EX-99 2 e27997ex99.htm IMMEDIATE RELEASE

Exhibit 99

FOR IMMEDIATE RELEASE

RPC, Inc. Reports 2007 Second Quarter Financial Results

ATLANTA, July 25, 2007 -- RPC, Inc. (NYSE: RES) announced its unaudited results for the second quarter ended June 30, 2007. RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international markets.

For the quarter ended June 30, 2007, revenues increased 17.1 percent to $171,031,000 compared to $146,065,000 in the second quarter last year. Operating profit for the quarter was $38,705,000 compared to $44,350,000 in the prior year. Net income was $23,815,000 or $0.24 diluted earnings per share, compared to $27,614,000, or $0.28 diluted earnings per share last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $57,927,000 compared to $56,066,000 in the prior year. (1)

Cost of services rendered and goods sold was $88,191,000, or 51.6 percent of revenues, during the second quarter of 2007, compared to $69,695,000, or 47.7 percent of revenues, in the prior year. The increase in these costs was due to the variable nature of many of these expenses. As a percentage of revenues, these costs also increased primarily because of reduced pricing in our pressure pumping service line, higher direct employment costs and materials and supplies expenses. Selling, general and administrative expenses increased by 20.9 percent in the second quarter of 2007 to $27,077,000 from $22,392,000 in the prior year. This increase was due primarily to higher compensation expenses consistent with higher activity levels and the implementation of our long-term growth plan. Depreciation and amortization increased 61.2 percent to $18,695,000 during the quarter, compared to $11,597,000 last year. This increase was due to the higher level of capital expenditures made during recent quarters under RPC’s long-term growth plan to increase our capacity, expand facilities and maintain our existing fleet of equipment.

For the six months ended June 30, 2007, revenues increased 21.3 percent to $342,076,000 compared to $282,089,000 last year. Net income decreased 1.2 percent to $51,860,000, or $0.53 diluted earnings per share compared to net income of $52,514,000, or $0.53 diluted earnings per share last year.

“RPC has continued to take delivery of revenue-producing equipment under our long-term growth plan,” stated Richard A. Hubbell, RPC’s President and Chief Executive Officer. “The average domestic rig count during the second quarter was 1,757, 7.5 percent higher than the same period in 2006. The average price of oil decreased 8.0 percent and the average price of natural gas increased by 15.4 percent during the quarter compared to the prior year. Our revenues grew at a greater rate than the domestic rig count because of the capacity growth realized in our growth plan. However, our revenue growth would have been higher except for pricing pressure from increased capacity placed in service by our competition, primarily within fracturing, and bad weather in several of our Texas and Oklahoma markets.

“We are disappointed by our second quarter operating results, because we did not achieve direct or fixed cost leverage as we usually do during periods of increasing revenues,” continued Hubbell. “Our direct costs were negatively impacted by pricing competition, rising personnel costs, caused by competition for qualified employees, and higher materials and supplies unit costs, some of which could not be passed on to our customers. Our profitability was also impacted by one of our new locations, which is not yet operating at optimal revenue

(1) EBITDA is a financial measure which does not conform to generally accepted accounting principles (GAAP). Additional disclosure regarding this non-GAAP financial measure is disclosed in Appendix A to this press release.


 
   

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2nd Quarter 2007 Press Release

levels. In addition, our depreciation has increased because of our high capital expenditures. We invested slightly more than $70 million in new equipment during the quarter, and we are diligently working to make this equipment operational.

“We continue to be optimistic about the long-term fundamentals within the domestic oilfield and the demand for our services in the markets in which we operate. We are encouraged by the continued growth of directional drilling in the U.S. domestic market, which requires higher service intensity than traditional vertical drilling, and we are positioning ourselves to benefit from continued directional drilling growth expectations. We are also encouraged by high current and projected prices of oil and natural gas. We will continue to monitor these factors, as well as the competitive environment in which we operate. We are also continuing to improve our operational execution of this growth plan to maximize efficiency and profitability.”

Summary of Segment Operating Performance

RPC’s business segments are Technical Services and Support Services. Technical Services includes RPC’s oilfield service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer’s well. These services are generally directed toward improving the flow of oil and natural gas from producing formations or to address well control issues. The Technical Services include pressure pumping, hydraulic workover services, coiled tubing, nitrogen, wireline, well control, downhole tools, surface production equipment, and fishing tool operations.

Support Services includes RPC’s oilfield service lines that provide equipment for customer use or services to assist customer operations. The equipment and services offered include rental of drill pipe and related tools, pipe handling, inspection and storage services and oilfield training services.

Both Technical Services and Support Services experienced higher revenues due to higher capacity, the increased drilling rig count and related customer activity. Technical Services revenues rose 17.2 percent for the quarter compared to the prior year, driven by increased capacity in this segment. Support Services revenues rose by 16.4 percent during the quarter compared to the prior year. This increase was driven by increased capacity in the rental tool service line, which is the largest service line within Support Services.

Three Months Ended June 30
Six Months Ended June 30
2007
2006
2007
2006
   
(in thousands)
Revenues:          
   Technical services   $ 140,198   $ 119,572   $ 282,505   $ 234,334  
   Support services   30,833   26,493   59,571   47,755  
Total revenues   $ 171,031   $ 146,065   $ 342,076   $ 282,089  
Operating Profit (Loss):  
   Technical services   $   31,427   $   37,044   $   66,713   $   73,283  
   Support services   8,496   8,361   18,037   13,552  
   Corporate expenses   (2,855 ) (3,024 ) (5,246 ) (5,969 )
   (Gain) on disposition of assets, net   (1,637 ) (1,969 ) (3,186 ) (3,001 )
Total operating profit (loss)   $   38,705   $   44,350   $   82,690   $   83,867  
Other income, net   527   119   1,424   380  
Interest (expense)/income, net   (354 ) 94   (1,090 ) 247  
Income before income taxes   $   38,878   $   44,563   $   83,024   $   84,494  

RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest and Rocky Mountain regions, and in selected international markets. RPC’s investor website can be found at www.rpc.net.


 
   

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2nd Quarter 2007 Press Release

Certain statements and information included in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements regarding RPC’s optimism about the long-term fundamentals within the domestic oilfield and the demand for RPC’s services in the markets in which RPC operates, RPC’s expectation about the continued growth of directional drilling in the U.S. domestic market, RPC’s belief that it is positioning itself to benefit from continued directional drilling growth expectations, RPC’s expectations about the continued high prices of oil and natural gas, and RPC’s ability to continue to improve its operational execution of its growth plan to maximize efficiency and profitability. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RPC to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Such risks include the possibility of declines in the price of oil and natural gas, which tend to result in a decrease in drilling activity and therefore a decline in the demand for our services, the actions of the OPEC cartel, the ultimate impact of current and potential political unrest and armed conflict in the oil-producing regions of the world, which could impact drilling activity, adverse weather conditions in oil or gas producing regions, including the Gulf of Mexico, competition in the oil and gas industry, and risks of international operations. Additional discussion of factors that could cause the actual results to differ materially from management’s projections, forecasts, estimates and expectations is contained in RPC's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2006.

For information about RPC, Inc., please contact:

BEN M. PALMER
Chief Financial Officer
404.321.2140
bpalmer@rpc.net 		JIM LANDERS
V.P. Corporate Finance
404.321.2162
jlanders@rpc.net

 
   

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2nd Quarter 2007 Press Release

RPC INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data)
Periods ended June 30, (Unaudited)
Second Quarter
Six Months
2007
2006
%
BETTER
(WORSE)
2007
2006
%
BETTER
(WORSE)
REVENUES   $ 171,031   $ 146,065   17.1 % $ 342,076   $ 282,089   21.3 %
COSTS AND EXPENSES:  
Cost of services rendered and goods sold   88,191   69,695   (26.5 ) 175,712   135,446   (29.7 )
Selling, general and administrative expenses   27,077   22,392   (20.9 ) 52,902   43,475   (21.7 )
Depreciation and amortization   18,695   11,597   (61.2 ) 33,958   22,302   (52.3 )
Gain on disposition of assets, net   (1,637 ) (1,969 ) (16.9 ) (3,186 ) (3,001 ) 6.2  
Operating profit   38,705   44,350   (12.7 ) 82,690   83,867   (1.4 )
Interest expense   (368 ) (10 ) N/M   (1,122 ) (11 ) N/M  
Interest income   14   104   (86.5 ) 32   258   (87.6 )
Other income, net   527   119   N/M   1,424   380   274.7  
Income before income taxes   38,878   44,563   (12.8 ) 83,024   84,494   (1.7 )
Income tax provision   15,063   16,949   11.1   31,164   31,980   2.6  
NET INCOME   $   23,815   $   27,614   (13.8 )% $   51,860   $   52,514   (1.2 )%
EARNINGS PER SHARE                    
   Basic   $       0.25   $       0.29   (13.8 )% $       0.54   $       0.55   (1.8 )%
   
   Diluted   $       0.24   $       0.28   (14.3 )% $       0.53   $       0.53   N/M % 
   
AVERAGE SHARES OUTSTANDING                    
     Basic   96,350   95,435       96,037   95,245      
   
   
   
     Diluted   98,448   98,634       98,391   98,700      
   
   
   

 
   

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2nd Quarter 2007 Press Release

RPC INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
At June 30, (Unaudited)
(In thousands)
2007 2006
ASSETS        
Cash and cash equivalents   $     4,723   $     2,936  
Accounts receivable, net   165,092   132,125  
Inventories   25,030   16,524  
Deferred income taxes   4,876   4,466  
Income taxes receivable   7,248   —  
Prepaid expenses and other current assets   3,888   2,783  
  Total current assets   210,857   158,834  
Property, plant and equipment, net   370,909   180,506  
Goodwill   24,093   24,093  
Other assets   5,854   4,372  
  Total assets   $ 611,713   $ 367,805  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Accounts payable   $   57,162   $   39,455  
Accrued payroll and related expenses   13,147   9,665  
Accrued insurance expenses   3,965   3,683  
Accrued state, local and other taxes   4,525   2,330  
Income taxes payable   922   723  
Short-term debt   —   2,036  
Other accrued expenses   641   756  
  Total current liabilities   80,362   58,648  
Accrued insurance expenses   7,245   6,280  
Notes payable to banks   125,150   —  
Pension liabilities   5,505   12,046  
Other long-term liabilities   1,907   2,522  
Deferred income taxes   12,264   8,074  
  Total liabilities   232,433   87,570  
Common stock   9,800   9,738  
Capital in excess of par value   14,978   12,343  
Retained earnings   359,820   266,008  
Accumulated other comprehensive loss   (5,318 ) (7,854 )
  Total stockholders’ equity   379,280   280,235  
  Total liabilities and stockholders’ equity   $ 611,713   $ 367,805  

Certain prior year balances have been reclassified to conform with current year presentation.


 
   

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2nd Quarter 2007 Press Release

RPC INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, (Unaudited) (In thousands)
2007
2006
Operating Activities:        
   Net income   $   51,860   $ 52,514  
   Depreciation, amortization and other non-cash charges   32,355   20,775  
   Other net changes in operating activities   (31,832 ) (20,519 )
        Net cash provided by operating activities   52,383   52,770  
Investing Activities:  
  Capital expenditures   (134,047 ) (62,534 )
  Other investing activities   3,962   3,951  
       Net cash used for investing activities   (130,085 ) (58,583 )
Financing Activities:  
  Payment of dividends   (9,745 ) (6,414 )
  Borrowings from notes payable to banks   291,750   7,046  
  Repayments on notes payable to banks   (202,200 ) (5,010 )
  Cash paid for common stock purchased and retired   (1,730 ) (1,944 )
  Other financing activities   1,621   2,262  
       Net cash provided by (used for) financing activities   79,696   (4,060 )
Net increase (decrease) in cash and cash equivalents   1,994   (9,873 )
Cash and cash equivalents at beginning of period   2,729   12,809  
Cash and cash equivalents at end of period   $     4,723   $   2,936  

 
   

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2nd Quarter 2007 Press Release

Appendix A

RPC has used the non-GAAP financial measure of earnings before interest, taxes, depreciation and amortization (EBITDA) in today’s earnings release, and anticipates using EBITDA in today’s earnings conference call. EBITDA should not be considered in isolation or as a substitute for operating income, net income or other performance measures prepared in accordance with GAAP. 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 are also required to use EBITDA to report compliance with financial covenants under our revolving credit facility. A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Set forth below is a reconciliation of EBITDA with Net Income, the most comparable GAAP measure. This reconciliation also appears on RPC’s investor website, which can be found on the Internet at www.rpc.net.

Periods ended June 30, (Unaudited) Second Quarter     Six Months    

 

2007

 

2006

 

 

 

2007

 

2006

 

 

 

Reconciliation of Net Income to EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

$23,815

 

$27,614

 

 

 

$51,860

 

$52,514

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

      Income tax provision

15,063

 

16,949

 

 

 

31,164

 

31,980

 

 

 

      Interest expense

368

 

10

 

 

 

1,122

 

11

 

 

 

      Depreciation and amortization

18,695

 

11,597

 

 

 

33,958

 

22,302

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

      Interest income

14

 

104

 

 

 

32

 

258

 

 

 
 
 
     
 
     

EBITDA

$57,927

 

$56,066

 

 

 

$118,072

 

$106,549

 

 

 
 
 
     
 
     

EBITDA PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

      Basic

$0.60

 

$0.59

 

1.7

%

$1.23

 

$1.12

 

9.8

%
 
 
 
 
 
 
 

      Diluted

$0.59

 

$0.57

 

3.5

%

$1.20

 

$1.08

 

11.1

%