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RPC's Q2 / Outlook: D&C to Decline in 2H19; Zipper Frac, Regional Activity

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RPC Inc. reported its Q2 2019 results - here are the highlights.

RPC's 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.

Regional Changes

• MidCon – Weakness

• Permian – Flat

• Bakken – Weakness

• Haynesville – Not as strong

D&C Activity Will Decline in 2H19

"Our activity levels improved compared with the first quarter because of seasonal improvement and more consistent customer activity levels, which benefited most of our service lines. However, our results continue to be impacted by intense competition and our customers' uncertainty regarding their near-term operations. As we begin the third quarter, there are indications that drilling and completion activities will decline during the second half of 2019. As a result, we continue to align our resources with expected activity levels.

Zipper Fracs Still Account for 60-65% of Jobs

RPC said: “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.”

Customers Uncertainty - Indications of Q3 Weakness

RPC said “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.

“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.

“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.”

Customers Continue to Decouple Supply Chain

“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.”

Replacing Fleets

"RPC's pressure pumping fleet remains at approximately 1,050,000 hydraulic horsepower. During the second quarter, 16 of our pressure pumping fleets manned and generated revenues. As previously announced, 2 pressure pumping fleets are on schedule to be delivered and placed in service by the end of the third quarter. However, we do not expect the number of manned and revenue generating pressure pumping fleets to increase."