RPC INC (RES)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue was $335.4M, down 1% sequentially and down 15% year over year; diluted EPS was $0.06 as margins compressed on insurance cost resets and negative operating leverage despite improved pressure pumping utilization .
• Adjusted EBITDA fell to $46.1M (13.7% margin), down 17% sequentially and 42% year over year, driven by seasonal softness across non-pumping lines and competitive pricing; net income margin declined to 3.8% .
• Management initiated FY2025 CapEx guidance of $150–$200M and highlighted a debt-free, highly liquid balance sheet ($325.975M cash) to fund organic investments, potential acquisitions, and capital return; quarterly dividend of $0.04 maintained .
• S&P Global (Wall Street) consensus was unavailable for Q4 2024 at time of analysis; estimate comparisons are not provided due to data access limits (SPGI daily limit exceeded). This constrains an explicit beat/miss assessment versus Street [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

• Pressure pumping revenues increased 3% sequentially on higher utilization of Tier 4 dual-fuel fleets, with relatively solid multi-month commitments into 2025, supporting improved well-site efficiencies and gas substitution rates .
• Coiled tubing and cementing showed sequential improvement; coiled tubing up low double digits and cementing strong, with new business wins and operational discipline offsetting broader seasonal softness .
• Strategic innovation in downhole tools: commercial rollout of the “unplug” perf pod system (perforation-level isolation) following Q3 trials, with management positioning it as a share-gain opportunity largely independent of broader OFS demand .
• Quote: “We finished 2024 with a slight sequential improvement in pressure pumping… The improved utilization of our pressure pumping assets… was driven by tier 4 dual fuel asset demand” — Ben Palmer .

What Went Wrong

• Sequential margin compression in Technical Services driven by higher insurance costs and SG&A timing; operating income down 35% despite flat revenues, highlighting fixed-cost absorption and negative operating leverage .
• Customer consolidation impact: loss of a meaningful pressure pumping customer to an incumbent vendor following acquisition, intensifying spot-market whitespace and pricing pressure .
• Elevated insurance costs (actuarial reset, deductible changes) were “a few million dollars” headwind in Q4, surprising management and directly impacting margins; this is expected to be non-recurring .

Financial Results

Segment breakdown (revenue and operating income):

KPIs and capital allocation:

Note: FY 2024 operating cash flow $349.4M and free cash flow $129.5M; FY 2024 CapEx $219.9M .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “The improved utilization of our pressure pumping assets, off a weak third quarter, was driven by tier 4 dual fuel asset demand… the oilfield services industry remains highly competitive.” — Ben Palmer .
• “Project capital spending in the range of $150 million to $200 million this year… Pursuing acquisitions to expand our business remains another key strategic priority… Our debt-free balance sheet remains strong and liquid, with over $300 million in cash at year end.” — Ben Palmer .
• “We continue to exercise economic discipline, opting to idle certain assets rather than operate them without adequate returns… we have relatively solid commitments for [Tier 4 DGB] fleets through parts or all of 2025.” — Ben Palmer .
• “We see several strategic imperatives… increase operational scale through M&A, rebalance our portfolio with a focus on high cash flow service offerings and strengthen our customer mix by increasing our focus on blue-chip E&Ps.” — Ben Palmer .

Q&A Highlights

• Margin drivers: insurance deductibles reset and actuarial changes drove “a few million dollars” of incremental costs; management does not expect recurrence .
• Pressure pumping outlook: management is cautious on 2025 pricing improvement; maintaining discipline, idling assets as needed; weather weighed on early Q1 activity across the industry .
• Contracting mix: no long-term firm contracts; shift toward semi-dedicated customer agreements providing multi-month visibility .
• Electric fleets: prefers Tier 4 dual-fuel flexibility; no plans to invest organically in electric fleets at this time .
• CapEx detail: FY2025 $150–$200M excludes a new Tier 4 DGB fleet; lead time for full fleet is 6–9 months; potential if firm customer commitments materialize .

Estimates Context

• S&P Global consensus for Q4 2024 EPS, revenue, and EBITDA was unavailable due to data access limitations (SPGI daily request limit exceeded). As a result, we cannot assess beat/miss versus Street for this quarter [GetEstimates error].
• Given lack of estimates, we anchor analysis on company-reported results and management commentary .

Key Takeaways for Investors

• Margin compression appears largely transitory given insurance-related resets; normalization plus improved Tier 4 utilization should support sequential margin recovery, subject to pricing discipline .
• FY2025 CapEx guide ($150–$200M) is lower vs 2024 actual, signaling capital prudence and potential improved free cash flow amid a debt-free balance sheet and $325.975M cash .
• Strategic innovation in downhole tools (unplug perf pod system) is commercially launched and could become an independent growth driver, reducing reliance on spot pumping cycles .
• Customer consolidation is a measurable headwind for frac work; portfolio rebalance toward less capital-intensive, diversified service lines and potential M&A are central to medium-term strategy .
• Semi-dedicated commitments on Tier 4 DGB fleets provide visibility; management will avoid adding fleet capacity absent adequate returns, which supports industry capacity discipline narrative .
• Dividend maintained at $0.04 and buybacks executed in 2024 underscore commitment to returns while preserving flexibility for acquisitions .
• Near-term trading implications: watch early Q1 weather impacts and margin normalization; medium-term thesis hinges on execution in downhole tools, disciplined capital allocation, and M&A that scales non-pumping segments .