RPC, Inc. (RES) Q2 2013 Earnings Report, Transcript and Summary

Jim Landers - Vice President of Corporate Finance Richard A. Hubbell - Chief Executive Officer, President, Director, Chief Executive Officer of Marine Products Corporation, President of Marine Products Corporation and Director of Marine Products Corporation Ben M. Palmer - Chief Financial Officer, Principal Accounting Officer, Vice President and Treasurer

Neal Dingmann - SunTrust Robinson Humphrey, Inc., Research Division Megan Repine - FBR Capital Markets & Co., Research Division Luke M. Lemoine - Capital One Southcoast, Inc., Research Division John M. Daniel - Simmons & Company International, Research Division Michael R. Marino - Stephens Inc., Research Division Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Brian Uhlmer - Global Hunter Securities, LLC, Research Division Doug Dyer - Heartland Advisors, Inc. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division Michael Cerasoli - Goldman Sachs Group Inc., Research Division Matthew D. Conlan - Wells Fargo Securities, LLC, Research Division Adam M. France - 1492 Capital Management, LLC

Good morning, and thank you for joining us for RPC, Inc.'s, Second Quarter 2013 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 Finance. [Operator Instructions] I would like to advise everyone that the conference call 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 want to remind you that in order to talk about our company, we're going to mention a few things that are not historical facts. Some of the 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 2012 10-K and other public filings, that outline those risks, all of which can be found on RPC's website at www.rpc.net. I also need to tell you that in today's earnings release and conference call, we'll be referring to EBITDA, which is a non-GAAP measure of operating performance. 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. Our press release today and our website provide a reconciliation of EBITDA to net income, the nearest GAAP financial measure. Please review that disclosure if you're interested in seeing how it's calculated. If you've not received our press release for any reason, please visit our website at www.rpc.net to see 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 second quarter of 2013. Following my comments, Ben Palmer will discuss our financial results in more detail. RPC continues to face challenges resulting from a competitive operating environment, including the transition from contract to spot work and difficult pricing. Our customers continue to drill and complete increasingly service-intensive wells. This is providing an opportunity for our equipment and personnel to remain on the job sites for longer periods. While we are pleased that the second quarter represented the first sequential increase in revenues and profit in over a year, we do not expect to generate consistently improving sequential results until natural gas fundamentals recover. Our CFO, Ben Palmer, will now review our financial results in detail for the second quarter.

Thank you, Rick. For the second quarter ended June 30, 2013, revenues decreased 8.5% to $457.6 million, compared to revenues of $500.1 million in the prior year. These lower revenues resulted primarily from increasingly competitive pricing, coupled with lower activity levels in several of our service lines. EBITDA for the second quarter decreased 30.4% to $120.4 million, compared to $172.9 million for the same period last year. Operating profit for the quarter decreased 43.4% to $67.9 million, compared to $119.9 million in the prior year. Our diluted earnings per share for the quarter were $0.19, a 42.4% decrease compared to $0.33 in the prior year. Cost of revenues increased from $281.3 million in the second quarter of the prior year to $287.6 million in the current year, due to greater service intensity within our pressure pumping service line. Cost of revenues as a percentage of revenues increased from 56.2% in the prior year to 62.8% for the second quarter of the current year, due primarily to lower pricing for our services and increased materials and supplies expense due to job mix. Selling, general and administrative expenses during the quarter were $47.6 million, compared to $43.1 million in the prior year. SG&A expenses as a percentage of revenues increased from 8.6% last year to 10.4% this year. This percentage increase was primarily due to an increase in bad debt expense, coupled with lower revenues. Depreciation and amortization were $52.8 million for the second quarter of 2013, a decrease of 2.2% compared to $54 million in the prior year. Our Technical Services segment revenues for the quarter decreased 8.1% compared to the prior year. Operating profit for this segment decreased to $66.1 million or 41.2%, compared to $112.4 million during the same period in the prior year. The decrease in revenues and operating profit was primarily due to lower pricing for our services. Our second quarter's Support Services segment revenues decreased by 12.8% and operating profit decreased by 43.5%, due primarily to lower activity levels, coupled with lower pricing within the rental tool service line, the largest service line within this segment. On a sequential basis, RPC's second quarter consolidated revenues increased from $425.8 million in the first quarter to $457.6 million, an increase of 7.5% due to improved activity levels. Cost of revenues increased from $268.2 million in the prior quarter to $287.6 million due to increased activity levels and corresponding increased materials usage. Cost of revenues as a percentage of revenues was relatively unchanged from 63% in the first quarter to 62.8% in the second quarter. SG&A expenses as a percentage of revenues were 10.5%, relatively unchanged from 10.4% in the first quarter. RPC's sequential EBITDA increased 8.9% from $110.6 million in the first quarter to $120.4 million in the second quarter, and our EBITDA margin increased slightly from 26% to 26.3%. Our Technical Services segment generated revenues of $424 million, 7.6% higher than revenues of $394 million in the prior quarter; and an operating profit of $66.1 million compared to $58.5 million. Our operating margin in this segment increased from 14.8% of revenues in the first quarter to 15.6% in the current quarter. Many of our service lines within this segment experienced improved utilization. However, the pricing environment remained challenging. Revenues in our Support Services segment increased 5.4%, due primarily to higher activity and slightly improved pricing due to job mix within our rental tools business. Support Services operating profit increased to $7.1 million in the second quarter, compared to $6.3 million in the first quarter. Our operating margin in this segment increased from 19.7% of revenues in the first quarter to 21.1% in the second quarter. RPC's pressure pumping fleet during the quarter remained unchanged at approximately 680,000 hydraulic horsepower. Although we had no plans to add additional horsepower, we were presented with an opportunity to acquire new pumps totaling 30,000 hydraulic horsepower at an attractive price. We expect to take delivery of this equipment by the end of the third quarter. Second quarter 2013 capital expenditures were $55.5 million, an increase of $2.4 million compared to the first quarter. Currently, we expect to spend in total approximately $250 million on capital expenditures for full year 2013. A significant portion of our total capital expenditures continues to be directed towards capitalized maintenance of our pressure pumping fleet and other operating and support equipment. Similar to last quarter, RPC did not relocate any equipment during the current quarter, and we are satisfied with the geographic distribution of our equipment and personnel. While we experienced some weather-related disruptions during the second quarter due to a late Canadian spring break-up and record rainfall in North Dakota, we estimate this negatively impacted our sequential revenues by approximately 1%. During the current quarter, we repurchased 1.2 million of our shares on the open market, and the board authorized an increase of 5 million shares to our repurchase program. RPC's outstanding debt under its credit facility at the end of the second quarter was $67.2 million. The balance decreased by $20.4 million compared to the end of the first quarter. Currently, our ratio of debt to total capitalization is 6.8%. And with that, I'll turn it back over to Rick for closing remarks.

Thank you, Ben. In the second quarter -- in the second half of 2013, we believe that our industry will remain in a mild cyclical downturn characterized by flat rig count and competitive pricing. Also, commodity prices will continue to hamper drilling activities in natural gas shale plays. However, we are encouraged by higher well counts, increased net footage and greater service intensity, all of which positively impact business prospects. RPC's ability to successfully compete and benefit from these current market trends reflect favorably on the quality of our equipment and personnel. In this environment, we will continue to focus on operational execution, cost controls, supply chain management and capital discipline. This should benefit RPC and optimize our return on invested capital when natural gas fundamentals recover. I'd like to thank you for joining us on the conference call this morning. And at this time, we'll be open -- we'll open up the lines to answer your questions.

[Operator Instructions] And we'll take our first question from Neal Dingmann with SunTrust.

Ben, just a question for you, you were talking about just the additional, I guess, assets. You had the 30,000 that you're going to be bringing on shortly. Number one, I guess, you guys are always pretty optimistic, I mean -- opportunistic, I mean, as far as looking for additional assets. Are you seeing small deals out there that maybe are catching your interest as far as private equity, having some horsepower that you might be interested, I guess? That would be my first question, I think.

I think this particular transaction could be indicative of that type of activity increasing. We have seen other types of equipment, yes, that seems to be coming available in pieces. So we don't know the actual origin of the equipment or where it's coming from and what the equity or debt backers might look like, but yes, I think that could be a trend. And that perhaps could be positive if there's maybe a shakeout taking place.

Okay. And then any idea where you're taking this and then, sort of in conjunction to, where you're taking the 30,000 or where you'll place that initially? And then sort of, Ben, in conjunction with that, I'm just wondering, versus, I think, the last time that you or Clint [ph] or somebody was out, just looking at sort of the breakdown, where you have 40% in the Perm and about 16% in Eagle Ford, your top 2 areas. I know you didn't move any other assets, just wonder if that's still a pretty good breakdown.

Jim will run through our breakdown. And regarding the new equipment, of course, that represents a little less than 5% increase in our fleet, so it's not tremendous. We are glad to have it. And it happens to be, we believe, at this point, headed toward West Texas and the Bakken. And Jim, maybe will tell you a little bit about where we think the equipment will be situated.

Yes. Neal, this is Jim. Just a pro forma percentage rundown, and by pro forma, I mean if the new pumps were in place right this moment, which they aren't, but if they were, and again, as Ben said, it doesn't change things a whole lot: West Texas is around 41%, Appalachia is pretty close to 13%. So see -- you see these things aren't changing a whole lot. Mid-con, around 12%, and recall for you and for others that, that does not include Arkansas. East Texas is around 12%. South Texas, about 14%. And the Bakken now would be about 6%. Then recall that we have that little -- well, that rotational fleet that supports equipment that's being maintained, and that's 2% or 3%.

And then just very last one, Ben, for you, as far as -- you mentioned in the press release about the intensity. I know that some of your peers have mentioned the same thing. I'm just wondering, again does that mean more of your crews, I guess, now? Or what percent are sort of on the 24-hour sort of basis as far as what they're running? And do you see this intensity sort of continuing through the remainder of the year to, at that point, do you think that will start to help push pricing more than it has at this point?

When we speak of the intensity, I guess that's, to this point, less than the fact that we're moving more to 24-hour work. We're still seeing a relatively low percentage of our fleet working 24 hours. We certainly will have and will continue to entertain appropriate opportunities to do that. I think the service intensity just reflects more on the type of jobs, the longer laterals pumping tremendous amount of -- on those jobs we're participating in, pumping a tremendous amount of additional proppant and so forth. So again, less so on the 24 hours, but we're still -- where are we, at 6%?

Yes, about 6%.

6% of our equipment is working on 24 hours. So it really hasn't expanded. We haven't found those opportunities yet that make sense for us, but again, we're open to it and evaluating them as we speak.

And we'll take our next question from Megan Repine with FBR Capital Markets. Megan Repine - FBR Capital Markets & Co., Research Division: I was hoping you guys could talk about how you think about customer budget plans for the remainder of the year. And any risk of a fourth quarter slowdown?

Megan, this is Jim. We don't really have any visibility into customer budgets for the remainder of the year. And the fourth quarter slowdown, as we all know, is always a specter in our business. People may decide that they'd run out of their budgets in October and November. Good question, I'm afraid we just don't have any analysis or any information to share with you. Megan Repine - FBR Capital Markets & Co., Research Division: Okay. And then my next question is on coiled tubing. Can you guys talk about the progression of activity in pricing over the 3 months in the quarter?

Yes, Megan, Jim again. Coiled tubing was flat during the quarter compared to the first quarter. There were some regional differences, but nothing that jumps out as anything that's meaningful from a business point of view. So coiled tubing utilization and pricing has, over the quarter, stayed pretty similar. Megan Repine - FBR Capital Markets & Co., Research Division: Okay. And then finally, can you guys provide the revenue breakdown by product line that you usually give?

Yes, by all means. As a percentage of consolidated revenues for the second quarter that we're reporting today, pressure pumping was 54.5% of revenue, Thru Tubing Solutions was 14% of -- 14.4% of revenue, number three was coiled tubing at about 9.5% of revenue; our snubbing hydraulic workover service line was about 3.9% of revenue. I should have mentioned rental tools right before that, rental tools was 4.5% of revenue.

And we'll take our next question from Luke Lemoine with Capital One Southcoast.

Ben, I think you had mentioned that you only have 6% of your horsepower on 24/7-hour ops. Is that just 1 crew now? Because I thought you had 2 previously.

Luke, it's sort of 1.5 crews. I mean, it's hard to measure about 24-hour work. It's the same as it was before.

Yes.

Okay. Kind of 1-ish in the Marcellus, and 1-ish in the Eagle Ford, at times?

Well, at times, yes, some more steady than others.

Okay. And then the 30,000 horsepower that you're buying, is that brand new?

Yes.

Yes. It's never been used.

Okay. And can you say how much you're paying for it?

Rather not.

Okay, well...

It's attractive -- an attractive price.

Okay. Your CapEx now is $250 million. I think, last quarter, it was $275 million. So you're decreasing it even with buying 30,000 horsepower.

Correct.

What's the difference there? What's coming out?

I think, obviously, as we get deeper into the year, the number hopefully gets a bit more refined. But I think it's too, as our guys, looking at what their requirements are, and we're trying to keep it to a minimum in this environment. We certainly have the capacity, if opportunities like this new horsepower, if it's attractive, then we want to jump on it, we clearly have that capability. But right now, just routinely and what we see on the radar, we see that trending down at this point. A very reasonable question, we too are looking at it, but I think we're all focused on trying to keep CapEx as low as possible, keep our capital invested as low as possible in this environment and just wait for the right time to begin to increase the spending.

Okay. And then you said Bakken and Canada impacted revs by about 1%. Do you have that margin -- I'm sorry, that number for the EBIT margins, how much it impacted EBIT margins?

We don't.

We don't. It would be about in line, Luke...

Yes.

And we'll go next to John Daniel with Simmons & Company. John M. Daniel - Simmons & Company International, Research Division: Just want to follow up on the equipment side. Jump [ph] off on the equipment order. The equipment, was that -- the 30,000 horsepower, is that equipment that someone walked away from? Or was this equipment that the builder had built on spec? Any idea?

Somebody walked away from it. Similar to what the -- Neal's earlier question was, that someone had ordered it and walked away and we were able to step in. John M. Daniel - Simmons & Company International, Research Division: Okay, got it. And then, I don't know if you said this or not, I apologize, but is the intent -- I know it's going to the Bakken and West Texas, but is it going out to replace legacy equipment? Or are you going to actually try to find a crew to crew this stuff up independently?

We -- I don't know that, net-net, it will increase the number of employees. We just think it'll position us better in those particular regions; get, whatever you want to call it, higher-quality jobs, better jobs, whatever. So we're not planning to move equipment out. It will be a net addition to those regions. John M. Daniel - Simmons & Company International, Research Division: Okay. Just quickly on outlook for Q3 activity levels, can you just help us -- I mean, specifically, any color on June activity or June revenue versus the Q2 average, sort of how the run rate is shaping up for Q3?

John, this is Jim. I hate to say that it's flat, because that doesn't seem to be very illuminating. But sequentially, during second quarter, things were flat, and that's the way it looks going forward.

I think what -- in our commentary, I think what we're trying to say is there doesn't appear to be -- we're very pleased with the sequential increase. We always say around here, it seems like in the oil field, what we've always experienced, that things are either getting better or they're getting worse, they're never stable. And it seems like we've sort of been in a stable period the last couple of quarters. We're obviously very pleased that we had a sequential increase, but we're not sitting here today saying, "Okay, we're off to the races, and we know that next quarter is going to be better." So it -- we're sort of in that period where we say that there could be some volatility. I guess what we're signaling is we wouldn't be surprised if our results continue to progress in the second quarter, but we likewise would not be surprised if it was flat or even slightly down. I think there's, it's still that -- more of that same period where it's a little uncertain. But it's not uncertain that we don't know how far it's going to go down, it's just uncertain as to when it's going to pick up. Hopefully, this is a -- maybe a signal that it's troughed. But just sort of in a wait-and-see mode and picking our spots and hoping for the best. John M. Daniel - Simmons & Company International, Research Division: Fair enough. And I mean, I appreciate that -- not wanting to give specific financial guidance, but just in the realm of flat results top line quarter-over-quarter, assuming that were to play out, given the pricing pressures alluded to in the commentary and the release, would you expect in that scenario, margins to be lower in Q3 versus Q2?

No.

No, we wouldn't.

And we'll take our next question from Michael Marino with Stephens.

To follow up on the new equipment. You mentioned West Texas and the Bakken, if you could help me understand the reasons it's going into those markets. Is it RPC specific? Or are those just the best markets from a pricing standpoint where you think you can find more work for it?

Well, probably a combination, I guess. It's probably more related to us and what we see in our particular circumstances. Again, it's less than -- I didn't run the number, but it's less than 5% of our total fleet. So again, it's not huge. Glad to have it, we think it will be a real benefit and -- but not a big needle mover. It's a reasonable question, but I think it's a combination of, yes, the market and where we're positioned and what opportunities we think we have in front of us, sure.

Yes. And Michael, it might give us a little -- and again, this is -- we're talking about small things that don't move the needle, as Ben says. But I -- it would give us a little more critical mass in the Bakken, where there are opportunities and we're gaining a foothold. So that's an opportunity. And West Texas, we have a big market share and are doing a lot there. We're encouraged by the increasing intensity of -- with the longer laterals and everything else going on in West Texas, so we think there's an opportunity there also.

Right, right.

Sure, okay, makes sense. And regionally, are you seeing any real discrepancies in kind of pricing for pumping? Or have things kind of leveled out here and no one region jumps out at you?

Kind of a replay of the first quarter call, but the mid-continent remains the weakest for us, the Permian a little better. The Marcellus has shown some strength, but not -- there's nothing that jumps out as particularly good or particularly bad, or we'd be moving equipment, maybe. So that tells you something.

And we'll take our next question from Jeff Tillery with Tudor, Pickering. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Just to circle back to John's question earlier. So it seems like the progression that you guys witnessed was pretty good increase in March coming out of winter weather versus February and January. And then from there, it's been pretty steady. Is that a fair characterization of what you guys have seen?

Yes. That is very reasonable. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: And then the pricing commentary. I mean, obviously, pressure pumping pricing is the most important thing to you guys just because of the weighting from a revenue standpoint. But as you think about the portfolio, where do you see the best pricing dynamics? Where do you see the softest? I mean, if -- kind of independent of size, just kind of raw pricing changes or price pressures in the portfolio.

Jeff, this is Jim. I -- there's not a whole lot that stands out, again, good or bad, favorable or unfavorable. In our rental tools service line, we did have lower discounts to our price book during second quarter than the first quarter. So pricing improved incrementally there, marginally. Thru Tubing Solutions continues to be strong, but certainly didn't improve. And then the others just kind of were fairly flat.

We're hopeful, I guess, with the Permian, again with the increased horizontal drilling, that we'll be able to capture a lot of that. And I think will be -- it will definitely benefit our business. And so I think that's a positive. And otherwise, I think the commentary kind of gets back to what Jim talked about before about the relative weakness in the mid-con and some of those other areas. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Anything going on with the raw material side that we need to be watching for potential either margin benefits or margin pressures as you step through the second half of the year?

Nothing of note right now. Reasonable question. It seems to be fairly steady at this point in time, not seeing or detecting any particular shortages or excesses. So -- I mean, we're comfortable with where we're positioned and not expecting any relative benefits or weaknesses from materials and supplies expenses in the latter half. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Last question. Just for clarity, the horsepower you're acquiring or you're buying, that's in the $250 million CapEx number for the year. Is that correct?

That is correct.

And we'll take our next question from Brian Uhlmer with Global Hunter.

I've got a few quick-and-easy ones. You mentioned G&A and bad debt expense going into that number. I was curious if you could help us out on the level of that, if you expect some recurrence of that and what occurred there. And just a little bit of guidance for next quarter's G&A and how the run rate shakes out.

It was about an extra $4 million. Most of that was one particular customer that we've done a lot of work for. And there was no indication of any problems, but they declared bankruptcy in the second quarter. And so we fully reserved for that, for that particular outstanding with that customer. We do not expect that to recur, we don't think that's a trend of any type. So relative to that -- relative to SG&A, I think, sort of adjusting that out, we're sort of on a, we believe, more of a normal run rate if you adjust out that $4 million or so.

Very helpful. Second question. On the new equipment, that was included in the $55.5 million during the second quarter, and that's in your PP&E for the Q2 balance sheet data. Is that correct?

No. The new equipment, we'll take delivery in the third quarter. So we -- so there's been no advancement of funds yet.

Okay. So -- okay. And then on the loss on disposition of assets, what did you guys dispose of, and what was -- I'm just trying to reconcile the balance sheet here with the PP&E and CapEx and then the last one on the disposition of assets. What did you dispose of, and what was the value, approximately?

Well, it was nothing unusual. What that line includes a lot of is some of the components in pressure pumping that get disposed of as it wears out prematurely. So it's nothing unusual. It's about consistent with prior quarters. I, to be honest with you, don't have that -- those details right in front of me now. But it's nothing unusual.

Nothing unusual, okay.

And we'll go next to Doug Dyer with Heartland Advisors.

My question has been answered.

[Operator Instructions] We'll go next to Daniel Burke with Johnson Rice. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division: In the Thru Tubing business, differentiated business there, but in this flat-ish domestic market, can you all continue to grow that business? Or can that business grow over the back half of the year, or is it essentially capped out by the flat market?

We -- it's a very -- we do believe that it can grow. There are some new innovations that we have in place which should allow us to continue to grow that service line. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division: Okay. So second half, it would be reasonable to expect in this flat-ish environment, second half '13 revenues above first half '13 revs?

For TTS, yes.

Yes. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division: Okay. Any thought as to the magnitude or how meaningful those new offerings are?

Not currently. We'd rather not comment on it at the present time. We'll see. It's under -- we're very good shape, and it's been operating. The acceleration will -- is yet to be determined, but we'll all watch it and see what happens. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division: Okay. And then maybe one other one. If I heard you all correctly, addressing Q3, I think you said a flat activity environment, you wouldn't expect margins to be lower in Q3. Was that correct? And if so, what's the inference to make on pricing, based on that comment?

Daniel, this is Jim. Prior comment is correct. The inference on pricing -- or our implication on pricing would be that it's flat.

Yes. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division: Okay, so...

Let me comment on that. I know this always comes up, I guess. You know, with the size of our portfolio, somebody else used that word, our "portfolio of pumps," and the fact that we currently move from a contract to a spot market, there is again, as we talked about earlier, the opportunity for volatility. I mean, we could win an opportunity or 2 and have a nice improvement. We could lose an opportunity or 2 and have a slight degradation in our results. So it's still a very fluid environment. We feel good about, again, our position in the market and our capability to participate in these new trends with, again, the more horizontals and longer laterals and all that, we think we are, again, well positioned and capable and have a good reputation in that area. But with our -- the size of our portfolio, there is that potential for volatility, either to the upside or the downside. So I don't know if that color helps at all, but that's sort of the way we look at it. So we're just day to day, month to month, quarter to quarter, doing the best we can getting ourselves positioned and waiting for the opportunity, the market to improve and jump on opportunities that are presented to us.

And we'll go next to Michael Cerasoli with Goldman Sachs.

It looks like there was a gradual pickup in utilization, but it sounds like it might be more customer specific than anything meaningful from a geographic perspective, if I heard you correctly earlier. And so was this pickup in utilization, is it more driven by larger players doing a little bit more? Or was it more the smaller private companies reacting to some recent positive trends in the market?

Mike, this is Jim. A lot of it was the January, February effect of -- we had a very slow start to the first quarter. And so there was flatness in the second quarter. I think also, more than customer specific, we did have, and it's hard to measure and it's hard for the industry to measure it, but higher intensity, longer pump times, longer laterals for horizontal completions, more time on the job. And that's part of what happened in the second quarter as well.

Okay, so not much of a variation between the larger customers and the smaller customers out there.

That's correct.

Okay. And then just returning real quick to the Bakken weather and Canadian breakup, it sounds like it was a pretty negligible impact, from your perspective, but some of the others out there talked about it being much more meaningful. From a higher-level market perspective, do you get the sense that there's a larger-than-normal backlog as a result of what happened, of more operators just not rushing to get back to where they expected to be at this time, maybe a sort of lack of urgency, if you will?

Well, one reason it wasn't hugely impactful on us is the fact that our exposure to Canada and North Dakota is relatively small. We have -- Thru Tubing is very active in Canada, but other than that, we have very little work up there for other service lines. So that's the main reason that it was negligible for us. Through our discussions, we have told that things are getting back to work pretty aggressively and as it relates to Canada. So from our perspective, we feel good about the progression up there in the third quarter compared to the second quarter.

And we'll take our next question from Matt Conlan with Wells Fargo.

Guys, so if I did my math right, your pressure pumping revenue increased quite a bit, up about 20% sequentially. And I know you got off to a slow start to the year. Can you give us some guidance as to maybe how -- what your sequential growth was in stages versus what was an increase in intensity, say, revenue per stage?

Matt, this is Jim. And you're a smart fellow, you're smarter than I am, but your sequential increase in pressure pumping is a little bit off. It was more in the 12% range. And as we've referred to before, and I apologize that it's kind of hard to measure, but again, it's hard for the industry to measure, that did not relate to pricing improvements, it just related to more work: again, more time on the job site; longer laterals; more pump times; more proppant, more raw materials, which are a big part of the pressure pumping ticket. And that's what it related to. And we're also in an environment now where a big customer can decide to do something or not decide to do something, and that impacts you too. And that does not reflect on the market, but even if the market is better or worse, as these completions require more personnel and more equipment and certainly more proppant, sometimes things happen or don't happen, again, for seemingly random reasons. But to try to answer your question specifically about first to second quarter, it was more like a 12% sequential increase and had to do with just increasing service intensity and harder work.

I'll definitely recheck my numbers...

Okay. Sorry, I had to bring it up.

No, no, no. I appreciate it. And so do you have any sense as what percentage of profit increase you're using? I mean, is it a broad-based increase and putting more sand down the wells?

It is -- and I don't -- I'm sorry, I don't have a good sequential increase for you. Although, it's not too far apart from where our sequential revenue increase is.

Keep in mind, too, that, that sequentially increase was generated from or resulted from the fact that pressure pumping, too, got out of the gates slow in the first quarter. So that's part of the impact as well. But we are seeing those trends. We are working on more, more and more horizontal wells as an overall percentage. And we are tending to the jobs, the amount of materials being used, is continuing to increase.

[Operator Instructions] We'll go next to Luke Lemoine with Capital One Southcoast.

Just one follow-up on the $4 million of bad debt expense in the G&A, how was that allocated between Technical Services, Support Services and corporate?

Technical. And what was your second question?

No, that's the only question, yes. So it was all in Technical?

Correct.

And we'll go next to John Daniel with Simmons & Company. John M. Daniel - Simmons & Company International, Research Division: You talked about the higher-intensity jobs that you saw this quarter. Is it safe to assume that, that work is resulting in greater wear and tear on the equipment?

Yes. All things being equal, yes. Although, maybe it's not even worth mentioning, but this is not like really service-intensive Haynesville work that's tearing up the pumps. It's more like pumps working at lower RPMs for a longer period of time, which isn't the worst thing in the world. But it's a little bit different from the nature of the work a few years ago. John M. Daniel - Simmons & Company International, Research Division: Okay, fair enough. And then just one on Thru Tubing Solutions: Can you, Jim, just provide an update on the competitive landscape here in the U.S., what you're seeing there? I know one of your competitors talked about a desire to get into that segment. And just some thoughts on the business.

Well, in general, I think we are seeing -- starting to see some competitive pressure in Thru Tubing Solutions. It's a good business, and it -- there's been a little bit more competition than what you've heard in the past.

The nature of that business, though, it's a little more specialty, which insulates it to some degree. But yes, I think there is more competition. It's a -- been a lot of development, again, of new products and new techniques. And we expect, just like everything else, it will remain competitive. John M. Daniel - Simmons & Company International, Research Division: Okay. And I don't know if you want to answer this, but are you seeing any signs that people are making a run at your folks in that product line and that's potential that we could see revenue hits by an exodus of folks?

That's always a possibility. We -- not to any significant degree at this point. John M. Daniel - Simmons & Company International, Research Division: Not at this point, okay.

And we'll take our next question from Adam France with 1492 Capital.

Ben, you made a relatively short comment on the bad debt expense, $4 million. What is a normal level? And I know you guys are always very conservative and smart folks, how did you get mixed up with a poor credit, I guess?

Well, good question. It's certainly, we've been lucky enough in the last several years. We've not had much in the way of bad debts. And I don't know. We've done work with this particular customer in other areas. There was no indication, based on our work, that there was any problem. And of course, we're not just evaluating these credits alone, we're using a lot of outside information as well. So it did come as a -- very much as a surprise. And maybe it'll come out later, that there's something more to it. But we don't think it was a failure in our internal processes or anything like that. I think it just sort of, whatever you want to say, came out of the blue, or whatever. So...

No, that happens. It's just...

We'll learn more. We did the work in the first quarter. So we did the work in the first quarter, they filed bankruptcy in the second quarter. There was no hint. And it's not like we've been sitting around waiting for 10 months to collect it and can't get it, and they filed bankruptcy. They did the work and filed bankruptcy. It's -- it happened very quickly.

And that does conclude our question-and-answer session. I'd like to turn the call back to you, Mr. Landers, for any additional or closing remarks.

Okay, thanks. We appreciate everybody calling in and listening this morning. And we appreciate the questions. Hope everyone has a good day. Thank you.

As a reminder, a replay of today's conference will be available on RPC, Inc.'s website, www.rpc.net, within 2 hours. Thank you, everyone, for your participation. This now concludes the call. Have a great day.