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RPC, Inc. Reports 2004 Second Quarter Results |
• Revenues for the Second Quarter Increased 20.5 Percent over Prior Year
• Diluted EPS for the Second Quarter Increased 62.5 Percent to $0.26 from $0.16 in the Prior Year
ATLANTA, July 28, 2004 -- RPC Incorporated (NYSE: RES) announced its unaudited results for the second quarter ended June 30, 2004. For the quarter ended June 30, 2004, revenues increased 20.5 percent to $85,426,000 compared to $70,864,000 last year. Net income was $7,474,000, or $0.26 diluted earnings per share, compared to $4,705,000 or $0.16 diluted earnings per share last year. Operating profit for the quarter was $11,467,000 compared to $6,865,000 in the prior year.
Cost of services rendered and goods sold was $49,189,000, or 57.6 percent of revenues, during the second quarter of 2004, compared to $42,390,000, or 59.8 percent of revenues, in the prior year. This increase was due to the variable nature of many of these expenses, including compensation, materials and supplies, primarily in the pressure pumping service line, and fuel costs. In addition, casualty insurance claim costs were higher in the second quarter of 2004 than in the prior year. As a percentage of revenues, however, these costs decreased because of improved pricing and higher equipment and personnel utilization. Selling, general and administrative expenses increased by 22.4 percent in the second quarter of 2004 to $16,166,000 from $13,208,000 in the prior year. This increase was due to an increase in personnel, an increase in bad debt expense, and an increase in incentive compensation consistent with profitability increases. These costs were 18.9 percent of revenues in 2004 and 18.6 percent last year. Depreciation and amortization were $8,604,000 during the quarter, 2.4 percent higher than last year.
For the six months ended June 30, 2004, revenues increased 25.7 percent to $165,428,000 compared to $131,564,000 last year. Net income was $13,275,000, or $0.46 diluted earnings per share compared to net income of $5,010,000, or $0.17 diluted earnings per share last year.
“RPC’s second quarter results reflect the continuation of strong activity levels," stated Richard A. Hubbell, RPC’s President and Chief Executive Officer. “Our overall domestic revenues increased due to higher customer activity, some pricing increases, and a shift in the mix of pressure pumping work towards higher-revenue jobs. Our revenues also increased during the quarter due to the continuation of our operations in Kuwait, although this revenue was lower than in the first quarter, and includes revenue from our fishing tool service line which we started in the first quarter of 2004. The average domestic rig count during the second quarter was 1,163, 13 percent higher than the same period in 2003. Our revenues grew at a higher rate than the rig count because of the factors mentioned above, slightly offset by continued weakness in the Gulf of Mexico and the sale of one of our non-oilfield businesses which occurred at the end of April. At the end of the second quarter, the Gulf of Mexico rig count was approximately 11 percent lower than in 2003, which indicates that this geographic market continues to be weak relative to the rest of the domestic oilfield.
Hubbell continued, "We are making capital expenditures to position ourselves to take advantage of favorable industry conditions, including making more than $16 million in capital expenditures during the second quarter. We continued to maintain a strong balance sheet, and finished the period with approximately $12 million in cash and cash equivalents. The proceeds from the sale of our non-oilfield business unit yielded approximately $4 million, which we intend to re-invest in oilfield assets which we believe will produce better returns."
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 snubbing, coiled tubing, pressure pumping, nitrogen, well control, downhole tools, wireline, fluid pumping, surface production equipment, casing installation services, 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 drill pipe and related tools, pipe handling, inspection and storage services, work platform vessels, and oilfield training services.
Both Technical Services and Support Services experienced stronger results due to the increased drilling rig count and related customer activity. Technical Services revenues rose 21.6 percent for the quarter compared to the prior year, driven by higher activity levels, some pricing increases, and a favorable job mix shift in pressure pumping. Support Services revenues rose by 29.8 percent during the quarter compared to the prior year. This relatively higher increase was due to significantly higher utilization and slightly higher pricing in rental tools, which is the largest service line within Support Services. Other revenues declined 55.4 percent due to the sale of the non-oilfield business unit that comprises the majority of the revenue in this segment, which occurred during the quarter. The impact of the sale of this business unit on operating and other income was immaterial.
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 future performance. 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, 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, 2003.
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