RPC Tries to Crank Up the RPM’s in Q1

• Posted by Danny
• on April 25th, 2012

RPC attempts to get back on track as oil drilling remains strong…but natty gas exploration drags.

 

RPC Inc. ($RES), an oilfield services company based out of Hot-lanta, GA, reported Q1 this morning that beat the Street on EPS (37c vs 34c), but came in a tad light on revs. The stock has been getting slammed in recent months, especially after the previous quarter’s big miss.

Not that they’re doing all that bad mind you (2011 was a great year), it’s the fear of uncertainty going forward that’s driving investors away. With natural gas prices drifting around 10 years lows, the drilling industry is shifting its priorities when it comes to energy exploration. Oil is king right now…natty isn’t. RPC still does very well with all the oil exploration going on, but they do even better when oil and natgas is being hotly pursued.

To the Q1 numbers (YoY):

• Revenue +32%
• Net income +23%
• EBITDA +24%
• SG&A +25%

RPC operates via two segments, Technical Services and Support Services. Technical revenues were up 32% and Support up 27% for the quarter. Also, more than $120 mil was plowed into new equipment and capex.

From the CEO:

“During the first quarter of 2012, RPC benefited from a larger fleet of revenue-producing equipment and high activity levels in the oil-directed domestic basins in which we operate…

From an industry perspective, the average domestic rig count during the first quarter was 1,990, a 16.0 percent increase compared to the same period in 2011…

The unconventional rig count, which is a more important indicator of the demand for RPC’s services, increased by 15.4 percent compared to the prior year, and during the first quarter of 2012 represented 69.8 percent of U.S. domestic drilling activity…

We remain cautious about near-term domestic drilling activity levels due to natural gas prices which are at a 10-year low. We will continue our allocation of resources to domestic basins which show the highest potential in an environment of continued high oil prices.”

 

 

Sitting atop the BeanScreen throne this month, RPC has been a real stickler for us. We own a good chunk at a cost basis (split-adjusted) of about $12 per share. We’re down, but not out, and continue to believe that RPC’s fundamentals remain strong. This report shouldn’t change our stance once the new figures are screened out.

If and when natgas makes its comeback, RPC will stand to benefit greatly. In the meantime we’ll just bide our time…and collect that 3.5% divy yield.

 

sources: RPC profit beats estimates on higher oil drilling – Reuters

RPC, Inc. Reports First Quarter 2012 Financial Results – Y! Finance

RPC drills into higher revenue, profit in first quarter – BizJournals

RPC.net

disclosure:  we currently own shares in RES

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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