EX-99 2 ex99.htm EXHIBIT 99 ex99.htm
Exhibit 99
 
 
GRAPHIC

RPC, Inc. Reports Record Third Quarter 2010 Financial Results and Stock Split

● Revenues Increased by 128.7 Percent Compared to the Third Quarter of 2009
● Diluted EPS for the Third Quarter Increased to $­­­­0.47, Compared to a Loss of $0.11 in Third Quarter 2009
● Three-for-two stock split effective December 10, 2010
● 16.7 percent increase in Quarterly Cash Dividend to $0.07 per Share (based on pre-split shares)

ATLANTA, October 27, 2010 - RPC, Inc. (NYSE: RES) today announced its unaudited results for the third quarter ended September 30, 2010.  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 September 30, 2010, revenues increased 128.7 percent to $302,200,000 compared to $132,159,000 in the third quarter last year.  Revenues increased compared to the prior year due to higher activity levels, particularly in service lines with significant customer relationships, improved pricing, and some capacity increases.  Operating profit for the quarter was $74,390,000 compared to an operating loss of $14,907,000 in the prior year.  Net income for the quarter was $46,269,000 or $0.47 earnings per diluted share ($0.32 adjusted for the three-for-two split), compared to a net loss of $10,385,000 or $0.11 loss per share last year ($0.07 adjusted for the three-for-two split).  Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $107,922,000 compared to $18,985,000 in the prior year. 1

Cost of revenues was $162,529,000, or 53.8 percent of revenues, during the third quarter of 2010, compared to $90,442,000, or 68.4 percent of revenues, in the prior year.  Cost of revenues increased due to the variable nature of many of these expenses.  However, cost of revenues as a percentage of revenues decreased significantly due to leverage of employment and other direct costs over higher activity levels, and improved pricing for our services.

Selling, general and administrative expenses were $33,095,000 in the third quarter of 2010, a 44.9 percent increase compared to $22,843,000 in the prior year.  This increase was primarily due to increases in total employment costs, including increased incentive compensation consistent with improved operating results.  As a percentage of revenues, however, these costs decreased to 11.0 percent in 2010 compared to 17.3 percent last year due to the fixed nature of many of these expenses.  Depreciation and amortization were $33,091,000 during the quarter, approximately the same as the third quarter of last year.  Interest expense increased from $533,000 last year to $707,000 in 2010 due to higher average interest rates during the quarter as compared to the prior year.

For the nine months ended September 30, 2010, revenues increased 76.4 percent to $768,240,000 compared to $435,448,000 last year.  Net income was $91,271,000 or $0.93 earnings per diluted share ($0.62 adjusted for the three-for-two split), compared to net loss of $17,543,000 or $0.18 loss per diluted share last year ($0.12 adjusted for the three-for-two split).

RPC also announced that its Board of Directors has approved a three-for-two split of the Company's outstanding common shares.  The split will be effected by issuing one additional share of common stock for every two shares of common stock held.  The additional shares of common stock will be distributed on December 10, 2010 to holders of record at the close of business on November 10, 2010.  No fractional shares will be issued.  Fractional share amounts resulting from the split will be paid to stockholders in cash.
 
 
 
 
 
Page 2
3rd Quarter 2010 Press Release
 
 “We are pleased to report strong sequential and year-over-year improvement in our operating results for the third quarter of 2010,” stated Richard A. Hubbell, RPC’s President and Chief Executive Officer. “The average domestic rig count during the third quarter was 1,618, a 66.8 percent increase compared to the same period in 2009, and a 7.4 percent increase compared to the second quarter.  The average price of natural gas was $4.30 per Mcf, a 37.9 percent increase compared to the prior year, while the average price of oil was $75.89 per barrel, an 11.4 percent increase compared to the prior year, but a 2.6 percent decrease from the previous quarter.  Our revenues increased at a greater rate than these industry indicators due to higher utilization of our equipment operating to support significant and growing customer relationships in several service-intensive unconventional basins. These operations are taking place in regions in which we have a large presence and technical expertise.  Most of our service lines generated stronger sequential and year-over-year results and benefited from improved activity levels and higher pricing during the quarter.  While we maintain a very favorable opinion regarding the current operating environment, as utilization levels increase, we are carefully monitoring the availability and cost of both labor and raw materials used in providing our services.

“During the third quarter RPC re-financed its revolving credit facility.  We are pleased with its terms as it is sufficient to fund our near-term growth opportunities.  Our capital expenditures during the quarter were $49.3 million as we made payments on some of the equipment purchases to expand our capacity and took delivery of some new equipment. We have made progress with existing and potential customer relationships and believe that our equipment delivery schedules will meet the requirements of these relationships.

“Our Board approved a three-for-two stock split at its regular quarterly meeting,” stated Hubbell.  “This is the fifth split in RPC's history.  Also, our Board voted to increase our quarterly cash dividend, which will be paid on pre-split shares, by 16.7 percent, from $0.06 to $0.07.  These decisions are responses to our strong earnings, confidence in our continued long term growth and our strengthening balance sheet.  We believe these actions will reward our stockholders and enhance the investment appeal of our common stock.”

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 segment includes pressure pumping, coiled tubing, hydraulic workover services, nitrogen, downhole tools, surface pressure control equipment, well control, 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.

Technical Services revenues increased 130.4 percent for the quarter compared to the prior year due to higher activity levels from expanded customer commitments and improved pricing.  Support Services revenues increased by 115.7 percent during the quarter compared to the prior year because of higher activity levels in the service lines within this segment. Operating profit in Technical Services improved due to higher revenues, improved pricing, and cost leverage. Operating profit in Support Services increased due to higher revenues and cost leverage in the service lines which comprise this segment.
 
 
 
 
 
Page 3
3rd Quarter 2010 Press Release
 
        Three Months Ended September 30        Nine Months Ended September 30  
   
2010
    
2009
    
2010
    
2009
  
               
(in thousands)
        
Revenues:
                        
   Technical services
   $ 268,049     $ 116,326     $ 684,990     $ 377,393  
   Support services
     34,151       15,833       83,250       58,055  
Total revenues
   $ 302,200     $ 132,159     $ 768,240     $ 435,448  
Operating profit (loss):
                                
   Technical services
   $ 65,225     $ (9,540 )   $ 136,527     $ (18,604 )
   Support services
     12,015       (1,770 )     20,564       320  
   Corporate expenses
     (3,755 )     (3,105 )     (9,618 )     (9,266 )
   (Gain) Loss on disposition of assets, net
     (905 )     492       (1,574 )     (1,542 )
Total operating profit (loss)
   $ 74,390     $ (14,907 )   $ 149,047     $ (26,008 )
Other income, net
     441       602       556       1,353  
Interest expense
     (707 )     (533 )     (1,750 )     (1,654 )
Interest income
     14       41       46       126  
                                 
Income (loss) before income taxes
   $ 74,138     $ (14,797 )   $ 147,899     $ (26,183 )
 
 
RPC, Inc. will hold a conference call today, October 27, 2010 at 9:00 a.m. ET to discuss the results of the third quarter.  Interested parties may listen in by accessing a live webcast in the investor relations section of RPC, Inc.’s Web site at www.rpc.net.  The live conference call can also be accessed by calling (800) 378-6902 or (913) 312-0662 and using the access code #4994945.  For those not able to attend the live conference call, a replay of the conference call will be available in the investor relations section of RPC, Inc.’s Web site (www.rpc.net) beginning approximately two hours after the call.

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, Appalachian and Rocky Mountain regions, and in selected international markets.  RPC’s investor website can be found at www.rpc.net.

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 our statements that we maintain a very favorable opinion regarding the current operating environment; our belief that we have made progress with existing and potential customer relationships and that our equipment delivery schedules will meet the requirements of these relationships; our confidence in our continued long-term growth and our strengthening balance sheet; and our belief that our stock split and increased quarterly cash dividend will enhance the investment appeal of our common stock.  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 changes in general global business and economic conditions; drilling activity and rig count; increased regulation of our business resulting from the oil spill in the Gulf of Mexico in the second quarter of 2010; risks of reduced availability or increased costs of both labor and raw materials used in providing our services; the impact on our operations if we are unable to comply with regulatory and environmental laws; turmoil in the financial markets and the potential difficulty to fund our capital needs; the potentially high cost of capital required to fund our capital needs; our ability to complete our proposed refinancing of our revolving credit facility; the possibility that the recent growth in unconventional exploration and production activities may cease or change in nature so as to reduce 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; an inability to implement price increases; 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, 2009.

 
 
 
 
Page 4
3rd Quarter 2010 Press Release
For information about RPC, Inc., please contact:

Ben M. Palmer
Chief Financial Officer
(404) 321-2140
irdept@rpc.net

Jim Landers
Vice President, Corporate Finance
(404) 321-2162
jlanders@rpc.net
 
 
 
 
 
Page 5
3rd Quarter 2010 Press Release
 
 
RPC INCORPORATED AND SUBSIDIARIES
                                    
                                     
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data)
                          
Periods ended September 30, (Unaudited)
  
Third Quarter
          
Nine Months
              
   
2010
    
2009
    
%
BETTER (WORSE)
    
2010
    
2009
    
%
BETTER (WORSE)
  
REVENUES
   $ 302,200     $ 132,159       128.7 %   $ 768,240     $ 435,448       76.4 %
COSTS AND EXPENSES:
                                                
Cost of revenues
     162,529       90,442       (79.7 )     431,621       291,492       (48.1 )
Selling, general and administrative expenses
     33,095       22,843       (44.9 )     90,410       73,821       (22.5 )
Depreciation and amortization
     33,091       33,289       0.6       98,736       97,685       (1.1 )
(Gain) loss on disposition of assets, net
     (905 )     492       N/M       (1,574 )     (1,542 )      2.1  
Operating profit (loss)
     74,390       (14,907 )     N/M       149,047       (26,008 )     N/M  
Interest expense
     (707 )     (533 )     (32.6 )     (1,750 )     (1,654 )     (5.8 )
Interest income
     14       41       (65.9 )     46       126       (63.5 )
Other income, net
     441       602       (26.7 )     556       1,353       (58.9 )
Income (loss) before income taxes
     74,138       (14,797 )     N/M       147,899       (26,183 )     N/M  
Income tax provision (benefit)
     27,869       (4,412 )     N/M       56,628       (8,640 )     N/M  
NET INCOME (LOSS)
   $ 46,269     $ (10,385 )     N/M %   $ 91,271     $ (17,543 )     N/M %
 
 
EARNINGS (LOSS) PER SHARE
                                   
   Basic
   $ 0.48     $ (0.11 )     N/M %   $ 0.94     $ (0.18 )     N/M %
   Diluted
   $ 0.47     $ (0.11 )     N/M %   $ 0.93     $ (0.18 )     N/M %
                                                 
AVERAGE SHARES OUTSTANDING
                                                
     Basic
    96,707       96,352               96,633       96,282          
     Diluted
    97,838       96,352               97,641       96,282          
                                                 
                                                 
ADJUSTED FOR THE THREE-FOR-TWO STOCK SPLIT EFFECTIVE DECEMBER 10, 2010
                              
                                                 
EARNINGS (LOSS) PER SHARE
                                               
   Basic
   $ 0.32     $ (0.07 )     N/M %   $ 0.63     $ (0.12 )     N/M %
   Diluted
   $ 0.32     $ (0.07 )     N/M %   $ 0.62     $ (0.12 )     N/M %
                                                 
AVERAGE SHARES OUTSTANDING
                                                
     Basic
    145,061       144,528               144,950       144,423          
     Diluted
    146,757       144,528               146,462       144,423          
 
 
 
 
 
Page 6
3rd Quarter 2010 Press Release
 
RPC INCORPORATED AND SUBSIDIARIES
 
            
CONSOLIDATED BALANCE  SHEETS
            
At September 30, (Unaudited)
  
(In thousands)
  
   
2010
    
2009
  
ASSETS
            
Cash and cash equivalents
   $ 3,234     $ 3,325  
Accounts receivable, net
     279,990       118,072  
Inventories
     61,888       55,429  
Deferred income taxes
     6,819       5,017  
Income taxes receivable
     788       18,694  
Prepaid expenses and other current assets
     4,021       2,677  
  Total current assets
     356,740       203,214  
Property, plant and equipment, net
     410,265       421,796  
Goodwill
     24,093       24,093  
Other assets
     11,767       8,964  
  Total assets
   $ 802,865     $ 658,067  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
Accounts payable
   $ 78,321     $ 36,550  
Accrued payroll and related expenses
     22,511       10,826  
Accrued insurance expenses
     5,153       4,260  
Accrued state, local and other taxes
     4,941       3,681  
Income taxes payable
     13,794       1,020  
Other accrued expenses
     1,020       271  
  Total current liabilities
     125,740       56,608  
Long-term accrued insurance expenses
     8,524       8,423  
Notes payable to banks
     108,300       101,850  
Long-term pension liabilities
     15,303       13,818  
Other long-term liabilities
     1,749       1,916  
Deferred income taxes
     53,009       58,036  
  Total liabilities
     312,625       240,651  
Common stock
     9,876       9,838  
Capital in excess of par value
     10,235       6,392  
Retained earnings
     478,560       410,186  
Accumulated other comprehensive loss
     (8,431 )     (9,000 )
  Total stockholders' equity
     490,240       417,416  
  Total liabilities and stockholders' equity
   $ 802,865     $ 658,067  
 
 
 
 
 
Page 7
3rd Quarter 2010 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 September 30, (Unaudited)
  
Third Quarter
    
%
 BETTER (WORSE)
    
Nine Months
    
%
BETTER (WORSE)
  
   
2010
    
2009
        
2010
    
2009
      
                                     
Reconciliation of Net Income (Loss) to EBITDA
                                    
Net Income (Loss)
   $ 46,269     $ (10,385 )     N/M %   $ 91,271     $ (17,543 )     N/M %
Add:
                                                
     Income tax provision (benefit)
     27,869       (4,412 )     N/M       56,628       (8,640 )     N/M  
     Interest expense
     707       533       (32.6 )     1,750       1,654       (5.8 )
     Depreciation and amortization
     33,091       33,289       0.6       98,736       97,685       (1.1 )
Less:
                                                
     Interest income
     14       41       (65.9 )     46       126       (63.5 )
EBITDA
   $ 107,922     $ 18,984     NM %     $ 248,339     $ 73,030       240.1 %
                                                 
EBITDA PER SHARE
                                                
     Basic
  $ 1.12     $ 0.20       N/M %   $ 2.57     $ 0.76       238.2 %
     Diluted
  $ 1.10     $ 0.20       N/M %   $ 2.54     $ 0.76       234.2 %
                                                 
EBITDA PER SHARE ADJUSTED FOR THE THREE-FOR-TWO STOCK SPLIT EFFECTIVE DECEMBER 10, 2010
                    
     Basic
  $ 0.74     $ 0.13       N/M %   $ 1.71     $ 0.51       235.3 %
     Diluted
  $ 0.74     $ 0.13       N/M %   $ 1.70     $ 0.51       233.3 %