RPC’s Frickin’ Frackin’ Earnings

• Posted by Danny
• on January 25th, 2012

Though RPC missed estimates by a long shot, sales and income still rose nicely over last year.

 

 

Ranked #2 in the BeanScreen, Hotlanta-based oil and gas services company RPC, Inc. ($RES) chilled the Street this morning as they missed badly on both top and bottom lines. They pinned the miss on project delays and rising raw materials costs. We whiffed it big time as well on our Estimize target of $0.62 EPS. They reported $0.51.

Nevertheless, it wasn’t that bad a quarter compared to last year’s Q4, and full year numbers were very impressive. RPC benefited from increased U.S. shale fracking “as petroleum companies aggressively tapped new oil fields in the United States.”

They also cranked up their divy by 20% and announced a 3-for-2 stock split.

Here’s the Q4 YoY stats:

• Revenue +47%
• Net income +35%
• Operating income +36%
• EBITDA +37%
• SG&A expenses +34%

Full year:

• Revenue +65%
• Net income +102%
• EBITDA +77%

Interesting take from the CEO on rig count and nat gas/oil prices:

“The average U.S. domestic rig count during the fourth quarter was 2,010, an 18.9 percent increase compared to the same period in 2010.  The average price of natural gas was $3.23 per Mcf, a decrease of 14.6 percent compared to the prior year, while the average price of oil was $94.55 per barrel, a 10.7 percent increase compared to the prior year.” 

Basically natty is suckin’ while oil is strong. The YoY rig count increase was a big positive (+3.1% QoQ was weak though), but this industry is inherently volatile and wild swings in the number of rigs being turned on/off can occur almost overnight…and with natty prices dropping like a rock, rigs could be forced to go off-line, thus reducing the need for RPC’s equipment.

So in a nutshell, while the long term prospects are likely favorable for RES as shale production booms and energy demands increase worldwide, the short term outlook may be weak until nat gas recovers from its pricing slump.

But doubling your profit in a year’s time ain’t too shabby!

 

sources:  RPC warns low nat gas drilling may hit prices – Reuters

RPC annual profit spikes 102% – Atlanta Business Chronicle

RPC 4Q net income rises 35 pct – Y! Finance (AP)

RPC, Inc. Reports Fourth Quarter and Record 2011 Financial Results – Y! Finance

RPC, Inc. Announces Stock Split and Increase in Regular Quarterly Cash Dividend – Y! Finance

RPC Begins Another Year of Huge Dividend Growth – The Dynamic Dividend

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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