RPC (RES) Q2 2026 earnings call transcript

Thank you and good morning. Before we begin, I want to remind you that some of the statements that will be made on this call could be forward-looking in nature and reflect the number of known and unknown risks. Please refer to our press release issued today along with our 10K and other public filings that outline those risks. All of which can be found on our PC's website at www. rpc. net.

In today's earnings release and conference call, we'll be referring to several non-gap measures of operating performance and liquidity. We believe these non-gap measures allow us to compare performance consistently over various periods. Our press release and our website contain reconciliations of these non-gap measures to the most directly comparable gap measures.

I'll now turn the call over to our President and CEO, Ben Palmer.

Thank you, Mike, and thank you for joining our call this morning. Before turning to our second quarter results, I want to briefly address the CEO's succession announcement we made in June. As we announce, I plan to retire as President and CEO and step down from the board by the end of 2026 following 30 years with RPC.

The board has initiated a search for my successor, which is expected to conclude before your end. And I will remain in an advisory capacity to support a smooth leadership transition. It's been the privilege of my professional life to spend the past three decades at RPC. Together with our talented team, we've built a diversified platform underpinned by strong brands, a low leverage balance sheet and a disciplined focus on full cycle returns.

I'm committed to working closely with the board to ensure continuity for our employees, customers and shareholders. And in the meantime, our focus remains on discipline, execution, prudent capital allocation and delivering long term shareholder value.

With that, let's turn to our second quarter results, and I'll provide you with a few operational highlights. While industry activity levels remained relatively subdued, RPC delivered sequential revenue growth and meaningful margin expansion driven by strong execution, improved job mix, technology adoption and contributions from targeted investments. Within technical services, through tubing solutions, downholed tools revenues increased 10% sequentially.

We saw a broad base strength with our Rocky Mountain region growing more than 20% sequentially. Through tubing solutions is a market leader and downholed completion tools for the portfolio of products supported by proprietary technologies and our patent portfolio. Over the last several years, we have introduced new motor sizes, new motor components, split string tools, surface tools and stage isolation products, just to name a few.

These products have been well received and allow us to continue to our market leadership. Through tubing solutions has introduced new sizes of its metal and metal power section called metal max, along with expanding availability across districts. This has resulted in increased addressable market and improved metal max penetration. Metal max performance and design characteristics are enabling entry into new markets and applications previously served by traditional power section components.

The product reduces the number of trips an operator has to make out of the hole, reducing non-productive time. Our through tubing solutions team completed multiple horseshoe wells in the Permian, exceeding 27,000 feet over the last several weeks. In addition to long lateral sections, these wells have added friction and complexities due to the turns. We collaborate with operators to package a solution that will drill out the well in the most efficient and reliable way.

Through tubing solutions on plug technology, which replaces traditional bridge plugs, continues to have success. During the quarter, we had several additional customers trial this product.

Overall, our downloadable tools business is benefiting from more complex and longer laterals that are well suited for our technology solutions.

Also within technology services, cut pressure controls revenues were up 8% sequentially led by quality, tubing, snubbing and well control. Cut pressure controls snubbing business was up 14% sequentially. We received a big bore snubbing unit during the quarter and began work in early June. The unit has since mobilized to a multi-project job. The big bore design features make it ideally suited for cavern gas storage inspections, which is regulatory driven. This is part of our effort to continue diversifying beyond well completions.

Call tubing our largest service line within cut pressure control was up 6% sequentially. Call tubing had the strongest growth in Elk City, which serves multiple basins, as well as growth in Pennsylvania and Michigan. We saw increased utilization across all of our larger diameter units with the two and seven-eighths unit fully utilized. As part of our multi-year call tubing strategy, we have accelerated our investments here.

We now expect a total of three, two and eight-sevenths capable units by year-end, with two coming from real trailer upgrades to previously modernized units, and one from the previously delivered Trailblazer unit. These upgrades provide additional large diameter capabilities to be deployed to the highest return markets.

While the wireline market conditions remain highly competitive, we have remained disciplined on pricing and continue to maintain a strong position with key customers.

Intel wireline revenues were down 16% sequentially. Revenues were impacted by customer activity reductions and lost crews due to aggressive competitor pricing.

Cut energy services, pressure pumping business, all 1% sequential revenue decrease. Revenues benefited from slightly improved pricing, but was also offset by slightly lower pump hours. Job mix impacted revenues as we saw less fuel and M&S costs and revenues, but benefited our profit margins. Our focus remains on continuing to earn an appropriate return on our equipment over a cycle, but without significant activity changes, we do not see meaningful increases in pricing.

Currently, we have no plans to reactivate fleets at current levels. However, we are encouraged by easing gas take-away constraints and the potential for 27 E&P budgets to reflect a more supportive commodity price environment. Current oil prices are more supportive of activity levels. However, the volatility from geopolitical events creates a less certain environment for customer investment decisions. We believe operators are being cautious due to uncertainty around the duration and ultimate levels of commodity prices.

We do not expect a significant change in activity near term, but we acknowledge the dynamic nature of the market and are in a position to respond. Our focus is on controllable factors, strong, full cycle returns, and cash flow generation.

With that, I'll now have Mike discuss the quarter's financial results.

Thanks, Ben. Our second quarter financial results with sequential comparisons to the first quarter of 2026 are as follows. Revenues increased 1% to $461 million.

Breaking down our operating segments, technical services, which represented 95% of our total second quarter revenues were up 1%. Support services, which represented 5% of revenues were up 11%. The following is a breakdown of the second quarter revenues for our largest service lines.

Pressure pumping, 30.3%. Downhold tools, 25.3%. Wireline, 19.2%. Oil tubing, 8.8%. Cementing, 6.2%. Rental tools, 3.6%. Together, these service lines accounted for 94% of our total revenues.

Cost of revenues, excluding depreciation and amortization, was $346 million compared to $356 million in the prior quarter. This decrease was primarily related to job mix, as we provided lower levels of materials and supplies and fuel for customers during the quarter.

SGNA expenses were $52 million, up from $48 million in the prior quarter. SGNA increased due to some incentive comp, higher bad debt expense, and some other consulting expenses.

As a percent of revenue, SGNA increased 60 basis points to 11.2%. Depreciation and amortization was $43 million, slightly up from the previous quarter.

The effective tax rate was lower compared to the previous quarter, primarily due to smaller impact of the permanent adjustments on increase. Pre-tax income.

Adjusted diluted EPS was 8 cents per share in the second quarter. Adjustments sold 3 cents per share and related to the acquisition related employment costs.

Adjusted EBITDA was $66 million, up from $53.5 million. Adjusted EBITDA margins increased 250 basis points, sequentially to 14.3%. EBITDA margin benefited by modest pricing improvements, better job mix, operational leverage from higher revenues at several locations, and a sales tax refund.

Net cash provided by operating activities year to day was $75 million, and after CAPEX of $71 million, free cash flow is $4 million.

Working capital has been impacted by higher revenues and the timing of customer payments. At quarter end, we had approximately $180 million in cash, $30 million note payable, and no borrowings on a $100 million revolving credit facility, which we amended and extended during the quarter through June 2031.

Our regular cash dividend remains unchanged at $0.04 per share. Dividend payments totaled $17.7 million for today. We expect 2026 capital expenditures in the range of $170 to $190 million. We raised the range due to targeted growth investments where we see strong, full cycle returns, particularly in the areas that can further differentiate our service offerings. Given the timing and lead times, some of this spend may ultimately occur in 2027.

We will continue to adjust our spend based on project returns and an opportunity. I'll now turn it back over to Ben for some closing remarks.

Thank you, Mike. While we remain cautious regarding the pace of broader industry improvement, we believe RPC is well positioned with differentiated technologies, a strong balance sheet, and the financial flexibility to pursue attractive opportunities. While continuing to generate cash and deliver strong, full cycle returns. I want to thank all of our employees who put in tremendous work to provide high levels of service and value to our customers every day.

Thank you for joining us this morning, and at this time, we're happy to address any questions.

Good morning.

Yeah. It. Yeah. We've done a lot in South Texas, the mid con and the Permian. That's where our focus has been, but obviously they are. Mobile and, you know, and in particular customer relationships will have a big bearing on where we send those, but.

But I would see at this point in time. Those particular basins are the ones that we would probably be focused on. We don't see any big shifts at this point in time.

In terms of increased, I would say no. What we are doing, though, we are. We are supporting the business. We are making selective.

Call them upgrades or whatever, you know, as equipment. Obviously, something you manage over over time in terms of older units or those refurbged or. Replaced, obviously we're upgrading those to the newer. Technology, obviously leaning more and more into. The equipment that is in either entirely or, or, you know, the DGB type of equipment. So, so that's ongoing. That process of doing those.

Upgrades, I would say again, we're trying to remain. Displend this that we have over time. We're not aggressively trying to upgrade. We're trying to be prudent. You know, use what we have that's available. That we can generate this decent returns with, but we're able to. You know, the business is able to. You know, fund those needs that we're willing to put back into the business.

Thank you, John. Appreciate that very much.

Okay. Thank you. Thank you for listening in. We appreciate. Hope you have a good rest of the day and look forward to checking in. Take care.