RPC Q2 Earnings Outpace Estimates, Revenues Lag

RPC Inc. RES reported second-quarter 2024 adjusted earnings of 15 cents per share, which beat the Zacks Consensus Estimate of 13 cents. The bottom line declined from the year-ago quarter's figure of 30 cents.

Total quarterly revenues were $364.2 million, down from the year-ago quarter's $415.9 million. The top line also missed the Zacks Consensus Estimate of $386 million.

The better-than-expected quarterly earnings were driven by margin improvement across various key service lines and lower cost of revenues. However, the positives were partially offset by lower activity levels in pressure pumping.

Segmental Performance

Operating profit in the Technical Services segment totaled $30.2 million, lower than the year-ago quarter's $77 million. The results were primarily influenced by decreased activity levels in pressure pumping, leading to negative impacts on fixed costs, especially labor, due to reduced leverage.

Operating profit in the Support Services segment amounted to $4.4 million, lower than the year-ago quarter's $7.9 million. The results were driven by higher activity within rental tools, partially offset high fixed-cost structure inherent in these service lines.

Total operating profit in the quarter was $35.5 million, down from $82.4 million reported in the year-ago quarter. The average domestic rig count was 603, marking a 16.1% decline from the year-ago quarter's level.

The average oil price in the quarter was $81.78 per barrel, up 11.2% year over year. The average price of natural gas was $2.07 per thousand cubic feet, down 4.2% from the figure recorded in the corresponding period of 2023.

Costs & Expenses

In the second quarter, the cost of revenues decreased to $262.3 million from $265.8 million in the prior-year period. Selling, general and administrative expenses amounted to $37.4 million, lower than the year-ago quarter's $43.6 million.

Financials

RPC's total capital expenditure was $75 million.

As of Jun 30, the company had cash and cash equivalents of $261.5 million, andmanaged to maintain a debt-free balance sheet.

Outlook

The company reiterated its capex guidance for 2024 between $200 million ad $250 million.

Zacks Rank and Key Picks

Currently, RES carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the energy sector are SM Energy SM, VAALCO Energy EGY and Energy Transfer LP ET. SM Energy presently sports a Zacks Rank #1 (Strong Buy), while VAALCO and Energy Transfer carry a Zacks Rank #2 (Buy) each.

SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.

VAALCO Energy is an independent energy company involved in upstream operation business with a diversified presence in Africa and Canada. Having a large inventory of drilling locations in premium Canadian Acreage, the company's production outlook seems bright.

Energy Transfer is a midstream player that owns and operates one of the most diversified portfolios of energy assets in the United States. Boasting a pipeline network extending more than 125,000 miles, its network spans over 44 states. With a presence in all the major U.S. production basins, the company's outlook seems positive.

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