Good morning, and thank you for joining us for RPC, Inc.'s fourth quarter 2021 financial earnings conference call. Today's call will be hosted by Rick Hubbell, President and CEO, and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Services. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for your questions. I would like to advise everyone that this conference is being recorded. Jim will get us started by reading the forward-looking disclaimer.
Thank you and good morning. Before we begin our call today, I wanna remind you that in order to talk about our company, we're gonna mention a few things that are not historical facts. Some of these statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks. I'd like to refer you to our press release issued today, along with our 2020 10-K and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net. In today's earnings release and conference call, we'll be referring to several non-GAAP measures of operating performance. These non-GAAP measures are adjusted net income or loss, adjusted net income or loss per share, adjusted operating profit or loss, EBITDA and Adjusted EBITDA.
We're using these non-GAAP measures today because they allow us to compare performance consistently over various periods without regard to non-recurring items. In addition, RPC is required to use EBITDA to report compliance with financial covenants under our revolving credit facility. Our press release issued today on our website contain reconciliations of these non-GAAP financial measures to operating loss, net loss per share, which are the nearest GAAP financial measures. Please review these disclosures if you're interested in seeing how they are calculated. If you've not received our press release and would like one, please visit our website, again, at rpc.net for a copy. I will now turn the call over to our President and CEO, Rick Hubbell.
Thank you, Jim. This morning, we issued our earnings press release for RPC's fourth quarter of 2021. Industry conditions continued to improve throughout 2021 as the average U.S. domestic rig count and oil prices both increased over 80% compared to the fourth quarter of 2020. RPC's financial results improved as demand for our services increased, resulting in higher activity levels and better pricing. In addition, we did not experience the typical holiday slowdown in the fourth quarter of 2021. Our CFO, Ben Palmer, will discuss this and other financial results in more detail, after which we'll provide more closing comments.
Thank you, Rick. For the fourth quarter of 2021, revenues increased to $268.3 million, compared to $148.6 million in the same quarter of the prior year. Revenues increased due to higher customer activity levels, resulting in higher utilization of our existing equipment and pricing improvements. Operating profit for the fourth quarter was $20.1 million, compared to an adjusted operating loss of $11.3 million in the same quarter of the prior year. EBITDA for the fourth quarter was $39.4 million, compared to Adjusted EBITDA of $7.8 million in the same quarter of the prior year. Diluted earnings per share for the fourth quarter were $0.06, compared to $0.03 adjusted loss per share in the same quarter of the prior year.
Cost of revenues during the fourth quarter was $200.6 million or 74.8% of revenues, compared to $117.9 million or 79.3% of revenues during the fourth quarter of 2020. Cost of revenues increased primarily due to increases in expenses consistent with higher activity levels, such as materials and supplies, maintenance and repairs, employment costs, and fuel costs. Cost of revenues as a percentage of revenues decreased primarily due to the leverage of higher revenues over direct employment costs and improved pricing for RPC services. Selling, general, and administrative expenses increased to $32.1 million in the fourth quarter of 2021 from $26 million a year ago, due to favorable employment-related cost adjustments in the fourth quarter of the prior year.
Selling, general and administrative expenses decreased from 17.5% of revenues in the fourth quarter of last year to 12% of revenues in the fourth quarter of 2021. This was due to the leverage of higher revenues over costs that are relatively fixed during the short term. Depreciation was $18.9 million in the fourth quarter of 2021, compared to $18 million in the same quarter of the prior year. Our Technical Services segment revenues for the fourth quarter were $254.4 million. That's an 83.1% increase compared to $139 million in the same quarter in the prior year. This is due to higher customer activity levels, resulting in higher utilization of our existing equipment and pricing improvements.
Segment operating profit in the fourth quarter of 2021 was $20.5 million, compared to an $11.3 million operating loss in the fourth quarter of the prior year. Our Support Services segment revenues for the fourth quarter were $13.8 million, a 43% increase compared to $9.7 million in the same quarter of the prior year. Segment operating loss in the fourth quarter of 2021 was $373,000. This is compared to an operating loss of $2.6 million in the fourth quarter of the prior year. On a sequential basis, fourth quarter revenues increased 19.1% to $268.3 million, due to higher customer activity levels resulting in higher utilization of our existing equipment and pricing improvements.
Cost of revenues during the fourth quarter increased 17.6% to $200.6 million, from $170.6 million in the prior quarter. As a percentage of revenues, cost of revenues decreased slightly from 75.7% in the prior quarter to 74.8% in the fourth quarter, due to leverage of our revenues over employment costs, again, which are relatively fixed during the short term. Selling, general, and administrative expenses during the fourth quarter increased slightly to $32.1 million from $31.4 million in the prior quarter, resulting in positive leverage on higher revenues. As a result of these improvements, operating profit during the fourth quarter was $20.1 million, compared to $8 million in the prior quarter.
Our EBITDA was $39.4 million in the fourth quarter compared to EBITDA of $26.5 million. Technical Services segment revenues increased by $42.6 million or 20.1% to $254.4 million during the fourth quarter due to higher customer activity levels resulting in improved utilization of our existing equipment and pricing improvements. RPC's Technical Services segment generated a $20.5 million operating profit in the current quarter compared to operating profit of $8.3 million in the prior quarter. Our Support Services segment revenues increased by 2.5% to $13.8 million in the fourth quarter. Operating loss was $373,000, compared to an operating loss of $55,000 in the prior quarter. During the fourth quarter, RPC operated eight horizontal pressure pumping fleets.
As we mentioned during our last call, we added a Tier 4 dual fuel fleet at the end of the third quarter as an upgraded replacement and not as an increase in our overall fleet capacity. Fourth quarter 2021 capital expenditures were $22.7 million, and full year 2021 capital expenditures were $67.6 million. We currently estimate full year 2022 capital expenditures to be approximately $125 million, comprised primarily of capitalized maintenance for existing equipment and selected growth opportunities. With that, I'll now turn it back over to Rick to give some closing remarks.
Thanks, Ben. This year, RPC reactivated idle pressure pumping equipment as market pricing and customer demand has consistently improved. In addition, we are happy to report that almost two-thirds of our active horizontal pressure pumping fleet is ESG friendly. We are encouraged by recent improvements in the operating environment, our overall financial results, and the outlook for 2022. We will continue to evaluate economics to support upgrading our equipment fleet. During this era of unprecedented challenges, we wanna thank our employees for providing safe, high quality services to support our country's energy infrastructure. At the end of the fourth quarter, RPC's cash balance was approximately $82 million, and we remain debt-free. We'd like to thank you for joining us on our conference call this morning, and at this time, we will open the lines up for your questions.
At this time, I would like to inform everyone if you would like to ask a question, please press star then the number one on your telephone keypad. Your first question comes from the line of Stephen Gengaro with Stifel.
Thanks. Good morning, gentlemen.
Hey, Stephen.
Two things for me to start. Can you speak a little bit about what you're seeing just in general on the pressure pumping pricing side? I mean, we've heard, you know, obviously we've heard some positive pricing traction. Just curious what you're seeing specifically as far as net pricing improvements and how do you think that kind of flows into sort of incremental margin performance and Technical Services as we go forward?
Steve, this is Ben. We are experiencing net pricing improvements. Some of the pricing improvements and increase of revenue is to you know cover some of the increased cost of you know that we're experiencing, supply chain or otherwise. There's a lot going on with you know how much of the contribution is from again net pricing improvement. There's just a lot of dynamics, right, that are going on there. Clearly, utilization is improving. We are getting some pricing, net pricing traction. We do expect that to continue to progress. It's something we're looking at every day and constantly.
What we do think in this environment, we feel with the current level of utilization and discussions with our customers that we will continue to be able to continue to capture net pricing improvements as we move forward. We see a continuation of, you know, the positive incrementals that we were able to generate in the fourth quarter versus the third.
There's a little bit, you know, it's a little bit difficult to predict given the costs and some of the other supply chain and personnel issues that are arising, COVID and so forth, here early in the first quarter. We're hoping those things are gonna work. We hope that situation, especially with COVID, is gonna work itself out here pretty quickly. We feel good about the progress we've made and what we believe we can achieve here, as we get into 2022.
Great. Thank you. When you mentioned your estimate for 2022 CapEx. You had eight fleets, I believe, working in the quarter. Is any of that targeted towards reactivation of additional fleets? How should we think about the fleet count in the first half of 2022?
Stephen, this is Jim. First half of 2022, I would think of it as being, you know, fairly constant to where we're starting the year. You know, we're assessing a number of things. One of them is activation of another fleet. We think we've got some fairly new and good quality equipment that can be reactivated if demand warrants it. Also, remember capitalized maintenance on pressure pumping fleets.
We're pretty active right now, so you have to budget for that as well when it comes to pressure pumping. We don't have any new equipment on order at the time. We don't know how long it would take for new equipment to be delivered, but we know it would be a little while. Even if we placed an order today, you wouldn't see a new, you know, additional fleet in the field from us during the first half of the year. Yeah.
What
Great.
This is Ben. I would add to that that we have been, up to this point, you know, really trying to focus more on generating sufficient cash flow on fleets we do activate much more than trying to get as many fleets in the field as possible. That still continues to be the top priority. You know, we're very interested in activating another fleet if the economics, as Rick mentioned in his comments, if the economics are there currently and are expected to be in the future, you know, we'll begin to. We'll do that. We'll take that action. We are most focused on trying to sufficiently utilize and capture returns on the fleets that we do deploy into the field. That's the top priority.
Great. Thank you, gentlemen.
Thanks, Stephen.
Your next question comes from the line of John Daniel with Daniel Energy Partners.
Hey, guys. Thanks for including me. Just wanna sort of.
Hey, John.
... dig in a little bit more to Stephen's questions. As you look at the budget, I know you mentioned you don't have anything on order now, but does that $125 million contemplate that? I'm just trying to sort of get a sense for where that growth CapEx would be allocated.
Hey, John, it's Jim. You know, there's probably a placeholder for a new fleet.
Sure. Do you have a preference at this point, Jim, whether it's Tier 4 dual fuel, or do you take the step to do something different?
Tier 4 dual fuel. Tier 4 DGB.
Okay. Got it.
That's the flavor.
Yeah. That's a good flavor. Okay. Last one for me, just on the crew counts. I think you said you averaged eight. I mean, where would you expect to be, call it, end of March?
End of March.
Just sort of-
We'll still be at eight.
Yeah.
At eight.
We'll still be at eight.
Okay.
Yeah.
Yes. Still at eight.
Yeah.
Okay.
I mean, we do have the vertical fleet. We're talking about horizontal here. Yeah, yeah. End of March.
Fair enough. All right, guys. That's all I really wanted. I appreciate your time.
Thank you, John.
Thanks.
Once again, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of Stephen Gengaro with Stifel.
Thanks. I just wanted to follow up. Jim, do you mind giving the product line breakdown of the segments?
Yeah, Stephen, thanks. Thanks for the question. I was gonna do it if no one asked. For the fourth quarter of 2021, and this is, as a percentage of consolidated RPC revenues, pressure pumping was 46.8% of revenues. Thru Tubing Solutions was 26.0% of revenues. coiled tubing was 10.1% of revenues. Nitrogen was 3.9% of revenues. Rental tools, 3.4%, and snubbing was 1.8% of consolidated RPC revenues for the quarter.
Great. Thanks. While we're on the topic of non-pressure pumping, what have you seen on the pricing front outside of pressure pumping? I mean, we talk a lot about the frac business, but when you look at the pricing dynamics in the other areas, how should we think about just the pricing dynamics there?
In our other big service lines, they're favorable as well, Stephen. We've had net pricing, as we refer to it in the business now in our larger service lines. In some cases, in one case, a new price book was issued. In another case, just lower discounts on the existing price book. It's favorable among our larger service lines.
This is Ben. All the large service lines are gaining pricing. Pumping, with the nature of the services offered, there's a lot more cost, right? Cost increases that are flowing through, so that's a little bit more difficult to, you know, peg exactly what the price increases are. The other service line's not affected as much, but certainly that too is a headwind or a component of the overall net pricing change. Yes, as Jim said, all the large service lines have been pushing for pricing and have been successful thus far in having those flows work into our results.
Thank you. If you don't mind, one more. We've been hearing more about whether because of trucking or availability in general. On the frac sand side, have you seen any disruptions to activity at the well site because of an inability to get sand on time?
Stephen, this is Jim. No, we have not experienced any job delays because of disruptions in sand deliveries. There's been a lot of moving around between in-basin sand and northern white and how to get it. We know it's been a problem in the oilfield. It has not to date been disruptive to us. It's a risk for sure.
Okay, great. Thanks for the color, gentlemen.
Thank you.
Thank you, Stephen.
Your next question comes from the line of Vebs Vaishnav with Coker & Palmer.
Hi, how are you doing?
Good, Vebs.
Good evening.
Well, impressive results, and thanks for taking my question. You just talked about sand issue, not sand issue specifically, but logistic issues and everything. Just wanted to see if there was any revenue impact in Q4 because of raw material or labor shortages.
This is Ben. Nothing, you know, significant enough for us to, you know, to quantify or to say. Certainly, there are challenges, right? There are ongoing challenges, you know, in some of our service lines. We may have a little more headcount, you know, for to plan for or have extra capacity because of some of the COVID issues. It's not clear from a revenue, missing out on revenue. There's not a lot of that we've experienced to date. You know, there are a lot of discussion about how much work is going into remaining busy and remaining highly utilized. Thus far, we've been able to work through it.
Got it.
Yeah. Vebs, one other note about sand is that in the fourth quarter of 2021, we used more in-basin sand as a percentage of total than Ottawa sand. That has a slight negative revenue impact just because the way the markets, the cost in the market. That was a slight negative, not huge, but slight offset to the other increases.
Got it. I guess where I was trying to go with this, I think in the press release, you talked about those issues could impact operations in one Q. Just how do you think that plays out over the next couple of quarters?
Well, I think just what we're saying, we're just, you know, we're trying to be, you know, forthcoming, there are challenges. There are supply chain challenges, personnel issues with COVID. We're just indicating that it could be an issue, right? These challenges and risks are there, but everybody's working really hard to do everything they can to overcome it. We were very pleased with the way the fourth quarter turned out. You know, leading up to the fourth quarter, we had little idea about, you know, there was no certainty that it would be as strong as it was. We were pleased to see that. We think it will, you know, all things equal compared to prior years.
You know, we're able to get off, you know, start the new year, you know, from rather than from a stall and having to crank back up. You know, we're able to just sort of continue on. That's very positive, and we're certainly pleased about that, and glad we didn't have to experience that severe fourth quarter slowdown again. Again, I think more of what we're trying to just indicate is those risks are there, and we're keeping them top of mind and trying to continue to work through them, which we've been able to successfully do thus far.
Got it. Maybe a numerical question. If we look at last couple of quarters, revenues have grown close to 20%. My understanding is the completions was still lagging drilling, and I think it could now be at par with drilling as we move forward. Just like if I think about the next quarter, maybe 20% or maybe somewhat less than that, I don't know, mid-teens, 20% revenue growth with this 30% incremental that we have seen last two quarters. Is that a fair way to think about the next quarter?
Vebs, the more modest incrementals are right, 25%-30% incrementals on our revenue growth. We're saying that rather than the traditional 40% incrementals you'd see at RPC in an upcycle. Part of that is because of increased costs, you know, and just the friction involved with that, at the very least. We think our first quarter revenues will be slightly up from fourth quarter, but not as high as the statistic you just gave. Remember, fourth quarter was strong because it was strong and because we didn't have holiday impact. The overall environment is very favorable, but there's a little bit of a slow start in January.
You know, the revenue growth that you're quoting on a sequential basis, we would see more in second through fourth quarter perhaps than fourth to first quarter. Again, as we're trying to discuss in this call, you know, we don't have any COVID slowdowns or any other issues right now, but they are risks, and we're very aware of them, so that's why we're calling them out in this discussion.
Got it. All right. That's all for me, gentlemen. Thank you so much.
All right. Thanks, Vebs.
Your next question comes from the line of Don Crist with Johnson Rice.
Morning, guys. How are y'all today?
Good, Don. Welcome to the group.
Thank you. Thank you, Jim. One quick question on your contract status right now. I mean, obviously the pricing environment is very good. How many of your fleets are in spot work right now and getting the updated pricing versus, you know, on six-month or one-year deals where it may be kind of lagging a little bit on that?
Yeah. This is Ben. You know, there's obviously not a bright line between spot and term, but we still. The majority of our fleets are still on spot, but we do have a nice mixture of some of the longer term work. Call it, you know, three are on contract and the other five are mostly focused on spot work. We've had you know, some turnover in some of those three dedicated contracts. I don't know that that's completely locked in. Those three are not necessarily working on the same pricing we were working on, say, in the third quarter of last year. We like that mix. We like the current mix of work that we have.
Okay. You've always had a very good balance sheet. On our models, you're building cash going into 2022 and 2023. If y'all have any dedicated use for that cash, or do you just see it kind of building on the balance sheet for now?
This is Ben. We don't currently have any definitive, you know, plans that we have to announce. We are looking at the alternatives, and we like at this point in time that we do have some alternatives that, you know, we hadn't had over the last couple of years. We're weighing those various alternatives. You know, we obviously used to be a dividend payer. That's something we're looking at very closely. We would love to reinitiate that. That's something we're looking at very closely. Stock buybacks is something that we've used historically and also have not done much of that in the last couple of years. I would still say our, you know, high up on the list is looking at opportunities to invest directly in the business.
We're, you know, looking very closely at the economics today and what we expect the economics to be over the next several years and making that determination about if and when to make some additional acquisitions of equipment. I'll say as it relates to pressure pumping, one of the things that we're continuing to do similar to what we did in the third quarter of 2019, you know, we peeled off, we retired, we decommissioned, whatever you wanna call it, a lot of our equipment and pared it down to what we thought would be reasonably capable of working. I think our teams did a great job doing that back in the third quarter of 2019. I think that served us very well.
That's something we do continuously, but something we're really focused on right now to really get a good handle on what is our capacity, what is our workable capacity. You know, in the comment that we made in our pre-call there. You know, when we were reading the transcript is that we kind of view that Tier 4 fleet that we added not to really be adding to our overall incremental capacity because we have identified some additional equipment that we're gonna be disposing of, that we're gonna be cutting up and making sure it doesn't reenter the market. But that's something we wanna stay on top of. We wanna make sure we have a realistic view of what our equipment capacity is, you know, what is capable of going back to work.
If it's not able to go back to work, we wanna not have it hang around. We wanna try to get rid of it. Again, that fleet we added late in the third quarter, we don't really view that as adding to our overall capacity. It's really more of a replacement and an upgrade. That's been our approach, and that's what we'll continue to do.
I appreciate all the color. I'll turn it back. Thanks.
Sure.
Thank you.
Thanks, Don.
Once again, if you would like to ask a question, please press star, then number one on your telephone keypad. At this time, there are no further questions. I would like to turn the call back over to Mr. Jim Landers for closing remarks.
Thanks. Thanks for everybody who called in to listen today and for questions. We enjoyed the discussion. Have a good day, and we will see you soon.
This concludes today's conference. You may now disconnect. As a reminder, today's replay will be available at www.rpc.net within two hours. Thank you for your participation. You may now disconnect.