Good morning, and thank you for joining us for RPC, Inc.'s Third Quarter 2024 Conference Call. Today's call will be hosted by Ben Palmer, President and CEO; and Mike Schmit, Chief Financial Officer. At this time, all participants are in 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. 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 all 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 be -- to compare performance consistently over various periods. Today's press release 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, we reported third quarter results that reflect the continuing challenges of the OFS market. It remains highly competitive with limited near-term visibility heading into the winter season as customers face budget exhaustion and limited incentive to increase activity amidst current oil prices. Consistent with recent performance, our pressure pumping business is facing relatively more headwinds than our other service lines. The spot and semi-dedicated market has ample supply of horsepower capacity seeking to be deployed, with pricing remaining under pressure as many of our peers seem motivated to maintain utilization. Our other service lines in aggregate were more resilient, posting a modest sequential revenue decline, indicative of the more diversified customer base, which includes larger Tier 1 customers spread across more basins. To illustrate this contrast, our pressure pumping revenues were down 12%, while all of our other businesses in total were down just 4%. The frac market remains highly competitive, and there's definitely a downward pricing bias with calendar white space in the spot market. We've remained disciplined opting to idle assets rather than burn them without adequate returns. We do see a difference in demand within our frac assets for our Tier 4 DGBs, where we see solid demand and have better visibility with dedicated customers. We have commitments for these fleets several quarters out and, in some cases, through the end of 2025. Our crews are delivering gas substitution rates that we believe are among the best in the industry, and our customers are pleased with our efficiency and performance on site with these assets. On the other hand, demand is more challenged with our legacy diesel equipment as those fleets like the ability to take advantage of low priced natural gas fuel. Thus, these assets…

Thanks, Ben. Shifting to the third quarter financial results with sequential comparisons for the second quarter of 2024. Revenues decreased 7% to $338 million, driven primarily by lower pressure pumping activity. Breaking down our operating segments. Technical Services, which represents 93% of our total third quarter revenues, decreased 8%, driven primarily by pressure pumping. Support Services were up 7% and represented 7% of our total third quarter revenues. The following is a breakdown of third quarter revenues by our top five service lines. Pressure pumping was 38.4%. Downhole tools, 29%. Coiled tubing, 8.8%. Cementing, 8%. Rental tools, 5.2%. Together, these five accounted for 89% of our total revenues. Cost of revenues, excluding depreciation and amortization, during the third quarter decreased by $14.8 million to $247.5 million or a 6% decrease, a point less than the revenue decline. The lower cost of revenues stemmed primarily from lower equipment costs -- and sorry, lower employment costs. We closed a small pumping location and reduced the headcount of this and other operating locations. Cost of revenues also decreased due to lower maintenance and repair expenses and materials and supplies, reflecting lower activity levels. SG&A expenses were $37.7 million, up slightly from $37.4 million, largely reflecting the fixed cost of our support functions. Diluted EPS was $0.09 in the third quarter, down from $0.15 in the second quarter. There were no non-GAAP adjustments to either EPS figures. EBITDA was $55.2 million, down from $68.5 million, with EBITDA margins decreasing 240 basis points sequentially to 16.4%. For the quarter, operating cash flow was $70.7 million. And after CapEx of $51.7 million, free cash flow was $19 million. On a year-to-date basis, operating cash flow was $255.2 million. And after CapEx of $179.5 million, our free cash flow was $75.7 million. We note that while year-to-date free cash flow is down from 2023 and will be lower for the full year as industry conditions have been more challenging. There were some timing benefits, especially in CapEx and working capital that boosted last year's free cash flow at the expense of this year. All told, despite a tough environment, we still expect strong cash flow this year and that our trailing two year average would still be quite robust. We still expect CapEx to finish 2024 within our guided range of $200 million to $250 million. During the quarter, we paid $8.6 million in dividends, and we maintained a strong balance sheet, including a cash position of $277 million at quarter end. I'll now turn it back over to Ben for some closing remarks.

Thank you, Mike. So as we wrap things up, I just want to reiterate our views on capital allocation and potential investments in the business. Historically, strong cash generation and long-term financial discipline afford us the opportunity to make strategic investments, specifically equipment upgrades and potential acquisitions. Beyond organic investments in our frac fleet and supporting new products and service introductions across the business, we are aggressively looking at M&A and are primarily focused on growing our non-pressure pumping service loans. We think rebalancing our portfolio over time to be less impacted by the swings in the frac market and more driven by a diverse set of oilfield services for a broad customer base will ultimately deliver more attractive and consistent financial results and returns for our investors. We believe there are ample opportunities and targets in the marketplace to execute that rebalancing and look forward to building a track record of acquiring and integrating high-quality companies and generating solid returns. Spinnaker was a good start along that path, and we look forward to potential future transactions over time. I'll close by reiterating that in an often volatile market, our discipline remains consistent with a focus on financial stability and long-term shareholder returns. I also want to thank all of 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] And your first question comes from the line of Don Crist with Johnson Rice. Please go ahead.

Good morning, guys. How are you, all this morning?

Good morning, Don.

Ben, I wanted to ask about the downhole technology. I've heard some field reports that it's pretty revolutionary and didn't know if you could expand on kind of what advances you're making in that. Any kind of color you can provide around that? And what kind of opportunity that can provide specifically in California going forward into next year?

Don, the California opportunity is with coiled tubing with some plug and abandonment work, where there's been some wells that have been impacted by seismic shifts. So that takes advantage of our -- some of our steerable tool technology working with coiled tubing. The frac technology that we talked a lot about are these pods that we have used in the past and quite successfully just very briefly. The improvement that we've recently made is on how to deliver those pods downhole. We've come up with a way to do that. We believe that's much more effective and straightforward and believe that's going to create an opportunity for customers if they are comfortable again to displace bridge plugs. There's a number of other benefits with that particular technology, and it's nice. And I'm sure you're aware, it's a pretty big market, and we're encouraged about it. We actually have a test going on today with a number of customers that are going to be out at our downhole tool facility in Newcastle, Oklahoma.

Okay. I appreciate that. And on the M&A front, how is the bid/ask spread going? Because I know, there's a lot of pressure out there from the small mom-and-pop operators that have been around for a long time and didn't know if that bid/ask spread is narrowing versus the last six months to nine months or so?

Yeah. We've talked about that in the past. It's all relative. I think everybody is settling in to the fact or realize and can see that just looking at public valuations, I think privates and others do recognize that people can't pay a substantially higher or higher multiple for private companies than they're trading at. So I think spreads have compressed a bit. I don't know, quite honestly, that I could say that we've looked at a large enough sample and gotten far enough along with targets to be able to say definitively that they're narrowing, but that is the -- it has narrowed. I really can't quantify on what that might be.

I appreciate that color. I’ll let somebody ask some questions and hop back in queue. Thanks.

Thank you, Don.

Your next question comes from the line of John Daniel with Daniel Energy Partners. Please go ahead.

Hey, good morning. Thank you. I'm going to follow along Don's questions if that's all right. On the acquisition opportunities, what is the -- what's your willingness to use cash? And what's the willingness of potential sellers to take stock?

Discussion stock is -- I think sellers typically, there's a range of things that a seller just experienced over the years, right, a number of things that people look at over time, and it has to be something that works with both parties. We're lucky enough to have a decent cash balance and a nice strong balance sheet. It gives us flexibility to go either way. We believe our stock is valuable to us. So we tend try to be prudent and not let too much of that go at too low a price. So it just varies. It varies. We cash oftentimes for private sellers or are the preference, but there are other opportunities where stock can be a more natural fit. So we have both of those.

Okay. Thank you. And then on the frac side of the business, I don't know if you'd be willing to answer, but I'll ask anyways. The U.S. completion market just stays stable for a year or two, right? A little bit of volatility in Q4 because seasonality and all that normal stuff. But what's the optimal fleet size for you guys from a marketed perspective? I think you have like 10 or 11 fleets on a regular -- back, say, a year ago. Is there any color you could say? Because that obviously has implications to CapEx and everything else.

Yeah. It remains stable, being where it is now. It's obviously going to be lower than that 10 or 11, and that's where we are now. We're…

And as you know, trying to define and say how many are being marketed and all that. If you're anything less than all, it's sort of hard to give a guide. But I think it's lower. It's going to be more the mix, and we continue to be committed to the frac market, right? We're just trying to be prudent and then trying to rebalance our portfolio, as we've talked about, and you never know what's going to happen around the corner. I guess we do know there's going to be volatility, but we are committed to continue to upgrade prudently over time. And -- but it's probably a lower number just because of the efficiencies that are lower for us. It'd be nice if it was lower than the overall industry. If the discipline can remain, overall, that would help everybody. But for us, it's probably lower. And I think with the continued upgrade of our fleet, I think we could actually, net-net, end up in a better place, right? But that's the question we're trying to ask now. We're going through our planning process next year and, of course, looking at our long-term plans. So we're still contemplating that question. It's a good question.

Okay. And I got one more if I may. The -- going back to acquisitions, and I know you have to speak in general terms of this, but you alluded to a lot of opportunities. Would you say that those are more characterized by PE firms trying to finally get out of their investments? Or are these distressed opportunities where you can step in or is it something else or all of the above?

A combination.

Okay.

I would say a combination, yes, just thinking through kind of the backlog, a combination.

So not a clear theme is what I guess I'm saying.

Right, right.

That’s all I have. Thank you for including me.

Very good. Thanks, John.

Your next question comes from the line of Stephen Gengaro with Stifel. Please go ahead.

Thanks. Good morning, everybody.

Good morning, Steve.

So two for me, and maybe I'll stay on the M&A side, and I apologize if I missed a little bit of this. But one of the things we've seen kind of over the last about 20-plus years, but clearly over the last 10, was the lack of kind of interest from investors around some of the smaller and very small oil service players. And the reason I bring it up is because I'm thinking about consolidation being kind of a key driver maybe of success in creating larger businesses. But when you think about consolidation, how do you balance sort of the maybe buying something or a couple of businesses that could be a little more commoditized, but kind of create critical mass in those businesses versus making sure you buy something that's kind of differentiated or unique in some way.

And you're talking about a...

And I guess what I'm asking, can you create value by kind of rolling up some kind of more commoditized businesses or not, and how do you think about that?

That wouldn't be our first choice to do that. Clearly, we want to try to find very good businesses, whether it'd be a commoditized service or not. I think that's -- that would be more of the key for us, and that's our focus. And I think in this particular market, as we're sort of alluding to that, I think we're somewhat uniquely positioned, I think, to be good purchaser. I think we know there are some parties out there that they care about where they land. And they care about -- earlier on John's question, they care about the consideration they receive and the culture and the environment that they come into, and I think we check a lot of those boxes for companies that are looking to exit and find their next home. So -- but to answer your question, we don't want to get bigger just to get bigger. I understand your question. I know that scale -- investment scale is very important. That's something that we do want to try to address and think we are positioned to do. And of course, that investment scale, if done correctly, can generate some operational scale and some cost leverage as well. So that's what we're trying to pursue. We're trying to change that. Consolidation has been discussed for oilfield services for a long time. And really, there hasn't been a lot of those transactions yet. But perhaps, that will pick up a bit, and we'll see. But that's our strategy. We'll see what happens.

Great. Thank you for the details. That's helpful. And then the other question is just kind of back on the frac side. Are you -- how are you thinking about the '25 pricing dynamic? I don't know if you mentioned earlier enough, but we've kind of heard kind of mix from some of your competitors so far. But how do you think about -- what's your view of kind of how pricing evolves next year?

As we sit here right now today, we’re not going to go into it and spend or do things expecting pricing to improve a significant amount. So we’re trying to position ourselves to take advantage if things do improve, but trying to be prudent as well. So it just feels like it’s more of the same. Hopefully, there’s going to be some discipline. We’ve idled some assets. We’ve reduced our headcount. If others do that, that would help in reducing fleet – marketed fleets and things like that. So we’re not counting on pricing to be better in ‘25. There’s certainly that possibility. The discussion about maybe the improvement in the natural gas market might help a bit, any sort of improvement like that could help, but we’re not counting on it.

Okay. Great. Thank you for the details.

Thanks, Steve.

[Operator Instructions] Your next question comes from the line of Don Crist with Johnson Rice.

Hey. Thanks for letting me back in at the end here. Ben, if you were going to upgrade another fleet, what kind of decision point would that entail and kind of how long would that take if you wanted to add another Tier 4 DGB fleet?

Don, it's probably still nine months or so to get all of a full fleet in place. And -- but we're looking at a variety of things. We're talking to some of the component manufacturers about some alternative technologies. We're talking to some smaller OEMs. We're looking at a variety of things. Chances are the next firm commitment that's directly in hand would probably be another Tier 4 fleet for us, but we're looking at a variety of things. There's a lot of different technologies that are available. And so just a few months out, but I think we have a little bit of time.

And would you require like a three year contract or something to do that or would you kind of do it more in the spot market?

We -- at this point, yes, we would not require a long-term contract. I mean when we place an order for that type of equipment, that just would be because where we are in our fleet, the evolution of our fleet and the need to replace and to maintain and things like that. So we probably would -- we certainly would try to pursue that. But at this point in time, we wouldn't require anything like a three year contract. Certainly, talking to the team, we -- certainly, at least a multi-month contract would be nice and something that certainly would support that decision.

I appreciate the color. Thank you.

Yeah. Thanks, Don.

There are no further questions at this time. I will now turn the conference back over to Mr. Ben Palmer for closing remarks.

All right. Well, thank you, everybody, for listening in. We appreciate it, and hope you have a good rest of the day. Take care.

A recording of today's call will be available on rpc.net within 2 hours following the completion of the call. This concludes today's call. You may now disconnect.