Good morning, and thank you for joining us for RPC, Inc.'s First Quarter 2024 Conference Call. Today's call will be hosted by Ben Palmer, President and CEO; and Mike Schmit, Chief Financial Officer. [Operator Instructions] I would like to advise everyone that this conference call is being recorded. I will now turn the call over to Mr. Schmit.

Thank you, and good morning. Before we begin, I want to remind you that 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. Please refer to our press release issued today, along with our 2023 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 several non-GAAP measures of operating performance and liquidity. We believe these non-GAAP measures allow us to compare performance consistently over various periods. Our press release issued today and our website contain reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. I'll now turn the call over to our President and CEO, Ben Palmer.

Thanks, Mike, and thank you for joining our call this morning. Before we get started, I'd like to take a moment to share some unfortunate and sad news. Our long-time Head of Investor Relations and Vice President of Corporate Services, Jim Landers, passed away a few weeks ago after a long and courageous battle with cancer. I worked closely with Jim here at RPC for more than 20 years, and he was a tremendous contributor to the company in so many ways. I'm sure those of you listening today who are lucky enough to work with him over the years know he was also a great friend and colleague. He will truly be missed by all of us. Shifting to the quarter. As you can see from our earnings release, the first quarter was a soft start to the year in what feels like a muted oilfield services market. So we did not give explicit financial guidance for the first quarter. We did expect more stable EBITDA. Our activity level in pressure pumping was down modestly on a sequential basis compared to the fourth quarter of 2023, contributing to our overall results finishing below our original expectations. Unlike some recent quarters where we have seen more volatility in pressure pumping compared to other service lines, revenue performance was generally consistent throughout the business. Our total revenues declined about 4%, with pressure pumping down 5%; and other service lines in aggregate, down 3%. The frac market remains highly competitive. We have seen some fleets moving into the Permian from gassy plays, adding capacity to an already crowded basin. In addition, ongoing operating efficiency gains have created additional pump hour capacity. Regarding pricing, motivation to keep assets utilized and absorb fixed cost has certainly impacted industry pricing compared to year-ago levels. We…

Thanks, Ben. I'll now discuss the first quarter results with sequential comparisons to the fourth quarter of 2023. Revenues decreased 4% to $378 million driven by a combination of moderately lower industry activity and some competitive pricing concessions. Breaking down our operating segments. Technical Services revenues decreased 4% driven by pressure pumping, our largest service line within that segment. Technical Services represented 94% of our total first quarter revenues. Support services were down 9% and represented 6% of our total quarter revenues. The following is a breakdown of our first quarter revenues for our top 5 service lines: pressure pumping, 46.6%; downhole tools, 24.8%; coiled tubing, 8.8%; cementing, 7.3%; rental tools, 4.2%. So together, these top 5 service lines accounted for 92% of our total revenues. Cost of revenues, excluding depreciation and amortization during the first quarter, decreased by $2.8 million to $276.6 million from $279.4 million or a 1% decrease. Despite lower sales, total employment expenses were flat and maintenance and repairs costs increased slightly compared to the fourth quarter, contributing to margin compression. On another note, materials and supplies were a higher percentage of our sales mix, which also impacted our margins. SG&A expenses were $40.1 million, up slightly from $38.1 million. The increase in SG&A was due to total employment costs and was in part due to the timing of certain accruals. Diluted EPS was $0.13 in the first quarter, down from $0.19 in the fourth quarter. There were no non-GAAP adjustments to these figures. Adjusted EBITDA was $63.1 million down from $79.5 million, with adjusted EBITDA margin decreasing 340 basis points to 16.7%. Again, there are no adjustments made to these measures for unusual items. Operating cash flow was $56.6 million. And after CapEx of $52.8 million, free cash flow was $3.8 million. We noted that second quarter will have a heavy spend as we make final payments and accept delivery of our new Tier 4 DGB fleet. While our guided CapEx range of $200 million to $250 million in 2024 remains unchanged, we may manage the lower end of that range depending on market conditions in the second half of the year. During the quarter, we spent nearly $10 million on share repurchases, of which $7.5 million was under our buyback program, and we paid $8.6 million in dividends. Thus, we returned more than $16 million of capital to our shareholders between our cash dividend returns and our buyback program. We continue to maintain a debt-free balance sheet with a strong cash position of $212 million at quarter end. We remain proud of our healthy financial position, a function of our ongoing discipline and conservative approach. We're also pleased to share that subsequent to the end of the quarter, we received a $52 million tax refund, including interest from the IRS this week related to past tax years. I'll now turn it back over to Ben for some closing remarks.

Thanks, Mike. So looking ahead, we are encouraged by oil price trends and optimistic for an uptick in rig count. This should translate into improved activity, which would hopefully be accompanied by disciplined pumping capacity management in the marketplace. We also see potential for increased activity by smaller E&Ps as a fallout from the wave of M&A in the larger E&P space. As mergers and acquisitions close, we see possible noncore asset divestitures, with the acreage moving into the hands of our customers. We would be well positioned to capitalize on this trend given our deep customer relationships. We are strong not only with spot and semi-dedicated customers in pressure pumping but our other service lines have excellent relationships with both small and large E&Ps. We continue to be presented with opportunities to use our strong balance sheet to grow the business. We're confident that in time, we will find attractive acquisitions to increase our scale, bolster our service lines, broaden our customer relationships and, of course, provide a solid return on capital. As we said last quarter, we are patient buyers and believe a potential silver lining to current industry conditions will be the availability of attractive acquisition targets. In the meantime, our balance sheet is quite strong, reporting our $0.04 per share quarterly cash dividend, and opportunistic share buybacks. If over time, we maintain an elevated cash position, we would likely assess options to return additional capital to investors at an accelerated pace. In closing, I want to reiterate that in an often volatile market, our discipline remains consistent with a focus on financial stability and long-term shareholder returns. Thank you to all our employees who worked tirelessly to deliver high levels of service and value to our customers. Thanks for joining us this morning. And at this time, we're happy to address any questions.

[Operator Instructions] Your first question comes from Stephen Gengaro with Stifel.

So a couple for me. I think just first, can you talk about just the overall pressure pumping market? So I'm thinking about the competitive landscape. I mean, you talked about competitive pricing environment. How do you think about either holding assets back or marketing assets at current price levels? And also, how do you think that evolves over time as far as the pricing structure?

Stephen, this is Ben. Good question. We're going to exercise a lot of discipline. We have exercised discipline. Compared to a year ago, there has been some degradation in pricing, and that's clearly affected our results. But we talk about it often. We do have some floors that we've established. We're not bidding everything at those floors today but we're going to remain disciplined. We're not going to burn out our equipment. There's been a bit of volatility here recently. There have been some people dropping down trying to "take advantage" of the spot market and the semi-dedicated market, so we're seeing some of that taking place. I don't know if that's an indication of some others having some pressure on their businesses. Our team is very agile, very in tune with the market, participating in a lot of opportunities. And as I said, we're going to remain disciplined. Certainly, I think the market, to get better, we're going to obviously have to see increased activity. We're going to have to see some of that capacity absorbed to where the service companies can have a little bit more control over the pricing; demand rising to the point where we can realize a bit more stability. We're working really, really hard with our customers. We're our own worst enemy with how efficient we're being. Our efficiency, when we look back over the last 12 months, is up considerably with our fleet. And unfortunately, again, this environment is not necessarily translating immediately or directly into better financial results. But I think that's consistent with everybody. We're in a not unusual, I mean this is the normal market, right? It's a highly competitive market, and we'll work through it. We're prepared to take more significant steps if we need to. We talked about pressure pumping revenue was down slightly more than some of the other service lines, but the margin change or indication was similar. I mean pressure pumping is not the contributor to any decline or an outsized contributor to changes in our operating performance. So everybody, on a relative basis, were talking about a fairly small change in revenues. And so there's some volatility in their pressure pumping and pressure pumping group. In the end, just fine, as you would expect, with a kind of a single, mid-single-digit revenue decline. So we're not displeased with the quarter. I think we're more disappointed with the environment that it wasn't a little bit stronger coming out of the fourth quarter.

I apologize because I jumped on a little late, just looking at other commentary from an activity level perspective, it feels like there's maybe modest growth in 2Q sequentially, just coming off of kind of early year inefficiencies and white space. Are you seeing the same thing into the second quarter? Any thoughts on that?

Again, it's highly volatile. I wouldn't say we're seeing any strong indication, up or down. It's sort of bumping along at this point.

Your next question comes from Don Crist with Johnson Rice.

I wanted to ask about non-pressure pumping activities. Obviously, they held up a little bit better than pressure pumping during the quarter. But are you seeing as competitive of a market in, say, coil or downhole tools as you are in pressure pumping? I know pressure pumping is significantly competitive in the Permian, but obviously, your other services are in other basins, just curious about demand there.

Yes. Good, Don. Let make a comment, then I'll have Mike take it over. I just want to reiterate that pressure pumping, again, did not contribute outsized to the decline in EBITDA. It was fairly consistent across the board. Mike can speak to the downhole tools and some of the other service lines.

Yes. I mean they were down 3% on average, our other non-pressure pumping lines. So the customer mix is a little different in those for us as well. So they were kind of more in line with the overall industry. We're also, as you know, spread out in the various basins where our pressure pumping is really kind of more heavily in the Permian. So we have that diversity, which helps those a little bit as well. So overall, the impact wasn't as strong in those, but as Ben indicated, they were down slightly also.

It's really sitting back and looking at performance for the quarter. Again, we're talking about mid-single-digit changes in revenues, and so the numbers and the margins can move around quite a bit with that small of a revenue change. The downhole tools are continuing to do well. We've come out with some new technology that we're really excited about and working now to strategically determine the pricing for that particular new tool that we think, again, creates a lot of efficiencies for our customers. So it's sort of a mixed blessing. So we're looking at our pricing strategy there and look forward to some of those results coming through in the next few quarters. So again, not outsized changes or differences between the various service lines.

Yes. I'll add, too, our CapEx spend is spread across all our service lines, too. So we are making some investments, other than just the new DGB fleet, in our other service line also, so we expect those to pay off for us as the year goes on and in future years.

I appreciate that color. And can you remind us on the coil side, are you pretty much doing new drill outs? Or are you doing some kind of workover work on oil wells, et cetera? Are you seeing any kind of pickup in coil that's not necessarily a new drill out prospective?

Our drill outs is certainly the largest component of that business, revenues in that business. We do have a special project, which is starting up very soon, using some of our some of our other specialty tools with coiled tubing to do some P&A work. That happens to be out in California. You wouldn't believe how difficult it is to start to do business in California. Or maybe you would. But we're looking forward to that. That could be a nice opportunity to expand and diversify coiled tubing for us and add some nice incremental revenue. But otherwise, overall, I mean, it's a very appropriate question. There's not a significant amount of other coiled tubing work out there at this point in time.

Your next question comes from Sean Mitchell with Daniel Energy.

You alluded to the kind of M&A in the E&P space, and I think you're right that activity should pick up as some of these assets get consummated by these folks and you get some splinters for some of these private smaller guys. But what are the smaller guys saying or the private guys saying? Because it seems like crude above 80 service costs coming down and continuing to come down, what are they saying is like the key driver here? Is it they don't have acreage to drill? Because the economics seem to make a ton of sense today at above 80.

Great question, Sean. To be honest with you, I can't tell you that I personally have talked to a lot of these guys. But just on an overall basis, it's the same sort of thing with the price of the oil where it's kind of a mixed blessing, right? I mean everybody showing discipline, and that's great. Hopefully, that will result in some more stability. Maybe the cycles won't be quite as severe. We're not seeing the uptick, but maybe we're not going to see a whole lot of significant downward pressure from here, hopefully. If everybody can show some sufficient discipline on the oilfield services side, it should translate into a better operating environment. So I don't have an answer for you, but it's a great question. And I think a lot of people are talking about 2025 and gas prices and all that, everybody is starting to look forward to '25, hopefully maybe get a little bit better in the rest of this year, and we look forward to a little bit stronger 2025. But we'll just have to see how some of these new companies shake out. They're still working on. Many of the divestitures haven't taken place yet. So a lot of those management teams probably aren't getting ahead of themselves, right? They got to first close and integrate some of those transactions before they get to work and start making some phone calls and sending out RFPs.

Yes. And then maybe one more, just as you think about the consolidation in the E&P space, I know you guys are looking for opportunities in the service space, are things picking up there in terms of consolidation opportunities? And kind of where do you see the best opportunities today for you guys?

Yes, I can start. This is Mike. We're always looking. We're getting a lot of opportunities coming across our desk. It's just finding the right one at the right price and the right fit. We think we will be successful in finding some good opportunities that make sense, but we're definitely actively looking at opportunities. And there are a lot of them out there. So I don't know, Ben, if you want to add anything.

Yes. A lot have been presented. We've had discussions with several. I think seller expectations on valuation still haven't lined up, but we're going to remain disciplined, right? We don't like to do transactions just to do transactions. Especially, I think if you look at our results, and it's not yet what we wanted it to be, but I think we'll see that others in the space, the results are not where they want them to be either. And the privates are seeing the same thing. With some of our discussions with some of the private oilfield service companies, I think they're feeling the pressure. And I think that the environment will get better. That is for finding some people who maybe will be a little more accommodative or reasonable, whatever, and maybe those will come our way. But we're focused on some of our service lines where we have a nice market share. Pressure pumping, we're open to an opportunity, some of the smaller pressure pumping companies. Sometimes the condition of the equipment and things like that can be an issue. So we're seeing multiple, multiple, multiple opportunities. You can imagine people would love to merge their company into our balance sheet, so we have to be mindful of that as well.

Your next question comes from Stephen Gengaro with Stifel.

I just wanted to follow up and I don't think you said this earlier in the call. When you look at the active fleets you have now, I think you have 10 horizontal fleets in total, can you just give us kind of where the fleet count was during 1Q and where you expect to be during 2Q? Were they active and just underutilized? Or has anything been kind of taken off the marketed fleet short term?

Yes. So they were all active during the quarter. But that said, just the utilization wasn't exactly where we would want it. We typically don't give the exact kind of utilization percentage, but obviously, our newer Tier 4s were utilized a lot more than some of the other fleets. But we're still fully staffed, not as staffed as we were this time last year, but enough that if the work is there, we can get them going. So we haven't taken any down in the current environment and have no plans to set any aside at the moment, other than the ones that we'll take down when the new Tier 4 comes onboard. As Ben said, we're not going to add capacity. We'll take a Tier 2 down when that one comes onboard later this quarter.

Okay. And then one other. When we think about the bigger players, right, they talk all about these long-term arrangements and, for lack of a better word, some level of contracted assets with some big E&Ps. When you think about your fleet and your strategy, how does that impact you? I mean, it seems to me there's been consolidation, so there's probably more bigger players. But does that give you kind of an advantage when things ultimately turn with the smaller players and available assets? How should we think about the short- and long-term implications of kind of consolidation and a lot of players going after sort of the term contracts and how that impacts you?

Yes. We certainly hope so. I mean, obviously, we haven't seen that right now, in this quarter, but our hope is if things stay where they are, that some of the smaller players and privates will get more active in the second half of the year, and we'll benefit then. That's certainly our belief.

That's exactly right. Yes, I mean, our results, given our customer base and where we are, might be a little more volatile than some others. But certainly, that gives us opportunities to the upside, right? So there may be a little bit more downside, but there's opportunities to the downside. We definitely think that's the case. Great question.

Your next question comes from Chuck Minervino with Susquehanna.

I was just wondering if you could provide a little bit more color on kind of the pricing situation in frac right now. You talked about some competitive pricing. Do you think it's kind of bottoming here? Or is it still kind of trying to find its bottom? Just wanted to try to get a sense of where we are in that. And also kind of tied to that, you mentioned some frac fleets coming in from gas basins. Has that stopped? Or do you expect that will continue as well?

Chuck, it's all in flux. I mean, we are hopeful that we're reaching a trough or a bottom. As I indicated, we've got our stated price at which we won't work below. We're not bidding everything at that particular price level. So we'll see. If, at some point, we're not winning anything at the level at which we're bidding it, we'll have to take more dramatic steps. But we're hopeful that the industry will be rational, appropriately rational. And we are monitoring it very closely. And I can tell you that the competition, all of the industries we compete in, all of oilfield services is incredibly competitive. Our customers do an incredible job exploiting the fact that they have lots of choices. And if our industry can show some discipline or more discipline, but it is competitive, this is capitalism, but we understand that, but we're hopeful we're reaching that point. It may help with some of the smaller players at the very low end of the market, that they're probably bidding more aggressively, but they're going to be wearing out their equipment and perhaps don't have the capital to be able to invest back in the fleet like others do, like us. So we're trying to be very mindful. We don't want to burn our equipment up. We want to be in a position, obviously, to generate a nice return on our investments. So we're not going to dip down too low, but we're hoping things will shake out, and there'll be some improvement. There's obviously a lot of focus on the e-fleet market, a lot of investment going in at that upper end of the market. I have to believe the competition there is intensifying as well. And so it's an ever-changing market. Technology is changing constantly. We're hearing of new types of technology that are different, innovative and could be quite interesting, which is one of the reasons we haven't, at this point, try to go into electric technology in a big way because it is changing, right? It is changing and it is evolving. And as we noted in our comments, what the ideal or appropriate configuration for the equipment and the ability to get power sources is evolving and changing. Lots of people are spending a lot of time coming up with viable solutions that hopefully, at the appropriate time, we'll be able to exploit. But at this point, we're monitoring that market and feel good about our position in the market that we focus on.

And I'll add in relation to your question about potentially more fleets from gassy basins moving into Permian or other areas, I mean, gas prices have been pretty low for a while, so we don't anticipate there's a lot more movement that could happen because we don't think there are a lot of fleets left in gassy basins that are not working. So they're at this price, we don't anticipate there to be incremental movement.

Got it. And then just one more. If you could just talk me through a little bit the free cash flow outlook for the year here. It sounds like maybe the CapEx number might be coming down a little bit. Also, you mentioned a tax refund coming in and, I guess, a little bit of the moving parts there with EBITDA as well.

Well, we did receive the tax refund. That came in this week actually, so that was good. We said, if things slow, we would move to the lower end of the range. And obviously, we're hopeful that's not the case. But I mean we have flexibility in that spend, I guess, is the point there. So if things are good, we'll definitely spend the money and we'll continue to invest in our businesses. As you know, we have a very strong balance sheet. We've got over $200 million in cash. And so we're not concerned currently about our ability to generate cash for the rest of the year and meet all of our CapEx needs. Still, we think we have plenty to do an acquisition if we find the right one and also return cash to our shareholders. So not a lot of concerns. The comment on CapEx is just that's a lever we can pull to ensure that we do continue to generate the cash we need to for our plans.

Our plans this year include some, I'll call them, strategic investments. We don't have a tremendous amount of specific growth capacity investments, but we're making a lot of targeted strategic investments in different parts of the business that we think, obviously, is appropriate and are going to pay off. That's part of what's driving our number this year. But we can manage that. Certainly, the capital maintenance would come down naturally if activity levels were to fall. That one would kind of manage itself, if you will. So the upper end of that $200 million to $250 million has some "extra stuff" in there that is incremental. So that's really not our annual run rate this level of activity. It'd be something closer to the lower end of the range.

[Operator Instructions] Seeing no further questions in the queue, I will turn the call back to Ben Palmer for any closing remarks.

Thank you, operator, and thank you, everybody, for joining us this morning, and we look forward to catching up again soon. Take care.

This will conclude our conference call. Please note, a replay of today's call will be available on marineproductscorp.com within 2 hours following the completion of this call. Thank you for your participation. You may now disconnect.