Good morning, and thank you for joining us for RPC, Inc.’s Fourth Quarter 2019 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. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session, instructions will be provided at that time for you to queue up for questions. 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 everyone. 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 in our conference call we’ll be referring to several non-GAAP measures of operating performance. These non-GAAP measures are adjusted net loss, adjusted net income, adjusted loss per share, adjusted earnings per share, adjusted operating loss, adjusted operating profit, EBITDA and adjusted EBITDA. We are using these non-GAAP measures today because they allow us to compare our performance consistently over various periods without regard to non-recurring items. In addition, RPC’s required to use EBITDA to report compliance with financial covenants under our credit facility. Our press release today and our website contain reconciliations of these non-GAAP financial measures to operating loss or income, net loss or income and losses or diluted earnings per share, which are the nearest GAAP financial measures. Please review these disclosures, if you are interested in seeing how they are calculated. If you have not received our press release for any reason, please visit our website again at www.rpc.net for a copy. I will now turn this call over to our President and CEO, Rick Hubbell.

Thank you, Jim. This morning we issued our earnings press release for RPC’s fourth quarter of 2019. During the fourth quarter, we continued to execute our downsizing plans first to close – disclosed in October, including closing various facilities and scrapping equipment. In addition, we reduced headcount by approximately 21% since the end of the second quarter. Our CFO, Ben Palmer, will discuss this and other financial results in more detail, after which I will have a few closing comments.

Thank you, Rick. During the fourth quarter, we recorded additional impairment and other charges of $10.6 million related primarily to severance and underutilized assets, bringing the total of impairment and other charges to $82.3 million in 2019. We do not currently expect any additional significant charges based on this review. For the fourth quarter of 2019, revenues decreased to $236 million compared to $376.8 million in the prior year. Revenues decreased due to lower activity levels, resulting from a more pronounced fourth quarter seasonal decline than in the prior year, lower pricing and a smaller fleet of pressure pumping equipment. Adjusted operating loss for the fourth quarter was $17.3 million compared to an operating profit of $19.7 million in the fourth quarter of the prior year. Adjusted EBITDA for the fourth quarter was $23.2 million compared to EBITDA of $61.7 million in the same period of the prior year. For the fourth quarter of 2017, RPC reported a $0.07 adjusted loss per share compared to a $0.06 diluted earnings per share in the prior year. Cost of revenues during the fourth quarter of 2019 was $176.9 million or 75% of revenues compared to $247.4 million or 72.8% of revenues during the fourth quarter of 2018. Cost of revenues decreased primarily due to lower materials and supplies expenses and other expenses associated with lower activity levels. In addition, cost of revenues declined due to lower employment costs as a result of our downsizing. Cost of revenues as a percentage of revenues increased primarily due to significantly lower activity levels and more competitive pricing for our services. Selling, general and administrative expenses decreased to $36.8 million in the fourth quarter compared to $40 million in the fourth quarter of the prior year, and this was due to lower employment costs. Depreciation and…

Ben, thank you. As 2020 begins, we are focused on improving utilization and well site execution as well as effectively managing our costs. We believe the actions taken as a result of our strategic assessment better align our operations with current market conditions. Despite the challenging environment during 2019 and approximately $250 million of capital expenditures, we ended the year with $50 million in cash and no debt. We will continue to maintain a strong balance sheet and allocate capital to maximize long-term shareholder returns. Thank you for joining us for RPC’s conference call this morning. And at this time, we will open up the lines for your questions.

Thank you very much. [Operator Instructions] Our first question will come from Tommy Moll, Stephens Inc.

Good morning, and thank you for taking my questions.

Sure, Tommy.

So, I think, I heard that at the end of 2019, you had 10 fleets in the field for pressure pumping. And I was curious, as you look across Q1, as of today – and understanding that a lot can change, but as of today, do you feel like that’s about the right number of fleets to be running? As a follow-on to that, whenever the market does improve to the extent that you might want to put more equipment to work, is it just a function of hiring up for the additional fleets? Or will there be some capital required to do that?

This is Ben. Yes, at the end of the year, we had 10 fleets. And as much as the fleets that we talk about is how those are staffed, and they’re pretty fully staffed and ready to go to work, we do have another three to four fleets’ worth of equipment standing by that would require minimum CapEx to put into service. But we think 10 fleets available to work is the right number at this point in time, but we’ll watch it very carefully. As Rick indicated, we want to be very focused on the calendar, the white spaces in the calendar, being as utilized as we can with those 10 fleets and being very careful and thoughtful about trying to increase the number of fleets or the number of personnel in those fleets given the current environment. There still is a lot of uncertainty, and we’ve had some – we believe some nice success in the fourth quarter. We – that includes what we were able to generate in the fourth quarter but also some of the wins we’ve had from a customer perspective. So, we feel better about the first quarter, but there’s still, as I said, there’s a lot of uncertainty, and we’re going to have to watch it very closely. And again, focused on the utilization of those 10 fleets, getting that really, really high and be really, really particular about and thoughtful about whether we were to increase that.

Okay, thank you. That’s all, helpful. And as a follow-up, is it fair to say that we’re in the late innings or maybe the game has ended in terms of the downsizing initiatives? It sounds like we’ve hit the right number of fleets. The footprint, in terms of locations, it’s smaller than a quarter ago. So is that a fair characterization? And through that process, any insight you can give us into how the customer mix may or may not have shifted? Or the type of work you’ve gone after may or may not have shifted would also be helpful to know. Thank you.

In terms of downsizing steps, as we’d indicated, we from a P&L perspective, we feel like we’re done at this time with our strategic review and any significant adjustments that we’re going to make, I mean there’s always, we’ll be watching and we’ll make adjustments based on how things – how the first quarter progresses and how we look and think about what’s before us for the second quarter, but at this point in time we’re done from a action standpoint and from a P&L impact standpoint. In terms of changes in the type of work we’re doing, I would – I don’t believe there’s really been any change in the mix of work because of the change in our staffing or the locations we’re operating out of, it’s the same as it has been and as we described the last quarter.

Okay, thank you, I will turn it back.

Thanks, Tommy.

Our next question will come from Connor Lynagh, Morgan Stanley.

Thanks, good morning.

Hey, Connor.

Just wondering if you guys could give some color on how you’re seeing work in the first quarter is shaping up, I assume it’s better than the fourth quarter, but maybe, maybe not, I mean, just broad thoughts on the market and the trajectory of activity this year?

Yes, Connor, this is Jim. First thing to say is that January is trending better than December was. So, we’re seeing – we saw a pronounced seasonal slowdown as we’ve discussed in fourth quarter and we’re certainly coming back seasonally. It is a little bit of a slow start in January, but we’re finishing the month pretty strong. An overarching concern though continues to be our customers’ ability to get the capital to work in 2020. That’s been a concern and it remains a concern and we just don’t have any visibility into how that part of things is going to pan out. All we can tell you again with the caveat of very low visibility is that first quarter is certainly trending up from December as we saw it, but again, very little visibility.

That’s helpful and I mean at this point, would you say that there is any further degradation in pricing? Would you say there is any positive moves in pricing or are we relatively stable? And I guess if you could couch that relative to fourth quarter and then just on a go-forward basis?

It’s stable at this point. I don’t think the pressure pumpers are taking any more price concessions and it was fairly stable in fourth quarter, although that’s not a good quarter to measure, but we feel stable at this point.

Got it. Appreciate it.

Thanks.

Thank you. Our next question will come from Ian McPherson, Simmons.

Hey, thanks, good morning.

Good morning, Ian.

Hey, Jim. Last quarter, the target was going to – was to end at nine fleets, seven horizontal and two vertical and you’re now at 10. It sounds like you are level loaded at 10 and I presume that is based on a slightly better work board than you had anticipated, but you said that January is trending better than December, but I guess I’m struggling with how that compares to Q4 on average because December might not be emblematic of the Q4 average, is that the right interpretation?

Yes, it would be hard with, as you know, and what December was like, but the first quarter, I mean, we went through the RFP season. I think we had a lot of success. We feel better again about our calendar and the amount of work we have. On your question about the number of fleets, good question and good observation that we talked about nine before and we’re at 10. As I sort of talked about, the number of nine versus 10 really the number of people we have for those nine and 10 is probably more important than whether it’s nine or 10. So we are not 100% staffed for the 10, but having 10 fleets kind of lined up and ready to go gives us a little bit more flexibility to respond to our customers. So, I wouldn’t deem that to be a significant change, but certainly going from nine to 10 is better than going from nine to eight. So, I guess that perhaps reflects a little bit of optimism, but I wouldn’t think it’s significant as one good thing, but we do as Jim indicated, the first quarter is clearly better than fourth, appears to be and we feel good about that. So said another way, I don’t know, have we bottomed, we’re reading things about people saying that they think it has bottomed, we’re certainly hopeful that it has, the fourth quarter was a difficult quarter, we had some bright spots and we had some difficult spots, but overall, we’re pretty pleased with the quarter, but we’re hopeful again that it is the bottom, we’re not 100% counting on it, we’re going to remain conservative with our spending and our costs and our staffing to make sure again we’re focused on utilization, we’re focused on utilization of our people and equipment and we want to make sure that gets up to an appropriate level and pricing as well, right. We want to be generating the appropriate profitability and cash flow before we try to extend our "exposure" into the future. So, we’re going to be real diligent about that, obviously focused on our CapEx and it’s – so, we feel like we’re in a good spot and we’ll be watching things real carefully in the first quarter and heading into the second quarter, we’ll make adjustments as we need to.

Good, thanks. And then also the G&A came in a little bit lower than we had maybe expected after your commentary last quarter, is that $37 million of G&A, is there anything unusual about that or should we project that on a quarterly basis from here?

There is not too much noise in there, but I would say that, yeah, kind of the high 30 range is kind of what we’re thinking about at this point, but again, we’re going to watch all that very closely. First quarter will be very telling for all of us.

Very good. Thank you.

Sure, thanks Ian.

Thank you. Our next question will come from Marc Bianchi, Cowen.

Hey, thanks very much. It sounds like you’re saying January is better than December, but still unclear if certainly January is not better than the fourth quarter. Would you anticipate at this point that, that your revenue is up in the first quarter and if you do, could you put some brackets around what kind of increase we should be looking for?

Marc, this is Jim. The reason we sort of caveated things is January had a slow start, but – and we can’t look at this on a weekly basis, but the run rate at the end of January is pretty nice. We would say at this point that first quarter revenue based on everything we know will be slightly higher than fourth quarter.

Which is an improvement from last year.

Yes. Yes, it’s a sequential improvement from last year – yes, easier sequential comps.

And then in terms of profitability, there were some overhead costs that were removed from the third quarter into the fourth quarter and I think we talked about kind of $5 million to $10 million at the time of the third quarter call. Did all of that – I guess first question is, is that still sort of the number that came out of the business and did all of that hit in fourth quarter or is there some additional benefit we should be thinking about as we move from fourth quarter to first quarter?

Marc, this is Jim again. In general, that’s not a bad answer, there is some noise in those numbers. There were – certainly we captured our costs in the impairment charges, but certainly there were some inefficiencies in fourth quarter, we worked through all of that, that wouldn’t happen in first quarter. Also, remember that we had a favorable job mix in the fourth quarter in pressure pumping and that was responsible for some improvement. I have every reason to think that, that favorable job mix will continue in first quarter, but we don’t know. So, I wish we could be a little more clear with you, but the direction you’re going and the numbers you’re thinking about I think are good ones, we just don’t have a lot of clarity.

Right, okay. Well, thanks for that and I’ll turn it back.

Thanks, Marc.

Thank you very much. Our next question will come from Stephen Gengaro, Stifel.

Thanks, good morning gentlemen.

Hey, Stephen.

So, I guess two things. I guess I’d start with S– can you just do you mind giving us the revenue breakdown in Technical Services and then as a follow-on to that when you – when I think about this and we think about the margin being weighed down by pressure pumping in Technical Services given the current environment, and you did mention the favorable product mix, but I was just curious if you had any commentary on how – what I think is lower pressure pumping revenue, how that impacted the margins in Technical Services?

Sure, let me emphasize the first part of your question because it’s the easier answer, but let me give some service line revenue percentages for the quarter. So, what I’m about to give you is percentage of consolidated RPC revenue for our five largest service lines for the fourth quarter. So, our largest service line was pressure pumping, which accounted for 38.2% of revenues. Our second largest service line was Thru Tubing Solutions, which accounted for 33.4% of revenues. Our third service line was coiled tubing at 8.3% of revenues. Our fourth largest service line was nitrogen, which was 5.1% of revenues and our fifth largest service line was rental tools, which was 4.8% of revenues. As you know, Stephen, we don’t disclose profitability or profits by service line. I think we’ve been fairly clear that pressure pumping has been – has really had challenged profitability during the 2018-2019 downturn. Things were slightly better in fourth quarter due to our cost cuts. A lot of these cost cuts have taken hold and have started to improve things and also a favorable job mix. That’s kind of – what we’re better off saying right now.

Okay, that’s fair and then as – given the cost cuts, it sounds like, and I know you were careful to mention 1Q revenues and sort of thinking about it as up modestly, but do you think margins do trend higher from here, at least gradually?

Yes, I mean based on everything we know, yes.

Okay.

Modestly.

Okay, thank you and then just one quick one, CapEx $80 million, I imagine $45 million or $50 million of that is maintenance CapEx around pressure pumping. Is the rest also maintenance CapEx? Are those numbers reasonably accurate?

Yes, at this point, we don’t foresee any certainly significant growth CapEx, so majority of that would be. I would think on the pressure pumping side though, I think the $80 million is probably on the high end. I mean we’re being a little bit conservative there I believe with – if we had 10 fleets at $2 million a fleet, we’re looking at $20 million, $25 million. We do have the harvesting of some components on the equipment that we’re disposing off, which is going to net that number down. It will be less than that. So, I think $80 million is certainly a high number. We’ll get – it will become more perfected obviously as we get into the New Year and toward the middle of the year, we’ll have a much better idea, but absent any good growth opportunity, that $80 million is certainly a conservative number.

Great, thank you.

Thanks, Stephen.

Thank you. Our next question will come from Waqar Syed, AltaCorp Capital.

Thanks for taking the call. Just in terms of your customer mix versus, let’s say, third quarter of 2019, how is the customer mix between private and public change for you? And also in terms of regional exposure, I mean, on the revenue side, how would you say that stands currently versus maybe third quarter of 2019?

Waqar, this is Jim. Customer mix allocated between public and private companies really has not changed since third quarter. We have several customer relationships now that are high utilization, and we expect to be working for them throughout the year. So that’s maybe an answer to another question. But our customer mix, divided between public and private, has not changed significantly over the past six months.

Okay. And in terms of regional exposure, how has that changed?

Waqar, I’m going to have to ask you to

regional exposure.

regional exposure. Yes, the Permian continues to be the center of gravity at RPC, especially after some of our facility closures.

Okay. And then in terms of the first quarter Technical Services EBIT margins, what do you – how should we think about the incremental margins that could be in the first quarter?

If you’re thinking about incrementals and just responding to your question where we thought that revenue would be slightly up, I would say that incrementals will not be overly robust. So I would say that incrementals would be modest on slight revenue growth. Again, we’re challenged with difficult pricing in this environment, and so that’s not going to drive things any higher. So, I’d say incrementals will be modest.

Is 20 to – 20% still modest? Or is that still high?

That is certainly lower incrementals than we’ve traditionally done, generated when revenue increased, so that’s probably in the ZIP code.

Okay. And the average active fleets in the fourth quarter, was that – nine is the right number for that?

Between 9 and 10. I mean, we were kind of going – we were completing our – the plan of going from a higher number during the third quarter to down to 10 during the fourth quarter. So it was 9 or 10, on average.

Okay. And the 10th fleet is a horizontal fleet, the final one?

Yes.

Okay. Good. That’s all from me. Thank you very much.

Thanks, Waqar.

Thank you. Our next question will come from Chris Voie, Wells Fargo.

Thanks, good morning.

Good morning.

Hey, Chris.

First, if I did my math right, it looks like thru tubing, which has been holding in relatively well for most of the rest of the year, was actually down pretty significantly in the fourth quarter. I was wondering if you could comment on the dynamics there in the fourth quarter and if you expect to rebound in the first quarter.

Well, no, good pickup. Yes, our downhole tool business thru tubing was more impacted this fourth quarter than they had been in the previous two slow fourth quarters. So pumping, on a sequential basis, therefore, had a pretty good – did well and, obviously, thru tubing was down. It was a bit of a surprise. It was late in the quarter. We have a lot of mid-con exposure for downhole tools, and that was particularly weak from a completion standpoint. So I think that’s one reason. We, for the downhole tool business, are seeing – we are seeing what are going to be about rebound improvement here in January, and that’s good to see. There is the ability within that business to adjust costs and so forth, as needed. So we’ll – our managers will be looking at that, and we’ll make adjustments in the first quarter to get the costs aligned. If the activity doesn’t bounce back to the – to whatever extent it bounced back, we’ll adjust cost as we need to. So, we do expect that to come back but, again, that’s one of those things. As Jim was talking about earlier, there still remains uncertainty. And it’s very difficult to get a handle on the degree of any bounce back or improvement and talking about incremental margins and things like that. It’s not clear that, again, that there’s a strong rebound. We’re going to – we’ll know a lot more as we get to the – toward the end of the first quarter to assess how things are and what further adjustments that we need to make. And we’re hopeful that we’ll be able to, again, reap rewards of additional utilization, and that will flow through to the numbers. But we’ll just have to wait and see. It’s – anytime you’re – hopefully, this is, again, bouncing off to the bottom. Anytime you’re doing that, who knows whether it’s going to be a strong balance or not. But we’re going to, again, remain diligent and focused and make sure we don’t get ahead of ourselves.

Okay. Thanks for that. And then a follow-up on pressure pumping. So in the fourth quarter, the industry as a whole did a huge amount of stacking. And now in the first quarter, some of the biggest competitors are talking about being pretty disciplined about redeploying. Obviously, when a lot of fleets are going down, you see a lot of irrational bidding in some cases trying to hang on to some work. Can you – so I get that average pricing is probably flattish, but can you give a sense of whether the band of bidding is tightening? If it seems like there are fewer irrational competitors and maybe that’s setting the stage for improvement? Or just what the feel is in terms of the bids that are out there?

Chris, this is Jim. We have, as always, during these times, seen some of what you characterized as irrational bidding but less and less. And we’ve seen some people who’ve done it – irrational bidding and not been able to perform. And so it hasn’t really stuck. So, we have seen that but less in fourth quarter than we did earlier in the year. It would be a real stretch to say that supply and demand are in balance in pressure pumping. It would be a real stretch. But there are indications that it might be, over the horizon, not too far from now if completion activity holds.

Okay, thanks. I’ll turn it back.

Thanks, Chris.

Thank you very much. Our next question will come from George O’Leary, TPH & Co. George O’Leary: Good morning, guys.

Hey, George.

Good morning. George O’Leary: The line in the press release on kind of improving execution in 2020 and winning new customers, I know we’ve touched on customers a little bit on the call, but can you just kind of run through how you strategically intend to target those new customers? And then from an improving execution standpoint, where you’re kind of dotting the Is and crossing the Ts and what specifically you’re doing to improve that execution?

I was – what we’re talking about there, again, I think, is the execution, is the efficiency, getting more, working its – out of a day, which translates into more revenue. I think it’s safety. It’s – it is reporting and digitization. I mean, we’re – we have initiatives that are – and we have a lot of that, that’s in place already. But we’re continuing to improve on that, and our ability to demonstrate to our existing and hopefully growing customer base in terms of what our capabilities are. So that’s the main thing we’re talking about, consistency of performance, utilization. Our challenge is going to be – we have an outstanding portfolio of customers, but our challenge is going to be, again, to keep that – the calendar filled. And as Jim talked about, some of these anecdotes with bidding, people not being able to perform, we’re going to have to work real hard to coordinate with our customers on our schedule and their schedule. And we just have to get those – we have to get the utilization up, which is efficiencies. And then when we have the opportunity to work, get the volume of work up. And those things, together, can have, as we all know, dramatic positive impacts on our results. So it’s those things that we’re referring to there when we talk about well site execution. George O’Leary: Got it, that’s helpful. And then the job mix line was also interesting in the press release, and you guys have commented on it a little bit, but curious if you could just peel back the onion a little bit further. At TTS, coming down as a percentage of revenues, I would have thought that would have been negative for margins. So what about the job mix within pressure pumping or some of your other businesses was helpful on the cost side, did they have something to do with consumables costs? What was kind of the driver, if you could nail it down to one or two things, of that improvement? Or was it really just fixed cost absorption on the idea that you guys got more volume done than you expected during the quarter?

George, it’s Jim again. Let’s see, do you want just one or two bullet points? One is that, in pressure pumping, we had a greater percentage of sand used that we brought to the job site. So as we all know, that runs through your P&L, and it’s healthy to you. We also have some good customers, and they had high utilization during the fourth quarter, perhaps they were just trying to get a lot of work done before the end of the year. So we had relatively – now we had a pronounced seasonal slowdown, let’s not forget that, but we had some relatively high-utilization customers. Also, maintenance and repair expense was perhaps a little bit lower in pressure pumping. So those were the drivers of some modestly incremental profitability in Q4. George O’Leary: Great, that’s very helpful color, guys. Thanks. Good quarter.

Okay. Thanks, George.

Thank you.

Thank you. Our next question will come from Vebs Vaishnav, Scotiabank.

Hey, good morning and a good quarter.

Thanks.

Thank you.

So I just – if I wanted to try to think about what has been said for the call, I just want to make sure I understand it correctly, so about 10 fleets working in 4Q and around 10 fleets could work in 1Q. You had some better mix in pressure pumping, which may or may not happen in 1Q. I guess, lower pricing in 4Q, which will have full impact in 1Q, but then maybe, higher utilization in 1Q, just because of better January, and you have full impact of cost savings. Taking all that together, is it fair to think your EBITDA per fleet would be higher in 1Q versus 4Q by, I don’t know, a couple of million dollars on an annualized basis?

It should be better. But in terms of quantifying, a lot of unknowns there but…

Okay, okay. thru tubing, again, like it was down almost, I want to say, 25% or 30%, yet 29%. And typically, I would think thru tubing is a higher-margin business, so more negative mix, if I think about an overall Technical Services business. Is that fair way? And like – is it fair like, let’s say, if, say, activity in the U.S. almost is flat versus fourth quarter and maybe, modestly higher, we can have some improvement in thru tubing?

That’s thru tubing revenues or margins? Or maybe the question is both?

Yes. I was thinking both.

Yes. The margins were okay. There will be some fixed cost absorption if Thru Tubing Solutions’ revenue improve sequentially. So yes, there could be some higher profit margins there, too.

Okay, okay. And lastly, if I can ask the total cost savings, is there a way you can help us think about how much total cost savings are expected from all the efforts that you guys have taken so far, and like it’s still to be realized in 1Q or 2Q?

Not an unreasonable question, but to be honest with you, we haven’t tried to go through that exercise. That’s what I’m kind of talking about. We’ve made adjustments. We feel good about the – I mean, there’s so many dynamics with number of fleets, Q3, during Q4 and what we’ve done. It’s hard to quantify. Like I said, we feel good, though, with the staffing where we are. And like I indicated, we’re going to watch the first quarter very, very closely in terms of our results. And look and see what, if any, other adjustments we need to make either to the upside, adding capacity or whatever, or whether we need to make adjustments otherwise. But sorry, I can’t really quantify. Then I’m not – there are so many dynamics, I’m not sure quantifying it would necessarily provide an answer. We did talk about the fact that our total headcount was down 21% from the end of the second quarter, obviously more pronounced in certain parts of the business than others. And we just have to see how first quarter goes and adjust from there.

And I guess, maybe if I can squeeze in one last one. I understand you guys don’t like to specifically guide on the call. But if I think about directionally, what are the risks for me to think about the bigger risk to think about why EBITDA could not be directionally higher in 1Q versus 4Q?

Pressure pumping fleet utilization.

Yes.

All right, that’s all and thank you for taking my questions.

Thank you.

Thanks, Vebs.

Thank you. Our next question will come from Connor Lynagh, Morgan Stanley.

Thanks for putting me back in guys. I have a similar line of questioning about your – I just wanted to square two comments that you made. One was that incremental margins would be relatively low in the first quarter. The other and maybe, I misheard this portion, but I thought that you were saying that there was still a full quarter of impacts to be realized of some of the cost saving initiatives. So, can you just help square those, I would think if revenues are relatively flat, but you’re getting some cost savings, you probably have higher than normal incrementals, but maybe I’m missing something?

No, Connor. there’s just noise in these numbers. It’s difficult to say with good precision that will allow you all to update your models in a way that you’d be confident with. I know everything is leading to higher incrementals or strong incrementals in first quarter; it’s just very difficult to say right now.

Yes, that’s fair. That’s fair. I guess one more just while I’m in here, is there a significant working capital wind down to think about from some of your basin exits or have you sort of already realized the impact of that?

What period – are you referring to the fourth quarter?

I’m referring to 2020 in terms of you shut down some facilities and I’m wondering if there is a big cash inflow from working down inventories and things like that or if you’ve already realized the benefits you would get from that.

Yes. I wouldn’t expect any unusual or significant working capital changes due to our restructuring, to your question.

Okay. Thanks a lot.

Thanks.

Thank you. Our next question will come from Chris Voie, Wells Fargo.

Hi, thanks for putting me back in. I just want to follow up a little bit on pressure pumping in terms of your active fleet. I was wondering if you could give an update on the percentage of the fleet that’s Tier 4 versus Tier 2 and whether you have any plans in that $80 million to think about potentially like adding dual fuel capability or any other upgrades that customers might demand.

Chris, it’s Jim again. I don’t have the specific number of Tier 4 versus something else on our fleet, but the majority of our fleet is Tier 4 right now, but the vast majority and we have very few Triplex pumps left. So, the majority of our fleet is going to be Tier 4 compliant at this point. Regarding dual fuel, we put that in the same category that’s sort of next generation pressure pumping equipment. We put that in the same category as maybe, e-fleets, which is we will do it at customer request if the economics are there. We have retrofitted pressure pumping fleets in the past for dual fuel and have used them, and are happy to do it and it addresses ESG issues and a lot of things, but we would need a specific customer request and some assurance or at least confidence in some regard that the dual fuel fleet would be utilized for that new purpose.

Okay, that’s helpful and then January kind of slow start and visibility is fairly limited going forward. So, I’m curious where the fleet has gotten to right now. Are you pretty happy with the amount of work that the fleet is doing in terms of hours per day et cetera or is there a long way to go to be in what you would consider a targeted efficiency range right now?

Well, I mean there are opportunities to be more highly utilized than we were in the fourth quarter. There are still opportunities. So, a part of maybe to answer your question, I mean how did we arrive at nine or 10 fleets. We – the thought was – I mean, it’s an imperfect science, but the thought was how many fleets that we think we could get sufficiently high utilization with over a period of time. So, we settled in on nine or 10. That didn’t mean that we thought nine or 10 was the exact right number for the fourth quarter. So again, to answer the question, I think there is opportunity to be more utilized with those 10 fleets and we’ll watch the first quarter, see how we do and we’ll make adjustments as we need to. We certainly do not expect that we would go significantly lower than 10, but we’re not afraid to and as I said too, the staffing arrangement is as or more important than the 10 fleet number, right. So – but we would not be opposed to – we want to be appropriately staffed for the level of work we’re going to have over a period of time, right. So, we’re watching that very closely in the first quarter, off to a decent start. Calendar looks okay. It looks like there’s opportunities, but there are going to be challenges to minimize or manage the calendar. and so that’s a big focus – that’s a big focus for us.

All right, thanks a lot. turn it back.

Sure. Thanks.

Thank you. Our next question will come from Marc Bianchi, Cowen.

Hey, thanks. if I sort of take everything I’ve heard here, I’m coming up with a first quarter EBITDA of $23 million, $24 million, call it $100 million on a run rate basis, correct me if there is anything wrong with that thinking, but what I’m wondering is at that level, assuming you can get some better utilization, perhaps there is some upside. At what level of EBITDA, do you think – do you start thinking about restoring the dividend and how do you think about what the right level of dividend would be maybe, compared to how much EBITDA you’re generating?

This is Ben, a reasonable question. Shareholder returns including dividends in particular is something that we think about a lot and are thinking about even more in the current environment. We don’t necessarily think about it as a percentage, especially in this environment. Again, it’s very difficult knowing what 2020 holds for us, but if we have come off the bottom, we have some cash, we have no debt. We’re going do everything in our power to manage the business to where we’re generating cash, right. That’s the intention and that’s what we’ll be striving for. So, I expect with additional cash being generated, all things being equal, in the coming quarters that we’ll be looking very closely at our dividend and our dividend policy, and what the appropriate approach is and it’s a high priority for us in terms of our capital allocation and we’re striving to reinstate or pay a dividend in 2020. That’s one way to say it. I mean that’s a goal, if you will, to be able to be in a position to pay some type of dividend in 2020.

Okay. Okay, that’s helpful and somewhat related to that, there’s a number of companies that are trying to exit the pressure pumping business or have sidelined their equipment and are looking for perhaps a dance partner for lack of a better word, how does this thinking about M&A play into your decision about the dividend and then just more generally about how you view maybe, combining with some other companies and what the likelihood of that could be?

This is Ben. I would not sit here right now and say that that’s a high priority for us to be thinking about M&A. Open to opportunities, want to look at opportunities, but it would have to be a sweet deal. We’re focused right now on returning shareholder returns and improving our financial position and generating some cash and stabilizing the business and putting in a position to be able to hopefully grow and generate some consistent cash flow. So that’s our focus today.

Okay, great. thanks. I’ll turn it back.

Thanks, Marc.

Thank you very much. [Operator Instructions] Well, speakers, at this time, we have no further questions in the queue. So, I would like to turn this conference back over to Jim Landers for any closing remarks.

Thank you. Thank you to everybody, who called in to listen in and thanks for the questions. We enjoyed the dialogue. We look forward to seeing everybody soon. Thanks.

Thank you very much. Ladies and gentlemen, this now concludes this teleconference. And as a reminder that this conference call will be replayed on www.rpc.net within two hours following the completion of this conference. Thank you very much for joining us. Please disconnect your phone lines, and have a great rest of the week. Thank you.