiled tubing unit in The US, which began promptly working in July. Two and seven eighths unit is uniquely suited for large pad customers who drill long laterals, has had multiple customers expressing a strong interest. Over the last couple of years, we've made investments in cut pressure control that provide additional opportunities for coiled tubing and snubbing in late 2025 and into 2026. Gut pressure control has been able to partner with other ARC service lines with new applications to generate additional revenue. Admitting revenues were roughly flat sequentially we saw rental tool revenues increase 17% versus the prior quarter, partly due to weather impacts. On last quarter.
Wireline, including our much smaller legacy business, increased substantially quarter over quarter due to the Pimtail acquisition. Pentel is the largest wireline provider in the Permian Basin. An operational leader with a well-regarded management team and a blue-chip customer base. The acquisition further diversifies our portfolio increases our scale through M and A, improves our cash flow profile, and strengthens our customer mix. Our portfolio of various services and products with strong brands and operational leadership has provided resiliency throughout the years. Intel revenues contributed approximately $99 million in the second quarter or 23% of total revenue.
Given Pentel's share position, we expect revenues trend with the overall market and have historically experienced limited seasonality due to its focus dedicated twenty-four seven customers. In our SEC filings following the transaction, additional financial data was provided. The wireline market too remains challenging with pricing pressure intense during the quarter. As smaller competitors and less consistent work with lesser consistent work attempted to increase their utilization. We saw relatively consistent gun usage during the quarter. However, competitive pricing leads us to expect slightly lower EBITDA margins than previously communicated, but still strong operating cash flow.
From a strategic standpoint, we believe bolstering these less capital-intensive service lines with organic investments and selective acquisitions will help drive growth, improve our customer mix, and reduce volatility in our financial results. We believe our balance sheet provides us optionality, including executing selective acquisitions. Benacre and Tintail were well positioned at these companies' participated in markets we had familiarity with but provided us a leading brand and leadership to significantly scale up in the respective service lines. While relatively small, we also have been able to deploy cash purchase assets in the existing service lines to enhance and expand our offerings.
With that, Mike will now discuss the quarter's financial results as well as some notes on the Pentel transaction.
Mike Schmidt: Thanks, Ben. Our second quarter financial results with sequential comparisons to the 2025 are as follows. Revenues increased 26% to $421 million. Excluding Pinetale revenues, revenues were down 3%. Breaking down our operating segments, technical services, which represented 94% of our total second quarter revenues, was up 27%. Support services, which represented 6% of our total second quarter revenues, was up 14%. The following is a breakdown of the second quarter revenues for our largest service lines. Pressure pumping, was 25.9%. Wireline was 24.7%. Downhole tools was 23.7%. Coiled tubing, was 8.5%. Cementing was 6.6%. And rental tools was 4.3%. Together, these service lines accounted for 94% of our total revenues.
Cost of revenues, excluding depreciation and amortization, was $318 million compared to $245 million in the previous quarter. This increase was primarily due to the addition of Pintail as our cost of revenues excluding Pintail declined 3% sequentially. The lower cost of revenues from our legacy businesses was primarily attributable to lower materials and supplies. Which saw declines in pressure pumping due to lower activity and job mix changes during the quarter. We also saw modest declines in employment-related costs. SG and A expenses were $40.8 million down from $42.5 million. As a percentage of revenue, these expenses decreased 310 basis points to 9.7%, reflecting minimal additional SG and A from the Pintail acquisition.
Leveraging our SG and A costs over higher revenues, as well as the capitalization of some costs associated with our IT system upgrades and ERP implementation. Our second quarter's effective tax rate was 41.3% which was significantly higher than our previous quarter's effective tax rate. The effective tax rate was unusually high this quarter primarily due to the acquisition-related employment costs associated with the Pintail acquisition. Which contributed to lower pretax net income and which are largely nondeductible for tax purposes. We expect our effective tax rate to be negatively impacted through the life of the acquisition-related employment cost due to their accounting treatment which differs from their tax treatment.
We expect our full year 2025 effective tax rate percentage to be in the mid-thirties. Adjusted diluted EPS was $0.08 in the quarter. Adjustments totaling $0.03 were entirely related to the acquisition-related employment costs. Adjusted EBITDA was $65.6 million up from $48.9 million with the margin increasing 90 basis points sequentially to 15.6%. Operating cash flow was $92.9 million and after CapEx of $75.3 million, free cash flow was $17.6 million. Free cash flow year to date reflected a negative working capital impact related to a large customer prepayment received in the fourth quarter of 2024.
At quarter end, we had $162 million in cash, a $50 million seller finance note payable, and nothing outstanding on our $100 million revolving credit facility. During the quarter, we paid $8.8 million in dividends. 2025 capital spending is expected to be between $165 and $215 million. Inclusive of Pennsail for nine months. Mostly related to maintenance and opportunistic asset purchases as well as our IT system upgrades and ERP implementation. I'll now give a few comments on our recent acquisition of Pintail Completions. As previously stated, we expect the acquisition to be accretive in 2025. The acquisition-related employment costs are noncash for the quarter, and are expected to continue at a similar quarterly amount over three years.
Our second quarter results reflect the additional shares issued in conjunction with the transaction. These results also reflect lower interest income from the lower cash balance and higher interest expense due to the seller note when comparing results to last year. The preliminary purchase price allocation details can be found in our second quarter 10-Q. Going forward, we will not be providing specific guidance on Pintails. I'll now turn it back over to Ben for some closing remarks.
Ben Palmer: Thank you, Mike. Uncertainty around the economy, tariffs, and commodity markets have created a challenging operating environment. We've begun seeing tariff impacts and are taking steps to either mitigate or factor these cost increases into our pricing. Lastly, the current oil prices are unlikely to stimulate significant activity increases in the near term within the overall industry. RPC is no stranger to business cycles and uncertain demand environments. We will continue to manage our business by focusing on prudent capital investments, and capital allocation decisions. Control costs, and utilize our balance sheet and liquidity to take advantage of opportunities as they arise. Our mix of service lines, customers, and basin exposures provide beneficial diversification.
I want to thank all our employees who work tirelessly to deliver high levels of service and value to our customers. Thanks for joining us this morning. And at this time, we'd be happy to address any questions you might have.
Operator: If you would like to ask a question, and your first question comes from John Daniel with Daniel Energy Partners. Please go ahead.
John Daniel: Hey, guys. Thanks for having me. Ben, you still have an enviable cash position and balance sheet, and I'm just curious if you could elaborate a bit on the go-forward acquisition strategy and to help frame what I'm looking for is really your preference for consolidation opportunities to drive more scale in a particular service or region or whether you think the best opportunity is to try to expand into other services and or other geographic markets? That's part one. I'll let you touch on that.
Ben Palmer: Okay. Thank you, John. Yes. That's still our strategy. You know, over time, obviously, with you know, in the last couple of quarters with some of the volatility and uncertainty around future activity levels, you know, it makes you know, the evaluation of current you know, oilfield domestic oilfield opportunities a little bit more difficult to you know, analyze and price and, that kind of thing. But, but we're certainly looking, know, I think, you know, scale for us and some of our existing service lines is certainly a possibility. But we're gonna be in the current environment, we'll we'll be we'll be selective, and we'll be, you know, again, mindful of the difficulty in trying to determine appropriate valuations.
But, with respect to you know, I think as historically we've done, we're we're much more know, opportunistic. There are you know, certainly on the lookout on some of our existing opportunities around some of our existing service lines, and, you know, the ability to diversify you know, outside the oilfield is something that we look at as well. Uh-huh. But you know, not necessarily focused on particular regions. But as I indicated in Mark's remarks, you know, we like we feel like we've benefited historically from the diversification. And, Tubing Solutions in particular, has a strong position in several basins around throughout The US.
So you know, if and when natural gas activity picks up, we're we're very well positioned to take advantage of that. Okay. Well, thank you. A follow-up, if I may, on the M and A strategy. But at least within a couple of the service lines, and you touched on it a little bit. There's a bit of continued pricing pressures, predatory pricing, if you will, and then you have the backdrop, presumably of a Q4 slowdown. Just the three. The trend is consistent with prior years, I'm curious if it would seem that for some of your peers, it's about to get worse.
And so how does that play into just hitting the pause on M and A and maybe there's better opportunities surface call it, first half of next year. Just treat that I'll I'll let you know. Yeah. Yeah. Yeah. I kinda touched on that. I think Yeah. We say we'd put a pause on, but, but certainly, we're not leaning into the wind quite as much as, as we as we have been. Okay. So and it very well could be. You're right. I think, you know, if and when things are checking out, that could create some different type of opportunities and situations that we'll be ready to take advantage of. Okay.
And I'm I got an easier one for you now. The addition of that two and seven ace is obviously an impressive unit. I'm curious, and you've only had a few weeks, but you mentioned good customer interest so far. I'm I'm curious if you've if you have any field results from it yet that you can speak to and whether or not you believe at this stage there's enough interest to warrant a possible second unit. If you could just provide some color, it would be helpful.
Ben Palmer: Yeah. The results so far have been very good. Very impressive. We're really pleased with that. And it and it's staying very, very busy. Thus far. And in terms of the second unit, we haven't entertained that yet. Okay. I think that you know, we certainly haven't placed any additional orders at this point in time. So it's more of a wait and see. We're trying to be very selective with our investments. So you can see that our, you know, CapEx know, is down versus the prior year, despite some of these additions that we've been able to make. So, we're being very careful about that. Okay.
John Daniel: Thank you for including me.
Ben Palmer: Thank you, John. Appreciate it.
Operator: Your next question comes from the line of Chuck Minervino with Susquehanna. Please go ahead.
Charles Minervino: Hi. Good morning. Good morning. Just was wondering if you could touch on the segment outlook a little bit. In the second half of the year here. I think you're your comments about the frac market, I think cautious in the second half of the year. I know it was down quite a bit in 2Q. I don't know if now the market has kind of settled there or if you kind of anticipate a little bit of another leg down in the pressure pumping piece? As you kind of work into March here. I guess that's my first one. If you can address that.
Ben Palmer: Well, fresh pumping in particular, know, you know, those of you who are familiar with our historical results, pressure pumping has had kind of a challenging quarter in each of the last two years, and that was the third quarter. Of the last two years. This year, it's the second quarter. We are seeing, as I indicated, we are much more aligned with more highly dedicated customers. That began during the second quarter. And continues into the third quarter.
But we see a lot more activity and a lot more certainty around, our calendar heading into the third quarter and hopefully into the fourth quarter with some of these dedicated customers who typically, you know, don't have as much of a seasonal slowdown. We expect hope and expect that, you know, that's gonna minimize the otherwise normal seasonality, that, occasionally gets hits the fourth quarter. You know, the fourth quarter of the last two years have been actually better than the third quarter of the last two years with the for the reason I indicated. Just there's been unexpected white space and non you know, excessive nonproduction time and things like that.
So we're hopeful again with the customer line up for pressure pumping that we have at this point in time that we'll we'll actually see a sequential an opportunity to have some improvement The mix, as we indicated too, the mix of the work has less materials and supplies. So the revenue, change may be a little bit different. Right? Obviously, more materials and supplies increases your revenues. So we may have low revenues that are lower than they would otherwise be, but we expect we'll we'll be staying a lot more busy.
Charles Minervino: And then I was wondering if you could just touch a little bit on free cash flow outlook for the second half of the year.
Ben Palmer: I would first say, we noted in our comments about the first half free cash flow was impacted by a it was actually around $45 million prepayment we received in the fourth quarter last year that negatively impacted free cash flow. So on a, quote, unquote, adjusted basis, you know, we've been closer to I guess, at 63 or so. So the back half of the year is gonna be certainly better than the than the first half for the for the following reason. We don't know whether we'll receive another, prepayment or not. But we're not we're not counting on that with respect to, you know, planning for and analyzing our expectations around free cash flow.
But with the level of CapEx we have that we signal, we think we'll have decent free cash flow for the second half.
Charles Minervino: Okay. And then just one more for me. I think you mentioned pricing in wireline getting a little bit more aggressive. Just wondering how that how you think that plays out a little bit. It in kind of the results in 3Q and 4Q. Does that is that kind of tied to Pintail a little bit? And is that how we should be thinking about it? Sure. Yeah.
Mike Schmidt: Yep. Definitely pin to one other thought, you know, on free cash flow. We only had PinTel for one quarter in the first half of the year, and we'll have them for both quarters in the second half of the year. So that should help us because, as we said, we expect them to be accretive. For the year. But, yeah, I mean, our existing wireline business was very small. So you can think about that. It is pretty much pentel in there. But they're also heavily in the Permian, which has had you know, some of the biggest struggle in the last in the most recent quarter.
So that impacts Pentel as well as our pressure pumping business more than our other businesses, and you can kinda see that you know, in the revenue increases and results. So, that would have an impact there. But you know, as we've said, it's it's still accretive. You know, the numbers are available in the eight k that we had a couple about a month back. That were, you know, extremely good in recent previous years, and they're just impacted like everyone in the Permian. But as Ben indicated, we have a really strong position with Pintail.
You know, they're as busy or more busy than anyone else in the Permian, and have great customer relationships and all the reasons we brought bought them. So you know, we're not we're, you know, still cautiously optimistic.
Ben Palmer: Yeah. And we think, you know, the management team is working really hard on know, costs where they can, in response to the to the, you know, the more challenging environment. Certainly, with the uncertainty around that came about because of liberation day and the impact, again, on the overall market. And customers' act appetite for, increase activity levels, obviously, and decreasing some of their activity levels. But Pentel's still well positioned, and they'll they'll be a nice contributor.
Charles Minervino: Thank you.
Operator: There are no further at this time. I will now turn the call back over to Mr. Ben Palmer for closing remarks.
Ben Palmer: All right. Well, thank you, everybody. Appreciate you listening in, and look forward to catching up later. Hope you have a good rest of the day.
Operator: This concludes today's call. A replay of today's event will be available at www.rpc.net within two hours following the completion of the call. Thank you all for joining. You may now disconnect.