Good morning, and thank you for joining us for RPC, Inc. Second Quarter 2019 Financial Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO; 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 is being recorded. Jim will get us started by reading the forward-looking disclaimer.

Thank you, Lisa, 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 2018 10-K and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net. In today's earnings release and conference call, we'll be referring to 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're also required to use EBITDA to report compliance with financial covenants under our revolving credit facility. Our press release issued today and our website contain reconciliations of these non-GAAP financial measure to net income, which is the nearest GAAP financial measure. Please review that disclosure if you're interested in seeing how it's calculated. If you've not seen our press release and would like to see one now, please visit our website at www.rpc.net. I will now turn the call over to our President and CEO, Rick Hubbell.

Jim, thank you. This morning, we issued our earnings press release for RPC's second quarter of 2019. RPC's revenues improved compared with the first quarter because of increased customer activity which benefited most of our service lines. However, our results continue to be impacted by intense competition and customer uncertainty regarding their near-term plans. As we begin the third quarter, there are indications that drilling and completion activities may decline during the second half of 2019. As a result, we continue to evaluate industry prospects and adjust our operations accordingly. Our CFO, Ben Palmer, will review our financial results in more detail. After which, I will have a few closing comments.

Thank you, Rick. Second quarter revenues decreased to $358.5 million compared to $467.9 million in the prior year. Revenues decreased compared to the prior year primarily due to lower pricing, lower activity levels and an unfavorable materials mix within RPC's pressure pumping service line. Operating profit for the second quarter of 2019 was $8.4 million compared to $75 million in the second quarter of the prior year. EBITDA for the second quarter was $51.2 million compared to $119.2 million for the same period last year. For the second quarter of 2019, RPC reported $0.03 diluted earnings per share compared to $0.28 diluted earnings per share in the prior year. Cost of revenues during the second quarter of 2019 was $265.1 million or 73.9% of revenues compared to $312.1 million or 66.7% of revenues during the second quarter of 2018. Cost of revenues decreased due to lower materials and supplies expense, including a change in materials mix as well as lower fuel costs, consistent with lower activity levels within RPC's pressure pumping service line. Cost of revenues as a percentage of revenues increased due to lower revenues, increasingly competitive pricing for our services and labor costs inefficiencies. Selling, general and administrative expenses increased slightly to $43.3 million in the second quarter of this year compared to $42.5 million in the second quarter prior year. Depreciation and amortization expense was $42.9 million during the second quarter of 2019, an increase of 7% compared to $40.1 million in the prior year. Technical Services segment revenues for the quarter decreased 24.9% compared to the same quarter in the prior year. Operating profit in the second quarter of 2018 was $75.6 million compared to $6.9 million in the current quarter. These decreases were due to lower pricing and lower activity within our pressure pumping service…

Ben, thank you. Yesterday, our Board of Directors suspended our quarterly cash dividend. RPC is competing in a very challenging operating environment. We remain focused on delivering quality services to our customers and maintaining a conservative balance sheet. In light of the dynamic industry trends, we continue to evaluate our capital investments and position our company to generate adequate returns over the long term. Thank you for joining us this morning on the conference call. And at this time, we'll open up the lines for your questions.

[Operator Instructions]. We'll take our first question from Brad Handler with Jefferies.

I guess just to help us all think maybe my first question is the routine one for Jim. Could you share the percentage of revenues coming by product line and the way that you do?

Yes, Brad, absolutely. So what I'm about to give you is percentages of second quarter consolidated RPC revenues for our largest service lines. So for the second quarter ended June 30, pressure pumping was 47.4% of revenue. Thru Tubing Solutions was 31.5% of revenue. Coiled tubing was 5.8% of revenue. Rental tools, which is our Support Services segment, was 3.9% of consolidated revenues. Nitrogen was 3.4% of revenues.

Great. And we'll be able to sort of think through that a little bit. I guess, first, maybe I'll start with just second quarter maybe a little bit more color from you guys. Should we think that your experience in the second quarter reflects -- when you talk about customer uncertainty, so how much of it get reflects customer budget management as well? Or is that a different way of saying the same thing or are we dealing with a different dynamic when you talk about customer uncertainty?

Brad, this is Jim. Just anecdotally, we know of customers -- or we know of -- job delays and various things like that, we do believe that customers are managing their budgets more closely. I wouldn't say on a month-to-month basis because the projects just don't work that way. But certainly as we approach midyear, there may have been some people in light of commodity price or oil prices that were in the low 50s rather than the low 60s who were slowing down a bit to manage their budgets. So we do think that played maybe some role in activity not being more robust.

Okay. That's fine. But if the predominant role was just the hesitancy, what visibility are your customers giving you about the second half? I mean you obviously are talking about risk of declines. I suppose you're getting pretty clear signals from some of them that they intend to -- if they had a program in place, they intent to now slow walk that or they intend to hold off until more robust commodity environment? Again, little bit of color around what your customers are telling you would be helpful.

Brad, this is Ben. Appropriate question. I think some of it is our customers again are uncertain. I think they are being cautious. They don't necessarily -- they are interested in us and our competitors quoting jobs and they're evaluating what the cost of completing wells are and trying to make decisions about whether they're moving forward or not. So we don't really get typically a whole lot of guidance from them in terms of specifically what they're doing with their budget. So think our comments are more broader and reading the tea leaves and reading the press about what companies are trying to do focus on key -- free cash flow and they're not in a rush to try to spend their budgets and they're just being cautious and slower to make decisions and just those types of responses by them are just creating, in our minds, uncertainty about the level of activity that we can expect and so we are remaining cautious. Therefore, we will remain cautious.

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

So I guess as we think about the second half and then seeing customers slow down, can you talk about your willingness to stack equipment? Or how you guys think about adjusting the stacked crew count as we go through the quarter? Is it as activity falls, we'll stack equipment? Or is there somewhat interest in holding onto additional equipment for potential recovery in 2020?

Praveen, this is Jim. I think we've signaled that we are looking at cost reductions and rightsizing the business to do what we need to do if that's appropriate. Right now, what we're doing with pressure pumping specifically is really evaluating the equipment and fleet configuration. That is probably more overriding concern than thinking about stacking additional fleets at this point, which I guess is another way of saying we aren't sure at this point, but we are really assessing the condition of our equipment and figuring out the right place and the right configuration for the new equipment that we have coming in during third quarter. So that's probably more our focus right now than anything we could tell you about additional fleet stacking.

I'm sorry. Yes. Praveen, this is Ben. Let me just add a little bit. Obviously, we're pleased that we had improved results from the first quarter to the second quarter. So that signals some progress on our part. But as Jim indicated, we're sitting back assessing again the environment, the competitive environment and customers and what they are signaling or seem to be singling and what everybody is saying. So as Jim indicated, we're looking at our equipment fleet, again, what is it that we want to have available to us, what makes sense to have available in terms of band fleets. And in my remarks, I indicated that despite the fact that we do have some newer highly capable equipment coming in that we don't expect at this point in time given our assessment of the next two or more or at least the next couple of quarters that we're not necessarily going to be stacking up additional crudes just because we have that new equipment. We think in the current environment, we're going to be as we always believe we try to be prudent, and we're making some assessments about the number of fleets that should be manned in the current environment. Again, we're in the business. We're going to continue to compete in the business, and there are just a lot of dynamics going on in our industry right now and so we're undertaking a process to try to decide where we should be positioned for at least the next couple of quarters, and we're, let's say, going through that process now.

Great. That's very helpful. I know it's early to think about 2020, and this is something you're likely going through the process of. But as you think about that in the context of capital spending, obviously, you guys have demonstrated a lot of flexibility in prior years of being able to flex that capital spending budget. But how do we think of it in the context of upgrading the equipment like you're doing this year and to what capital spending could be next year? And then also how do electric fleets play into that decision making process?

This is Ben. So yes, relative to 2020, we've talked before of this. If we believe that longer term as the industry allows us that we will plan to continuously, not necessarily yearly, but we will continuously evaluate and look to upgrade the fleet. At this point in time, given in part that we've got these new 2 fleets coming on board in 2020, the chances are unless things improve, we won't be adding any capacity in pressure pumping in 2020. If conditions improve and we see that we have opportunities, we'll have the flexibility to add capacity. But at this point, we don't expect to add any. As it relates to electric fleets, it's something that we are, as many people are, we're studying it. We are talking to vendors. We're talking to customers. Everybody wants to learn about it, try to understand what the opportunities are but also what the uncertainties are and what the complexities are. From our perspective, there's still a lot of unknowns about it and uncertainties, and so it's not something we're planning to rush into, but we are open to opportunities if they present themselves working with customers or otherwise, but it is unlikely that we will go out on a spec basis, highly unlikely that we will go out on a spec basis and add an electric fleet without some very real and specific financial incentives and guarantees and so forth. And I don't see that forthcoming, but it's something that we're, again, open to talking to customers about and vendors. And we want to learn about it. We think it clearly has -- seems to have some attractive aspects to it, but it's something that I'm not -- it's not clear to me whether anybody has been able to figure out what the right configuration is both from a design perspective and from an operational perspective and then how that translates into relationships with customers and pricing and pricing differentials between conventional equipment and the new technology. So there's just still a lot of decisions to be made there. I think a lot of research to be conducted. And we don't expect to be on the leading edge of that.

Our next question comes from Chase Mulvehill with Bank of America Merrill Lynch.

If I guess and kind of come back to the 3Q outlook here, it sounds like you don't have a ton of visibility. But maybe could you talk about, I guess, how many manned fleets do you have today? I mean it sounds like you're going through the process of trying to understand in the back half how many you're going to have. But kind of start there and then maybe if you drop some fleets, is it fair to assume that revenue would be down in 3Q? And then maybe what about profitability? Could you drop some less profitable fleets and get profitability up if revenue was down?

Chase, this is Jim. 16 fleets manned and operating right now. We cannot -- I cannot tell you how many fleets we will have manned and operating on September 30. If we do idle anymore fleets, there will be fleets that are inefficient due to labor cost inefficiencies, and there's certainly a scenario where a low utilized fleet today, which is idled, would actually improve the bottom line although revenue would decline. But those are the kind of metrics we're looking at and solving for right now. We do see indications of weakness in the third quarter, but we just cannot tell you how many fleets we think will have active on September 30.

Chase, this is Ben. That's part of the business judgment to be made is what we think there's potentially the opportunity to adjust the number of fleets and maybe have revenue increase, right? I mean it's just there's a lot of dynamics we're working hard to as we talked about before trying to get more the right customer relationships. So there certainly is the potential to have improvements in revenue and declining costs. So what we're trying to find is, as Jim said, solve for or try to assess or try to make a judgment about what the appropriate number, say appropriate number, the number that we feel we should move into the latter half with. So that's a little more color on that. And let me say in terms of the e-frac I said earlier that we don't expect to be on the leading edge, we expect to be out there trying to understand what the potential benefits and operational opportunities and challenges are we're going to be the leading edge of that. But I don't expect we're going to be the leading edge of spending new capital on electric fleets.

I think that's the right decision, too. There's a lot of unknowns out there right now. And to deploy that capital and not really have some certainty about where things are going to go across the industry, it makes a lot of sense. So I guess a quick follow-up. When I think about 2Q margins, revenue came in stronger. You had 16 fleets rather than kind of 17 fleets that you had maybe anticipated. So it feels like utilization across the fleet was better than at least what we felt, but margins came in softer. So maybe kind of help frame that the margin in 2Q kind of what happened there. I mean, was it more pricing? Was there a fleet or 2 that really struggled from an operational standpoint? Kind of just help us understand the margin profile in 2Q.

Chase, it's Jim. Just a couple of things to put out. Pricing in pressure pumping was relatively stable. It might have declined a little bit, but pricing was stable in second quarter. Utilization was -- we certainly would have liked it to have been better, but utilization did improve. The materials mix impacted us a bit. More of our customers brought their own sand, and we continue to be pumping some in-basin sand and that is because proppants are our largest cost. It's also our largest revenue line item. And to the extent that there is a markup, that would have impacted margins a bit, not knowing exactly what your model had in it, but that is a possibility as well.

Okay. I'll just ask one more real quick one, it should be pretty quick. So dividend, a couple of questions on the dividend. You're kind of maybe down to your minimum cash levels. So how do you think about the dividend and the potential kind of having to pay that with debt?

We have suspended the dividend for the time being. We've done that historically back in '15 and '16. So that is suspended at this point. So it's a quarter-to-quarter decision, and that's where we are.

We'll take our next question from Tommy Moll with Stephens Inc.

It's certainly understandable given the limited visibility if you don't want to throughout a bogey for 3Q, but I just want to ask anyway. Are you willing to say on revenue and/or EBITDA flat, up or down sequentially for 3Q? Best guess.

We don't provide guidance, and we're not -- so we won't here either.

Okay. In terms of capital allocation, if the macro remains challenged through the second half of the year, you've suspended the dividend, reduced the CapEx budget. As we go forward, would you continue to solve for avoiding needing to tap the revolver as we get into third and fourth quarter, potentially with additional CapEx reductions or potentially operational adjustments to your operational strategy, how many fleets you're running, et cetera? Or would there be some willingness on a short-term basis anyway to tap the revolver?

Tapping revolver is not absolutely taboo, but it's certainly it's a good metric for us. It's a good target for us to shoot for. Our intention is not to have to use the revolver. We're trying to make the right judgments and business decisions. And that's again, as I said, that's not the primary driver, but it's a good indicator of where we are and how we're doing. So it's our intention to try to manage to that and not having to use it. But I guess that's the primary point. It's not to have, but it's therefore a reason and use it if we need it. But we clearly don't want to manage the business to say it really doesn't matter whether we used it and whether the debt is growing. It's clearly something we want to maintain the level of conservatism that we've had over many years, and so we hope to avoid having to use it.

We'll take our next question from Marc Bianchi with Cowen.

I guess just wanted to start with the commentary you had about the second half here, and it sounds like from the way you phrased it that you're anticipating some declines but maybe you haven't seen it yet thus far in the quarter. Is that a fair characterization of what you guys see?

Marc, this is Jim. It's really hard to call this on week-by-week. We're 3 weeks into July. We haven't closed the books of July yet. I know that goes without saying. We just know from our operational reviews that customers have talked about slowing down in the second half of the year. They talked about budgets. Continuing frac fleet efficiency does not help the situation. So that is our view of the world right now that the second half of the year will slow down for us. We just don't -- we don't have a whole lot of better information than that right now.

I think one thing that I will -- this is Ben, will comment on. I guess our assumption is in terms of our planning is that the fourth quarter again will be weaker than we would like it to be just because that's the way it's -- that's what's happened in the last 2 years. So we have that as our backdrop as what should we be doing now given that there is expectation and that the fourth quarter will be less activity than we might experience in the first, second and third quarters. So that is part of our planning assumption at this point.

Right, right. Okay. And these two fleets that are coming in here towards the end of the third quarter, all else the same, it sounds like they're going to be replacing 2 of the 16 fleets that you have right now. Presumably these are fleets that customers are really looking forward to working with. Would you anticipate that those have a positive impact to your overall EBITDA once those come in, all else the same?

Yes, Marc, absolutely. Other things equal, demand would be higher. The footprint of this new equipment is smaller, yet it requires fewer people. It's more efficient. So maintenance downtime or maintenance expense and associated downtime would be lower. So yes, all else equal, that would be an offset to any potential revenue declines that come from customer activity slowdown.

Got it. And then just one more on the capital allocation for 2020. I know, Ben, you mentioned that you wouldn't be adding any pressure pumping capacity in 2020 assuming things still look kind of depressed. But my understanding was that these two fleets that you're adding here that we're just talking about are more replacement than new capacity. I just want to make sure we've got our vocabulary kind of on the same page. When you say no new capacity, is that mean that, for example, these two fleets that we're talking about, you wouldn't be adding another two like that in 2020?

Yes. At this point in time, we will not be adding any new equipment.

Okay. So then fair to think about the second half run rate in CapEx being kind of what 2020 could look like as a starting point?

No, no. Second half of '19 reflects the arrival of the equipment that we're just speaking to. So full year, $260 million is what we're looking at for 2019, but that includes again some coiled tubing. That includes several -- some growth CapEx. And at this point, we're not -- we're anticipating very little growth CapEx for 2020. And growth or -- we're anticipating very little other than we're not expecting to spend CapEx on anything other than maintenance CapEx for next year. So we're not expecting to order new equipment, new -- to add to the fleets.

Right. So if I've got kind of -- I'm looking at my numbers right here. I mean is it fair to think that, that maintenance number is below $150 million?

That's a reasonable assumption.

Our next question comes from Vebs Vaishnav with Howard Weil.

I guess just if we can talk about how are the other nonpressure pumping business progressing, particularly the Thru Tubing business, that would be helpful.

Vebs, this is Jim. Happy to. It was a decent quarter, I think, for most of our other businesses. Thru Tubing continues to benefit from some of its new products and some of its innovative technologies. It's -- sequentially revenue was flattish, but it's -- it continues to be a good performer for us. Coiled tubing, we're upgrading the fleet. So we need to work on that a little bit, but it did improve sequentially. Our snubbing service line improved. Rental tools was flat. I mean all this is kind of transparent to you at this point. So the other businesses are kind of performing well actually better than the rig count but kind of along with completion activity and everything else. So it's a relatively flat environment sequentially. And of course, pressure pumping revenues did improve. We're talking about the dynamics relating to that.

So as you guys think about drilling and completions activity declining in second half, is that fair way of thinking for the rest of the non-pressure pumping business as well?

Probably. Those that are exposed to completion as well and then drilling, too. So, yes, yes. All those -- I mean some of the businesses have improvements for their -- for various other reasons. So it's kind of hard to tell. We think the real exposure to a decline in completion activities will be pressure pumping.

Okay. And I understand we don't have any real visibility into third quarter or fourth quarter. But just if I think about what would your early thoughts on 2020 U.S. activity would be, would you venture a guess?

Tell us the price of oil, and we'll tell you what activity looks like. I'm sorry, we don't mean to be flipping about it. It would be disingenuous to tell you that we know what 2020 looks like when we're not sure what third quarter of 2019 looks like.

Well, and again from a planning assumption standpoint, we were not planning on and our assumption is not that activity levels next year will be picking up to any significant degree. So we're not counting on it, but we don't have any better information and anybody else does with respect to, as Jim said, commodity prices and customer budgets and all those things. So we're not planning on it improving. We're not going to be positioning the company for growth next year. We're going to be deciding what's the appropriate position for the company given the current environment that the payer to make adjustments hopefully upward adjustments to capture upward benefits and activity levels when that does occur.

Completely fair given just no visibility. I guess where I was going with that is, let's say, if we think U.S. activity in second half is flat -- flattish from here on and maybe 2020 is flattish, just like what steps are needed to be taken to improve profitability either in broader fleet basis in pressure pumping? Or what are the other things that you would need to think about in terms of the total corporate structure?

Well, the dynamics, the same things we've been trying to work on is get the right mix of customers, the customers that have higher and more consistent revenue. That's what we're still striving for. If we're able to -- and then the question becomes what's the appropriate level of staffing to execute with those customers. So that's still the metric, the approach that we're trying to take and we're hopeful we've made some progress and we hope to make additional progress in that regard and we'll take those successes and that change in our profile will take that into account, making decisions about what the right operational platform that we need to be able to provide quality services to those particular customers. So that's what we'll react as what, and that is our opportunity at this point is to increase the number of customers to get us that more consistent work that can generate more predictable results and better cash flows and returns and so forth over time. But we're going to remain disciplined with our CapEx, and we'll remain disciplined with our returns criteria as it relates to any new investments and how we try to, again, manage the business and staff the business and that sort of thing.

Our next question comes from Waqar Syed with AltaCorp Capital.

You have assets in multiple basis in the U.S. Is this weakness that you're mentioning about second half, is this in all basins? Or is it more heavily weighted towards the Haynesville and MidCon where you have some decent exposure versus the Permian and DJ and the Bakken?

Waqar, this is Jim. Welcome back. Let's see. We are seeing some weakness probably in the MidCon. You mentioned the DJ. We actually don't have extensive operations there. The Permian is probably a bit stronger relatively than some of the other basins, and that maybe about the best that we can. We're probably seeing some weakness in the Bakken also in some areas.

How about the Haynesville? Do you have some, I believe, exposure there as well?

We do. We do. And that the Haynesville itself is not that strong because of the completion requirements and the current price of natural gas, we do some other work there in the Cotton Valley, which is fine, I guess, probably weaker, again weaker than the Permian.

Okay. Fair enough. Now I also saw your days receivables went up. Could you comment on what's going on there with your customers? And secondly, what was the working capital outflow in the quarter? And how do you expect that to change in the coming quarters?

Waqar, could you repeat the first part of that question? I lost you for a second, something went up. Yes, something went up.

Yes. Days receivables, the payments slowdown from your customers.

Maybe slightly. There are no particular concerns there at this point in time, and I think it's normal ebbs and flows. We're comfortable with the quality of our credits. You asked about going forward. Obviously, it will depend upon activity levels. We're not expecting terms to continue to extend or there to be any significant changes in the dynamics of our working capital. It will respond what business activity levels are for the most part.

And what was the working capital change in the second quarter, cash inflows, outflows?

We haven't published our Q yet.

Calculated.

Yes.

Based on the balance sheet?

Yes.

That's okay. I just want to see what the impact was on the cash flow table from working capital changes.

Again, a lot of people find that differently. [Indiscernible] about a number on the call. I apologize.

That's fine. And then just final question. In terms of service intensity, are you seeing that now flattening out? Are you seeing still pickup? And in terms of your zipper fracs, what percentage of your fleet was running zipper fracs?

Waqar, it's Jim again. Our zipper frac and 24-hour percentages stayed fairly consistent over the recent quarters. About between 60% and 65% of our work in the second quarter was zipper frac versus traditional. Service intensity seems to be leveling out at this point. There's not a discernible real change one way or the other regarding if we're talking about sand, proppant first stage and that sort of thing, it's leveling out at this point.

Okay. And then maybe just one last question. So as you add these 2 fleets, they will have a fourth quarter impact. Is that correct? Not in third quarter?

Yes, minimal impact on third quarter it will be more. Fourth quarter which again we're expecting it to be difficult environment. So uncertain about what the contribution could be, but we do, all things equal, we expect it will be working some in the fourth quarter and position very well when hopefully one actively picks up a bit in early 2020 compared to the fourth quarter.

Our next question comes from George O'Leary with Tudor, Pickering, Holt & Company.

So just trying to think about the cadence of activity in the second quarter given you guys haven't closed the book on July, but just to think about how maybe July might have started off. Could you maybe describe the -- just the utilization, the stages, the hours pumped however you guys and think about it, days worked on April versus June for your fleets? Any color there or even just directionally how activity turned it throughout the quarter would be helpful, again just to frame the thought process for how third market might start out?

George, we get into trouble every time we talk about granular detail. No pun intend -- actually there was a pun intended. So we're not going to talk about weeks or that sort of thing. During the quarter, we can say that the end of the quarter was a bit stronger than the beginning. But let's not go down a rabbit hole about how much stronger or percentages or things like that. We published our second quarter financial results. We're just going to have to stand as they are. Sorry.

That's okay. And then from the third quarter perspective, just about the 2 fleet deliveries, could you frame the -- just the cadence of the CapEx spend in the back half, is Q3 going to be the heaviest quarter from a CapEx perspective?

Slightly heavier.

Yes.

Our next question comes from Chris Voie with Wells Fargo.

So a question actually about the coil business. I think you mentioned that it was actually tracking pretty well but the CapEx cut is coming primarily from canceling two coil orders. Has there been any deterioration in pricing there? Or is this mostly just CapEx discipline driven?

I think more of the latter. We're pleased with the progress so far with the new units that we brought in, getting into the fleet and up to speed and establishing good customer relationships. So we feel that, that could be a nice contributor going forward, if the environment allows it. Pricing certainly is very competitive. It remains competitive in all segments of our industry, of course. But I wouldn't say that there's been near term discernible changes in pricing. Some of that is we witnessed new technology that we brought on board. It's very similar but different than what we've had in the past. So we're still sort of in a discovery mode as well, so we can't really compare last year to this year. But we think there are some reasonable opportunities for us, and I'm happy that we have them in our fleet now.

Okay. And then my follow-up just to follow-up on Waqar's question. Based on scale is important issue for profitability in frac and at least in our view. As you focus on cost efficiency, are you making any tough decisions or evaluating whether you might need to exit any of these basins going forward?

Certainly. I mean we're always looking at what our operational platform looks like. And the question about operational efficiencies with scale, we're seeing with the mix of our business with materials, the more customers provide materials, that scale, from logistics standpoint becomes all things equal a little less important. It really gets down to having quality equipment and delivering a quality service. Scale can have some benefits, but I think we evaluate our reserve result service line by service line, location by location, and so we'll continue to monitor that performance and make what we believe are appropriate adjustments. So we're willing to do that, are looking at that very hard and looking at the dynamics and the changes in the industry and how our customers are changing and so forth. And so as we opened up our comments, we're taking a hard look at the businesses. Given the current environment and the fact we're just during that time of the year, we're starting up our planning process. So it's a good time to go through them.

We'll take over next question from Connor Lynagh with Morgan Stanley.

I think we've covered a fair bit here, so I'll just ask a brief one here. The choppiness that you're seeing in the customer business that's driving the expectations of the downturn activity, is there any clear trend between privates, smaller company, larger companies? Is there anything that you'd point to on that front that's driving the outlook there?

Connor, this is Jim. Not really. You could argue it probably argue at a couple different ways. Public companies maybe under more scrutiny on their budgets. Private companies may or may not have great financing. We certainly understand the question. We understand that it's an important one, but there's nothing discernible for us that's really clear enough to talk about.

Okay. Fair enough. Actually one more. The margin, certainly, it sounds like you've got a fair bit of inefficiency right now. If we think about what things could look like next year if activity is flattish to this year, how much of an impact with decreasing some of the underperforming fleets, staffing or something like that? How big of a lever is addressing the labor inefficiency?

Connor, that is the biggest lever we can pull at this point, and we just haven't done the work to come up with it. I mean, we -- it would certainly improve our Technical Services margins by a number of basis points even though revenue would be lower. Just trying to look at the number and share with you right now. It's a valid question though.

We'll take over next question from Brad Handler with Jefferies.

I was thinking about the -- some of us have talked in private on this thing. But if we're -- just looking at the third quarter again, in coil, you're still getting 2 new units -- the contribution from 2 new units as well as I think for upgraded units in the third quarter. So there's a reasonable chance of demand is there that revenues are up nicely in coil. Perhaps revenues could still go up in Thru Tubing. It seems to have it on dynamic some times. I know it's obviously affected by the macro. But I guess what I'm getting at is, I'm wondering if there's a chance that pumping is down but others offset it and so revenues are more flat. And in that case, maybe it's a question ultimately on margin mix, but good margins, if revenues are flat, could the margins fold up? Do they naturally rise and then naturally fall because of that mix?

Brad, then mix shift that you're outlining for third quarter would probably have -- would probably give an upward bias to margins. Other things equal, that's our caveat. The ideas that you're bringing up are valid. We're talking about more coiled tubing units coming you're talking about Thru Tubing Solutions doing well. So we could very easily see a muted sequential decline in revenues. We're not saying that third quarter is necessarily doom and gloom, but I just have to come back to the lack of visibility that we have right now.

Sure, that's fair. Okay. But I appreciate you just sort of validating and thinking a lot of it. And then I guess just one more for me, and it's probably again just sort of understanding the mindset. So if we think about your choice, your consideration in terms of investing in new fracking equipment, a lot of it is independent of the market because it's all the efficiency that you described and answer to an earlier question. But I suppose the problem is the top line still if you just can't get comfortable with the utilization being adequate to realize those savings than the spreadsheet, if you will, the returns fall apart. Is that kind of where you're sitting right now with the choice to continue to refresh your fleet?

There might be two parts for this, Brad. One is just the natural refreshing of our pressure pumping fleet. The work continues to be very hard on the equipment. It doesn't care how much money it earns for you. The work is still hard on it, and we are dedicated to being in the pressure pumping business. We also have the capital strength to replace equipment when that comes up. So we certainly want to be mindful of capital allocation and our own balance sheet and various other things. But in general, if the market is decent, we will certainly replace our pressure pumping equipment. There's another content too, which relates to electric frac fleets. We've been looking at them for a long time and talking to customers about it, but they cost a lot more. And in the current environment, if we can't keep the economics that we bring by investing 40% more in a frac fleet and can't have some reasonable assurance of that, then we're going to let somebody else make that investment and figure out how that works. So I hope I'm responding to your question by I think it meant those 2 ways about the investments.

Well, I think -- and again, this is Ben. I think you're right. New equipment was higher capability and so forth. It's a net positive, but the decisions are driven to by expectations of several -- a few years of performance in terms of payback. So until there's a little more clarity about the competitive environment in the market and our competitors, we know many of our competitors are really, really struggling and what's going to happen to them, how many are going to have to -- how many more are going to have to go out of business or restructure and how and are they going to come back into market. Just like our customers are being much more focused on free cash flow. We always have been. We generated -- we've always been focused on the terms to shareholders and buybacks and dividends and trying to be prudent with our capital investments and managing our balance sheet and minimizing our debt and all those sorts of things. So we're not -- we're focused on those things. We're not focused on trying to grow the fleet. Much of our fleet is capable of doing the type of work that we're looking to perform. Some of it is less than ideal so we're looking at again assessing that fleet and perhaps making some adjustments to it. Whatever adjustments we do at this point won't affect what our capacity or activity levels have been in recent quarters because we had equipment that's essentially been stacked, not manned, not working. So that's going to be some natural rethinking about what the fleet needs to look like. And then we can move forward from there, right, make decisions about what we think the current environment -- what environment is today, what environments going to be and assess our investments in light of whatever the latest facts are. And right now the facts are that to us is that there's not an opportunity in the near term. It's too uncertain to be putting out additional capital for expansion of our fleet. That's our assessment at this point in time and what we would expect for 2020, but we'll see as the coming quarters unfold.

Our next question comes from Dylan Glosser with Simmons Energy.

On the last call, you guys mentioned potential levers that you could pool to augment free cash flow generation. Can you speak to those? And if those levers still remain an option?

I think the levers that we've refereed to last quarter probably were personnel. We had improved performance from first quarter to second quarter. All things being equal, we were pleased with that, but those are still and we're talking about those earlier those are the primary levers is going to be on the number of manned fleets and our costs in general. So those are the levers that would be our costs and primarily our labor cost.

Okay. And last one for me. As you guys increased your stock repurchases this past quarter, can you speak to your strategy with that moving forward? And are you guys likely to increase your share buybacks before getting reinstating the dividend?

That's a decision that the Board makes based on our recommendations. And the current environment given that we've suspended our dividend and that sort of thing, there's a lot of dynamics that go into that. Reasonable question, but obviously the buybacks, there's more flexibility in terms of the timing with which you can make those decisions as opposed to a dividend. Obviously, it gets approved at the board meeting and that has a specific time frame on it. So that's just to say that maybe it's more likely that we will do some share repurchases before the dividend was put back into place, but that may just be the timing of our visibility and decisions relative to when the board meetings occur and those decisions can be made.

[Operator Instructions]. We'll take our next question from Chuck Minervino with Susquehanna.

I know lot's been covered. I just want to get a little bit more color on what you're thinking on pricing in pressure pumping for the remainder of the year. Just kind to thinking about the fact the second half of last year when activity started to kind of rollover, the pricing impact that happened. And I guess this year, you're looking for some weaker activity as well but obviously coming off of a different pricing point than you would have been last year but also offsetting that you have a bunch of the equipment in the industry stack. So just kind of trying to get your mindset, what you guys are thinking as far as do you think pricing will take a leg down with that activity slowdown? Or do you think it's more of a there's not much left to give?

Chuck, this is Jim. More of the latter. We certainly can see the activity decline in the second half of the year, but I don't think we're going to give up -- we, as an industry, are going to give up any more pricing. As you kind of pointed out, and I think we certainly all know, we and our peers have been stacking fleets this year rather than working at suboptimal pricing which wears out the equipment, et cetera. So I think there will always be the marginal competitor who's willing to price 10% or 20% lower than everyone else, but that group is probably getting smaller. And the fleets that have been sidelined at this point certainly speak to a little more discipline than we've seen in the past cycles.

And I'll add -- this is Ben. I'll add that the pricing dynamic to -- that goes into that is what is the activity that you're going to be able to get and sustain. So pricing in and of itself is a piece of it, and it's good to talk about it in that single dimension, but it really have several dimensions. And so when you price the work, it's not always clear exactly much volume you're going to get. So it's hard to compare one pricing sometimes to another. So we are still striving to try to improve our utilization. We're not striving at this point to get more business by lowering pricing. We're trying to be successful at winning work at appropriate levels of pricing and get the volumes up to where it can improve our results. And hopefully, as Jim alluded to, hopefully, the industry is getting just like everybody, just like our customers are becoming more disciplined and we need to all reach that point with supply and demand and so forth that we all can get back to a period of reasonable returns.

Okay. And just one other question separately. We have seen a transaction in the space in frac and pressure pumping. I just wanted to get your thoughts on -- it sounds like there's some companies out there that are looking to exit their pressure pumping businesses. Maybe there's other companies that are looking to expand and find the scale benefits. Just wanted to know your thoughts on kind of how the industry is going to kind of progress over the next 6 months. Do you anticipate seeing more transactions and a consolidation of the industry? Or do you think it's going to be hard for companies that want someone to write them a check to get paid for some of those assets?

This is Ben. I feel that in the current environment, it will be difficult to value the companies that maybe would want to exit, like I said, we want to have a check with and that sort of thing. We've always viewed that scale can be. We alluded in this talk about the scale can be beneficial, but we have a pretty diverse geographic, disbursed geographic exposure to the market. So we have a pretty good feel for that. We don't need -- we ourselves will not need to acquire somebody to get exposure to another basin. So that would benefit us and the whole thing with equipment configuration and age and capability and all that, those situations are quite complex. And normally somebody who is again wanting to exit the business, having their equipment properly maintained is a challenge. So there's a lot of discussion about combinations taking place and that it could be beneficial. And if it is beneficial, I would love for it to continue. It's not something that we're going to be -- it's unlikely that we would actively pursue and try to bid up to add additional pressure pumping capacity or resources to our company.

We'll take a follow-up question from Marc Bianchi with Cowen.

I guess I just wanted to speak through something -- somewhat philosophically around your business and kind of the outlook over the next number of quarters. If we think the third quarter activity declines, your revenue declines along with that and maybe the second half of this year is perhaps a bottom in U.S. activity. It sounds like whatever the margin leverage is on that, if we put 40% decrementals or something on the top line decline of maybe mid-single digits, we can get you to mid-40s EBITDA per quarter. It sounds like maybe there's more cost cutting opportunity that could occur, maybe pricing for competition or competitive pricing is weaning as you mentioned earlier. Could we perhaps see your EBITDA bottoming in that $45 million to $55 million range in the back half of this year? And that's kind of where things settle out assuming the market doesn't change a whole lot? Or are there other puts and takes that you think you would add to that?

Marc, that's a reasonable view, but we are definitely not trying to give guidance on what third quarter is going to be like. And if you look at our fourth quarter and our peers' fourth quarters over the past couple of years, they were pronounced slowdowns. So I would not venture any sort of guess as to what fourth quarter EBITDA might look like under really any kind of scenario, so.

Yes. Yes. I guess where I was trying to go with that is if we think that something in that range in the 40s is a perhaps a low on a run rate basis as we go into 2020, Ben mentioned earlier kind of $150 million or less of CapEx, yes, you don't have any interest expense. Your taxes would be minimal. So it seems like you could be perhaps cash generative in that scenario on a sustainable basis. Do you think that's the right way to think about it? Or am I missing anything?

No, that's a fair view and something we would really want to manage to cash flow neutral.

And that concludes the question-and-answer session. I would like to turn the call back over to Jim Landers for any additional or closing remarks.

Okay, Lisa. Thank you, and thanks to everybody for spending the last hour and 10 minutes with us. We'll be seeing a lot of you soon. We hope everyone has a good day. Thanks.

And that does conclude today's presentation. As a reminder, the conference call will be replayed on www.rpc.net within 2 hours following the completion of the call. Thank you for your participation, and you may now disconnect.