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.
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 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.
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.
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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