Good morning and thank you for joining us for RPC, Inc.’s First Quarter 2017 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 Finance. [Operator Instructions] I would like to advise everyone that this 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 are going to mention a few things that are not historical facts. Some of the statements that we 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 2016 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 have discussed and will be referring to EBITDA. EBITDA 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 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 are interested in seeing how it’s calculated. If you have not received our press release for any reason and would like one, please visit our website at www.rpc.net for a copy. I will now turn the call over to our President and CEO, Rick Hubbell.

Thanks, Jim. This morning, we issued our earnings press release for RPC’s first quarter of 2017. Industry conditions continue to improve throughout the first quarter of 2017 and the average U.S. domestic rig count has more than doubled over the last 10 months. RPC’s financial results improved as demand for our services increased resulting in higher activity levels and slightly better pricing. Our disciplined approach had long-term view during the industry downturn prepared us to meet our customer’s increased demand with well-maintained equipment, experienced crews and efficient logistical processes. Our CFO, Ben Palmer, will review our financial results in more detail, after which, I will have a few closing comments.

Thank you, Rick. For the first quarter, revenues increased to $298.1 million compared to $189.1 million in the prior year. Revenues increased due to higher activity levels, increasing service intensity and improved pricing in our Technical Services segment. EBITDA for the first quarter increased to $46.4 million compared to negative $14.1 million for the same period last year due to higher revenues and improved profitability. Operating profit for the quarter increased to $1.6 million compared to an operating loss of $75.1 million in the prior year. Our diluted earnings per share were $0.02 compared to $0.15 loss per share in the prior year. Current quarter diluted earnings per share includes $0.01 per diluted share compared to the adoption of a new accounting pronouncement related to share-based payment awards. Cost of revenues increased from $161.3 million in the first quarter of the prior year to $216.2 million in the current year due primarily to increased activity. Cost of revenues as a percentage of revenues decreased from 85.3% in the prior year to 72.5% due to improved pricing for our services and efficiencies resulting from higher activity levels, primarily within our Technical Services segment. Selling, general and administrative expenses decreased from $43.5 million in the first quarter of the prior year to $37.2 million this year primarily due to lower bad debt expense and employment cost during the quarter. In addition, during the first quarter of 2016, we recorded the non-recurring contingent professional fee of $2 million. SG&A expenses as a percentage of revenue decreased from 23% last year to 12.5% this year due to lower expenses and improved leverage of higher revenues over fixed costs. Depreciation and amortization were $44.7 million during the first quarter of 2017, a decrease of 26.3% compared to $16.6 million in the prior year due to…

Ben, thank you. Since last year, RPC has consistently stated it would only reactivate idle equipment when market pricing and customer demands improved to acceptable levels. This threshold was reached late in the first quarter we reactivated a portion of our idle pressure pumping equipment. While we are encouraged by recent improvements in the operating environment and our overall financial results, we remain cautiously optimistic and continued focus on not overextending ourselves in volatile industry. I would like to thank you for joining us on the conference call this morning. And at this time, we will open up the lines for your questions.

Certainly. [Operator Instructions] Our first question will come from Ken Sill with SunTrust Robinson Humphrey. Please go ahead.

Yes, great quarter guys. Yes, kind of a two-part question here. So, you started reactivating idle capacity late in Q1, how much of that if any was available during the quarter and accounted, how much the capacity increase will account for the revenue growth versus just improved utilization pricing?

Ken, this is Ben, actually very little. So what we were able to do was really add employees and be able to increase the usage on the capacity that was already there. So it was repeating that most of the addition was very, very light in the quarter and contributed very low.

So kind of as a baseline you got 70% active versus 50%, which is a 40% increase available capacity, I don’t know that you guys would expect to see pressure pumping revenues go up that much Q1 to Q2 that would be an awful good jump?

Yes. That would not be something that we would want to say here.

Something less than that.

And then just a housekeeping question out of the way, could you give us the breakdown of revenue in Technical Services? And thanks for letting me question.

Sure Ken, absolutely. This is Jim. So what I am about to tell everyone is the percentage of consolidated RPC revenues accounted for by our largest service lines. So as a percentage of consolidated RPC revenue for the first quarter, pressure pumping was 61.4% of revenues. Thru Tubing Solutions was 17.6% of revenues. Coiled tubing was 7.2% of revenues. Nitrogen services were 2.9% of revenues. And rental tools, which is in our Support Services segment was 1.8% of revenues.

Thanks.

We will move to our next question Rob MacKenzie with Iberia Capital.

Thanks. Good morning guys.

Good morning Rob.

I wanted to ask about the equipment you reactivated and what is the cost to-date on a capital standpoint and whether or not you are reactivating some of your older equipment or the brand new equipment you delivered at the end of the last cycle, but never put in the field?

Rob, this is Ben. In terms of the cost, I mean you saw that our capital expenditures were only $11.7 million, so it’s very, very minimal. And actually to be honest, so small and we didn’t go on to accumulate to be able to give some specific numbers. It’s cost what we expected. As we said we worked hard to try payment the equipment both, when we are working during the prior strong period and through till now. So, very, very minimal CapEx and really [indiscernible] that didn’t show up in the numbers as well. So we are very pleased with that. And what we have reactivated to-date is really more of the older equipment. We have not reactivated any of the new equipment yet.

Okay. Thank you. And your current plan is still to reactivate all the idle equipment sometime this year?

Rob, this is Jim. Yes, as – assuming logistical capacity is there for us, crews work, customer demand is there, acceptable pricing. Yes, we intend to continue reactivating our pressure pumping equipment and get it all done actually by the end of third quarter is our plan at this time.

Okay. Thanks Jim. And then can you help us on the cost front. Obviously, we all know about the inflationary pressures the industry has been facing. You guy seems to have managed those pretty well this quarter. Give us your take on how you expect to say that roll through the P&L in the second quarter and beyond at this stage?

Well, we didn’t incur too much in way of raw materials cost increases during first quarter. We expect that cost increases will accelerate some in the coming months, last mile transportation all that sort of thing. And we just – because we are in the spot market presuming things, we don’t even internally have a great projection of what we think cost increases are going to be, but we do want to tell you that we are going to price any cost increases into our proposals for new work, number one. And we will know what those cost increases are before we price things which I guess is…

And along those lines, could you refresh us how much of your equipment, is it all still on the spot pricing or do you have some on term now?

This is Ben. This is all spot, spot pricing.

Okay. Thanks. I will turn it back.

Okay. Thanks a lot.

Our next question will come from Marc Bianchi with Cowen.

Thank you. If I am doing my arithmetic correctly, it seems like pressure pumping revenue was up 68% sequentially, one, is that correct. And two, you maybe back towards the earlier question, can you break out how much of that was due to activity improvements and how much was due to pricing improvement?

Marc, this is Jim. Your math is correct. And a little more of the – a little more than 50% of the revenue increase was due to pricing – I am sorry, due to activity increases and a little less than half of that revenue increase was due to pricing. So more than half was activity, less than half was pricing.

Okay. And I guess it seems like the profitability progression throughout the quarter was accelerating and kind of curious where the exit rate was relative to the average in terms of profitability, if you can help us with that?

Well, this is Ben. I guess what we will say is that March was the best month of the quarter. I guess beyond that we try to quantify, probably don’t want to get into that level of detail. But certainly, there has been progression each month for the last several months. So the work that we did in March was priced late last year and into the first couple of months of the first quarter. And it has continued to progress. And as I said, March was the best month of the quarter.

Okay. I suppose if I think about the pricing improvement progression from here you had a lot of combination of what seems like cost recovery pricing and then also net pricing, as you go forward from here, do you anticipate to get a lot more net pricing improvement or is it more just a matter of cost recovery as we go forward and how do you see that playing out over the next two quarters?

This is Ben again. I would say, very difficult to quantify, maybe one way to say. Jim indicated that the plans and our activities are around trying to get everything reactivated by the end of the third quarter, subject to adequate demand and pricing and things like that. One way to respond to the question is are we pleased with the level of profitability that we generated in the first quarter with pressure pumping, I would say on a relative basis, yes, but not on absolute basis. So with those, I would say it needs to continue to get better. If we are going to have all of the equipment reactivated and staffed by the end of the third quarter.

Okay, thanks for that. I guess just last one, if I think about the fleet reactivation that you have done, how many of those crews that have been reactivated now are actually working, kind of maybe once a week, they all have work during the week?

I would say all of the crews are working – all of the crews, which have equipment, as their crews and equipment together that assemblage of assets are working every week. We are highly utilized.

Okay.

And reactivated has been working.

Yes.

Okay, thanks very much. I will turn it back.

Okay. Thanks, Marc.

We will take our next question from Jim Wicklund with Credit Suisse.

Hi, good morning guys. This is Jake on for Jim, missing by accident. I guess first question here, how much of your equipment is working today is on 24-hour versus daylight?

Well, there is a lot of different ways to address that. What we would say is that the amount of revenue generated in the first quarter for 24-hour work was somewhere around 85%.

Around 85%. Okay, great. And then I guess on pricing, could you quantify at all how much pricing is up today relative to the beginning of the year and then related how much more pricing would you need from current levels to support new builds through talking about being having everything reactivated by the end of the third quarter doesn’t seem like that’s too far off?

Jake, this is Jim. From the end of the year end of 2016 to the end of first quarter, pricing was probably up 30% to 35%. And as we have discussed, we are reactivating our idle equipment and that is a good financial proposition right now for new builds to go out and build – buy build equipment today, pricing would have to take another leg up and we have to be confident about the duration of it. So, it’s another good increase that we will have to have before we build new equipment.

Another 20%, 25%, is that fair?

We haven’t even begun to look at it yet. We got to get comfortable with the sustainability and we got to get the idle equipment reactivated and look forward about it.

Yes. I would say that’s at the bottom end of the range of price increase.

Okay. And then last one for me, you mentioned before the intention of all your equipment reactivated by the end of 3Q, is that based on a broader macro view or on specific conversations with customers in your view into their demand?

More like specific conversation, that’s not a macro call on the oilfield or anything else, it’s just the whole collection of customer conversations we are having right now indicates that there is demand for our services.

Alright, very helpful. Thanks, guys.

Alright, Jake. Thanks.

Our next question will come from Scott Gruber with Citi.

Yes, good morning.

Hey, Scott.

Given the reactivation plans with industry growth concentrated in the Permian, is it fair to assume that you plan to transport additional fleets down into the Permian, is that correct and if so, how much?

Scott, this is Jim. We don’t have firm plans on timeline or exact destinations. Your hypothesis about the Permian is correct. More equipment will go there, but we are seeing demand in some other areas too. So, exactly where all this equipments goes as it’s reactivated, we don’t know and aren’t prepared to disclose right now. We are looking at it, right.

Got it. If we kind of work forward on the hypothesis that the Permian continues to grow and I was just on that couple of weeks ago and it seems like a safe assumption for the next few quarters. Do you feel like you have a distinct advantage as a large established player in the Permian? Just thinking about if you are going to add incremental crews in the region, hiring the sand sourcing or the maintenance, if the Permian continues to grow, could you think that’s a material advantage for RPC?

Yes. We won’t believe that there are economies of scale within the basin due to enhanced logistical capabilities, the ability to move crews around, we have 5, I believe, pressure pumping locations throughout the Permian. And so we have flexibility to borrow equipment, borrow crews, use maintenance that sort of thing. So there is definitely – there is definitely an advantage to scale within the basin. So that way is on the position.

Do you think we would ever get to the point where you would have a pricing advantage within the basin versus companies that are trying to add additional crews into the basin as the whole supply chain gets tight?

This is Ben, pricing advantage...

When thinking about the risk associated if the supply chain gets really tight thinking about the risk associated with transplanted crews into the basin, crews in equipment?

Well, Scott, if supplies get tight, that will be bad for everybody, but it will be less bad for us than for a new entrant in the basin. We have seen that repeatedly where people come to the basin during the times of tight supply and realize that they need logistical capacity that they don’t have. So that speaks to operational execution and profitability. It doesn’t necessarily speak to pricing. I am not sure we have an answer to pricing, because we have to know how rational our peers are going to be.

Well, that’s right. That’s kind of what I was going to say. We may have superior pricing only because some of the competition doesn’t understand their costs or they are trying to get market share or whatever and so they are bidding lower than we would bid. So, is that better pricing or is that logistical getting what we feel like we can get that we need to get and somebody else is willing to bid lower. So is that better pricing or not?

It will show up in the margins. That makes a lot of sense. And just on ThruTubing, where do margins sit today for the business and how should we think about the outlook?

Well, we don’t disclose margins among our different businesses. But you know us pretty well, Scott, traditionally ThruTubing Solutions has had good margins and good financial returns which we care about. And yes, our ThruTubing, right?

Yes, yes.

Yes, okay.

Is it still lagging – is it lagging frac today?

Yes. The information we have disclosed would indicate that its growth is lagging frac. We disclosed things – we said some things in our press release about shortages of skilled personnel. The oilfield is short of skilled personnel and you see it throughout the completion phase and ThruTubing Solutions has been impacted by that both within their own business and weighting on other partners to get things done, because they had a lack of skilled personnel. So that’s what’s still on ThruTubing right now.

So, is there line of sight to ThruTubing moving back to its normal accretive margins position?

The line of sight in this dynamic environment is not a very long line of sight, but we do think that its position to improve as it has in the past. The fundamentals about ThruTubing Solutions remain in place for sure.

Got it. Appreciate the color.

Alright. Thanks, Scott.

Our next question will come from George O’Leary with TPH & Company. Please go ahead. George O’Leary: Good morning, guys.

Hey, George. George O’Leary: Just wanted to following on the Scott’s question on the ThruTubing Solutions maybe coming out from a slightly different direction. I just wanted to clarify the revenue is lagging because lack of personnel, but the margin is not looking for any absolute margin color, but margin is still holding in relatively resiliently in that business. You called out good pricing on pressure pumping and down-hole tools and I assume a portion of that is related to the ThruTubing Solutions if not all than on the down-hole tool side. But just a little more color there would be awesome?

Yes. The ThruTubing’s margins traditionally has held much better across cycles and that’s true. Last quarter, ThruTubing was relatively better than other service lines, pressure pumping grew absolutely as illustrated grew revenues and some of the incrementals were also very strong in pressure pumping, but ThruTubing continues to hold in quite nicely and they did have some incremental improvement, which is not quite as dramatic as pressure pumping this particular quarter. But as Jim said, I mean, ThruTubing still the fundamentals and everything are still there. One comment I will make that we have talked about and maybe this is well, we say hope is not a strategy, but we historically have seen that in down-cycles and this last down-cycle pressure pumping was more significantly impacted before coil tubing and before things like down-hole tools. So what we are hoping is maybe there is that lag here coming back out, pressure pumping has picked up first. We hope that we are going to see some of the other services like coil tubing and down-hole tools will pickup here soon and that delay up and down in past cycles has been 3, 4 months. So maybe we will see some pickup here soon in those particular service lines. George O’Leary: Great. That’s very helpful color. And then maybe just one more from me, you touched on a little bit in your answer, where you mentioned coil tubing and then that flows through ThruTubing Solutions as well, but are you guys seeing in any instances where you are able to go in and pump a job and then you don’t have the skilled labor and the access to folks to actually know how to plug and behind that job, so you are actually fracking the well, but not truly finishing the completion, because you cannot go in and move out the plugs, is any of that occurring in the field, is that part of why we are hearing about completion is lagging the drill bit?

George, this is Jim. That’s I don’t believe we have any cases of that. There may be – there are definitely completions probably lagging drill bit as you say, but we don’t think what you seem to be describing there is an incomplete completion if I can use that phrase and we don’t know of those happening at this point.

But I think we have heard anecdotes of some of down-hole tools and that coiled tubing being delayed because frac crews would pump. Thus the increased demand for pressure pumping, but some of our other service lines have been slowed a bit at times. There are examples where that’s happened, I would say this. But a large, large percentage of the driver of why maybe lagging, but there are instances where some of the work for some of the other services have been delayed because frac crews one of that. George O’Leary: Thanks guys.

Alright. Thanks Rich.

Thank you. Our next question will come from Daniel Boyd with BMO Capital Markets.

Hi. Thanks guys. A lot of good color already given to me, I will try to just hone in on maybe what the next quarters look like, so pressure pumping revenue up 68% this quarter, was up 47% in the fourth quarter and now you are really ramping up the capacity adds, still 40% this quarter and another 40% in 3Q and given the momentum in pricing, I guess I am struggling with why at least pressure pumping revenues wouldn’t be up in excess of what your capacity additions are, so can you maybe help me understand the progression?

Dan, this is Jim. There are just a lot of moving pieces. We knew the oilfield would eventually get better. We just didn’t know when, that’s why we have been prepared with this equipment. Your scenario is a very possible one, as are others. And we don’t know internally even the pace of reactivation right now and pricing is on a spot market basis. And customers have been dragging their feet on price increases. So when you put all that in the mix, it makes for very difficult forecasting.

Okay. A bit – scenario of similar sequential growth is possible based on what you see here late April?

Sure.

Okay. And then on the incremental margin side, I mean this is one thing that I think being in the spot market has definitely given you guys an advantage versus others just also in the shape, quality of your equipment, but we have seen operating margins at least in Technical Services sort of the mid to high-40s range, is there any reason to expect that the change at least over the next couple of quarters?

No.

Okay. Thank you very much. I will turn back over.

Thank you.

Our next question comes from Waqar Syed with Goldman Sachs.

Thank you. I just wanted to get a sense on incremental margins you had pretty strong incremental margins in Technical Services around 46% [indiscernible] been in the 20% of the low kind of range and understanding the reactivation cost has not been there for you guys, do you think you can keep that 46% kind of margins into the second quarter as well or do you expect some let up there?

Waqar, this is Jim. Forecasting is very difficult right now. But we do think the incrementals that we posted an reported during first quarter can be continued into second quarter. Pressure pumping pricing, leading edge pricing is good. We are seeing a follow-through from the results we had and we posted in the first quarter. And we think as Ben outlined earlier, things like coiled tubing tend to follow pressure pumping. So there should be some incremental margins to come from coiled tubing activity and perhaps Thru Tubing and some other things. So we think those are possible.

Right. If you assume 70% is roughly about 650,000 [ph] hydraulic horsepower that’s being reactivated, how many crews is at both horizontal and vertical?

The crews flex – Waqar, I think if I heard your question, with the people we have hired and rehired and our working force in the field right now, it kind of depends, it’s somewhere between three and five crews that we have today, additional crews that we didn’t have at the end of the year.

And your question, I think you asked about horizontal versus vertical and again, it’s the vast majority is horizontal.

Great. And could you tell us how many or what percentage of the crews are in Permian versus in other areas, where they are located?

Waqar, for competitive reasons and other things, we would rather not give you down to decimal points, but let me just try qualitatively. Right now, as a percentage of active horsepower at RPC, active hydraulic horsepower, a little more than half is in the Permian. And number two behind that is East Texas between 15% and 20%, again I am giving the range, right behind that is South Texas, which is a little bit less than what we have in East Texas. In the Mid-Continent, we have between 10% and 14% of our equipment and crews working. And then in the Bakken as you know that’s our smallest location. We have got somewhere between 4% and 6% of our equipment and crews working in the Bakken. That’s the most detail we are comfortable giving right now.

I appreciate that, that’s helpful. And then just one final question on the sand intensity, are you seeing stabilization in sand intensity per well or are you still seeing that pickup month-over-month?

Service intensity continues to grow, has continued to grow during the first quarter.

Great. Thank you very much. That’s all for me.

We will take our next question from Praveen Narra with Raymond James.

Hi, good morning guys. Thanks for taking my questions.

Sure Praveen.

I guess just to think about the sand side a little bit more in terms of the sand that you guys [indiscernible] jobs, how much of that was produced at the [indiscernible] site?

In the – around 20%.

Okay. Well, I guess as we think of that moving forward, is that something that you will move higher as we kind of gone to kind of increased usage of that or is that how you see that thicken?

Yes. Praveen, it might move a little bit higher, but the sand mining capacity – the sand mine that we own this capacity is limited and the use of sand is growing. So we think of our internal source of sand more as a strategic opportunity, it’s an ability to perhaps get jobs done, when we couldn’t get them done otherwise and filling gaps and that kind of things. So it’s more it has more of a strategic value than saying it’s going to supply X% of our sand needs and X% being a big number.

Right, okay. So and then I guess if we go back to the pricing questions, in terms of the pricing differences you are seeing on planned out work versus quick call-out work, could you give us a sense of what that gap could be?

Praveen, I am not sure we see a distinction there. We don’t have contracts in the sense that we all think about in the industry, we don’t yet in anyway. And there is – we don’t have any empirical data that says that a rush job where somebody calls us to work tomorrow has better pricing, because we actually can’t do those jobs and we are scheduling.

I guess could you give us a sense how far out you are looking at now and then at the same point give us kind of that willingness to sign long-term contracts both on your end and as well as customer?

Second part of the question is easier to answer. Pricing is not good enough yet to sign long-term contracts. The first part of it, we are certainly booked out for a few months at this point.

Perfect. Thank you guys very much.

Alright. Thanks, Praveen.

We will move next to Matthew Johnston with Nomura.

Hey, good morning guys.

Hey, Matt.

Have you received any inbound increase from your customers yet for pressure pumping work in 2018?

No.

Okay. And then how should we think about working capital build for the rest of this year?

Well, it depends on what our revenues do. It depends on what the activity levels are.

You could take your revenue forecast and put a DSO on it and that would be a decent proxy for working capital requirements, I think.

Okay, fair enough. And then last quick one for me, G&A as a percent of revenue going forward, how should we think about that evolving?

This is Ben. We don’t at this point anticipate any significant increase in SG&A. We are not looking at any additional facilities. We are not rapidly adding support type of personnel. So I believe we have the opportunity. We hope that very soon we will be able to be talking about deliveries in additional employment costs around incentive comp and things like that. But in terms of absolute addition of many employees, we think we have the pretty good base in employees to be able to only slightly increase the SG&A expense with a much, much lower pace than we expect revenue to grow.

Got it. Thanks, guys. Great quarter.

Thanks.

Thanks, Matt.

Our next question will come from John Daniel with Simmons & Company. Please go ahead.

Hey, guys. I may have missed it and if I did, I apologize. But Jim, could you tell us what the active horsepower was at the end of the quarter, what it was at an average for the quarter and where you exited year end?

Yes, sure. Ben mentioned it in terms of percentages, but...

That was at quarter end, not after.

Yes, at quarter end. At quarter end about, 670,000 200 hydraulic horsepower was active compared to about 450,000 at the end of fourth quarter. It’s a simple average doesn’t work, because the horsepower that was activated during the quarter was activated at the very end and revenue contribution from it was basically nil and average doesn’t work from that point of view.

But you did say 3 to 5 additional crews out today versus year end. I mean, did they go to work in the month of March?

Yes, they actually went to work on equipment. So, utilization of equipment was able to – we accomplished increased equipment utilization due to more crews, more and more towards 24-hour and utilizing the equipment that we had in place.

Okay. So I am confused. I just want to make sure 670,000 active at the end of the quarter, 3 to 5 additional crews, but it sounds like those crews, that incremental horsepower you put out, call it 220, in terms of staffing, my math correctly here or not? 120, 120 excuse me that basically did not work much in the first quarter, is that fair?

That is fair. Correct.

Okay, got it. Thank you. And there is coiled tubing, the revenues were down just outlook on that segment, why would that be down when the rig count is up 20%ish some color there would be appreciated?

Some lack of skilled personnel. We have focused more on recruiting, screening, hiring and training in pressure pumping than we have in some of the other service lines. And it’s hard – it’s harder to find an – well, entry level coiled tubing people do not exist, it takes about 6 months to train the ground hand and that sort of thing. So, that’s just been slower to ramp up, because it’s been more difficult to get people who are working and generating revenue for you.

You feel more personnel as opposed to want to enroll what the actual service, coiled tubing as a service line?

Yes, yes. Correct. I mean, there has been lot of discussions as you know about dissolvable plugs and things like that. But coiled tubing’s results for the first quarter don’t relate to it being dis-intermediated, it was just the tactical issues of personnel. And the fact that as Ben mentioned coiled tubing lags pressure pumping, both down and up.

Pricing hasn’t improved as much as pressure pumping. So, we are not as enthusiastic about doing a lot of that work as enthusiastic about doing a lot of that work at current pricing levels.

Ben, I mean, the segment did grow in the rig count last quarter. So I am just....

No, it’s a great question.

Are you guys expanding capacity at that mine?

I would say we are expanding production, not capacity.

Okay, thanks guys.

Alright, John. Thanks.

We will take our next question from Ryan Ward with Heikkinen Energy Advisors. Please go ahead.

I had my question answered already. Thanks, guys.

Thanks.

Thank you. We will move then to Tom Curran with FBR Capital Markets.

Good morning, guys.

Hello.

Hey, Tom.

Ben or Jim, when it comes to the pipeline of private pumpers and equipment being chopped around how have valuations evolved over the past few months, specifically how has the asking price per unit of horsepower evolved relative to the range that we have seen the public pumpers remain with that?

Tom, this is Jim. It’s a good question. We actually haven’t seen any private pressure pumpers come to market. This is just an RPC answer in the past few months. They have all been going public to the time of data point.

That’s interesting. So that pipeline of the companies that you might have booked on or received inbound calls about that’s pretty much dried up, Jim?

Yes, for us.

Interesting. And then as you look to executing the remainder of your planned reactivation program through 3Q which of the costs you are struggling the most to manage, is that we are going to surprise the upside? Seems like that it would be most likely culprit and in trying to manage that source of inflationary pressure, what advantages do you have in this upcycle that you did it in the last?

I don’t know, Tom, it remains a difficult and comparative business. If we have any real issues in the next few months, I mean, it’s sort of usual suspects. We have had some great success recruiting skilled personnel in the pressure pumping business. We have had some nice success there. That can’t last forever. So, there might be a negative surprise from a cost inflation point of view on crews. One thing that we are doing right now is being more mindful of our margins and so we are – we are being lot more judicious with things like relo and accommodations – living accommodations and things like that. So, that’s one thing we have gotten a little bit smarter on. We feel like there is a big supply of proppants. We are not worried about the existence of proppant that our customers want to use, but at some point just as in past cycles either last mile transportation or something on the rails is going to get is going to get difficult. In terms of how we might be better this time than last, we certainly understand logistics better now than we did in the last upcycle, but it’s hard to know what you don’t know. So, we have got to be nimble and try to anticipate those things.

I think one thing I will add, this is Ben. I think with the process we have gone through in the down cycle, I think we are much better positioned, things are not as volatile, we are much better positioned from a standpoint of understanding our costs and how to price our jobs and how we are executing and where we need to make changes to be more consistent with our results. The locations we are operating in now we have been for an extended period of time. If you would go back to the early innings of the prior cycle, we were opening up new locations in basins we had not operated in before. So I think the consistency and quality of our results across many service lines or pressure pumping, in particular, will be more. Again, with higher quality, more consistent and better openings, maybe not better than the absolute we were able to generate at points in the prior cycle, but all things being equal, we will be better off from that perspective.

Thank you to both answers. And Ben lastly, on infrastructure and logistics, a two part question there, first, on the M&A front, have you seen any change in terms of frequency or price with regards to inquiries about [indiscernible] in terms of taking off your hands, any attempts to firstly to sell it. And then on the other side, are you reconsidering your current degree of vertical integration for infrastructure and logistics ranging from simply perhaps within your railcar fleet increasing the percentage of cars you own to something perhaps more drastic such as purchasing more trans-loading facilities your terminal staff, just curious for an update on both of those?

Tom, this is Jim. Maybe I can answer this as well. I will answer the second part of the question first. No real changes here on our desires about vertical integration. It’s – we are happy where we are. We want to be as – we don’t want to be asset intensive on things that are not our core competency. And owning a lot of real estate when demand may change in another areas not one of them. Transport facilities, you can lease those. So that we are a little bit more flexible for trans-loading facilities. It’s certainly a commitment and it’s something you have think about and do, but it’s not a huge capital commitment or a huge long-term financial commitment. Regarding selling [indiscernible] if we had any discussion selling [indiscernible] those will be confidential, so I don’t think you will see us [indiscernible].

Obviously, I will also say, this is Ben, around vertical integration is that we have I learned at RPC same throughout my career that I think it’s important to stick to what you know and competition seems it takes a lot of things this industry is able to fix shortages in supply pretty damn quickly, all the way up and down the value chain from finding new reserves, drilling, producing, last mile logistics, coming up with new logistical facilities, trans-loads, if the demand is there, they are going to be people who are expert and have right kind of capital available to make those things available to us, to be more of a lease versus an owned transaction and that is definitely our – that’s kind of will continue to be our first preference and not try to become vertically integrated. We know that this industry will continue to be volatile. It will go up and down. We are here for the long-term, so we are not trying to create the most – the best and absolute best. In a nine inning game we want to play well the whole game, not just one or two innings out of nine. So we would try to keep it simple and focus on what we know and work on our relationships with our outside vendors and we think that’s – that we will continue to service well in the long run.

You are not alluding that benefit interesting strategic to be emerging about, which model will be most effective for a full cycle return. Thank you. It’s been a rigorous Q&A.

Thank you, Tom.

[Operator Instructions] We will hear next from Chase Mulvehill with Wolfe Research. Please go ahead.

Hi. Thanks for squeezing me in here. Hi Jim, so I guess the first thing and I apologize if this has been discussed, but on the sand pricing impact for you guys in the first quarter, how much of a negative impact was that in the first quarter and do we have any contracts that roll as we get into 1Q or as we get into 2Q, if you could talk to that just a little bit?

Chase, we had no negative margin impact from sand price increases during the quarter. Sand price increases were minimal. We have a minimal amount of contractual obligation to buy sand. We have really been on the spot market with sand. We have some handshake agreements with vendors to insulate us from price increases during the first quarter, but we had those. We certainly appreciate that, but they appreciate the fact that we paid our bills during the downturn. So that’s the benefit of paying your bills during a bad time when nobody else can, people do remember that during an up-cycle. So going forward, we are just going to have to – we are just going to have to manage it. We are disciplined on our pricing. So we don’t put forth the pricing proposal or firm pricing proposal where we don’t know the cost of our raw materials. So it’s just going to be have to be that continued grind upwards where we are looking at cost increases and factoring that in with the customer, that’s why we are judicious in how we are unlimbering taking out of the stack out of equipment. That’s the answer we can give right now.

Okay, alright. And then I think when John was asking some questions, I think you said – did you say you added three to four or three to five crews in the first quarter and was this all on 24-hour work?

Most of it was and why we said the reason we said three to five is that it’s flexible and we are trying to be as good as we can with the workforce in terms of being efficient, so yes, three to five and think of them all as 24-hour if you want to.

Okay, alright. And so where – I think you gave some numbers about the end of the first quarter where horsepower was, where do you expect horsepower to be at the end of 2Q and when are you fully deployed with all of your horsepower in your fleet?

We are not sure, we would rather not say. Our best estimate right now is that if things continuously have, we will be fully deployed by the end of third quarter and that is really the best estimate we can give people right now.

Okay, alright. And so what are the lead times on new builds, if you are fully deployed by third quarter, what is the lead times on the new builds, when do you decide to add equipment?

Since we are not adding – since we are not ordering any, we don’t exactly know, but our channel checks indicate at least six month for getting the complete kit that’s a pressure pumping fleet. At least six months to nine months, at least six months, maybe as much as nine months.

Okay, alright. And then what were your frac stages up in the first quarter?

We didn’t disclose.

Okay. And so what about average horsepower per fleet, where do you stand for your fleet and then kind of how does that compare over 2 years ago?

Just to summarize the answer is an average fleet for us is around 45,000 hydraulic horsepower at this point. We have a couple of pressure pumping yards that do smaller jobs, asset work that sort of thing that have smaller fleets. We have some that are larger. In general, fleet sizes are growing because of the longer duration of jobs not that you need more equipment. The need for equipment is not a function of time as you know, but you do it more redundancy that kind of things, so average fleet size has probably grown 10% to 20% over the past couple of years.

Have you all looked at how much horsepower is required as a function of the amount of frac sand you pump, I am just trying to think about a metric here that would correlate horsepower demand and the amount of frac sand we are pumping?

I don’t think those conversions actually work you are missing a bridge there. The amount of hydraulic horsepower that you need relates to the pressure at the wellhead and the pump rate. And so the amount of proppant actually doesn’t really figure into that when there is a correlation, but it’s hard to make that correlation exactly.

Okay, last one on acquisitions. Are you thinking about acquisitions any differently? Are there anything out there that looks attractive at this point? You just talked to that a little bit?

Well, we keep looking. We are always receptive to ideas. It’s the same group of ancillary services we would be interested in. I think with the capital markets being what they are right now, these things are priced to perfection. So they are priced to a high multiple of either 2014 EBITDA or 2018 EBITDA and so with the execution risk, due diligence risk, that sort of thing, that’s keeping a lot of transactions from getting done probably.

Okay, awesome. Very helpful. Thanks, Jim.

Thanks Chase.

We will take our final question from John Daniel with Simmons & Company. Please go ahead.

And you guys are extremely patient with us. Thank you.

John, we care about you.

Well, you guys are good guys. Alright, look I got to come back to some modeling stuff and if you don’t want to answer that’s fine, but I got to try.

Go for it.

You got to try. Okay. So for the non-frac businesses, I am going to shift focus on say ThruTubing coil and rental given that there was whatever we call a lag this quarter in Q1, would you expect the revenue growth for those three businesses to be more in line with what the rig count grew at in Q1 as we go forward into Q2 or is it something that?

For coil that you ask about the other three, so for coil tubing solutions and ThruTubing Solutions, we would in general agree with that concept. The rental tools, is a little bit different. We talked about service intensity and all these things that are going on, but the rig count is still only 800. So there is still we believe a real excess supply of rental tools that are used for drilling on the market. So, we believe that the rental tool business relating to drill pipe is going to lag and probably sort of some inelastic demand, I guess. So, it’s going to be a while before that catches up.

Okay, fair enough. Another one modeling one here if we assume average horsepower call it 450 in Q1, again I know you put some stuff up later, call it 450,000 horsepower per fleet, call it 9 to 10 fleets, that assumes revenue per fleet of maybe $15 million, $20 million a quarter. If you start extrapolating here Jim and say you get the 4 incremental fleets maybe 5 in Q2 versus Q1, I am assuming that pricing is a little bit higher in Q2 versus Q1, is it unreasonable to think that your frac revenues are in excess of $215 million in Q2?

John, the math works, but it depends on the reactivation and that kind of thing.

Okay. But I mean you did have those four fleets reactivated as effective April 1 more or less.

Yes, that’s right.

Things are moving along swimmingly. Okay, very good. Thanks, guys.

Sure, John. Thanks.

And with that being our final question, I would like to turn the conference back over to Jim Landers for any additional or closing remarks.

Okay. Operator, thank you and everybody thank you for your questions. I would like to amplify one earlier answer that we gave, not change it, but just to amplify it. There was an earlier question about completions being slowed down and perhaps that pressure pumping was working, but the other completion services work. I just want to amplify the fact that there are no incomplete completions and it’s at the customer’s discretion. So, the customer will either have everything lined up and will do the completion job or they will say we don’t have everything lined up, but we never do pressure pumping and then leave before the completion is done. So that was just a final clarifying point. I appreciate everybody’s attention and we will talk to you soon. Have a good day.

Thank you. As a reminder to our callers, today’s conference will be replayed on www.rpc.net within 2 hours following the completion of today’s call. We do thank you all for your participation. Have a wonderful day.