10-Q: RPC, Inc. Reports Q2 Profit Decline Amidst Acquisition Costs and Pressure Pumping Headwinds

RPC, Inc. reported a significant drop in second-quarter net income and operating cash flow despite a revenue increase driven by the recent Pintail Alternative Energy acquisition, as its core pressure pumping business faced pricing pressures and lower activity.

Summary

• Revenues for the three months ended June 30, 2025, increased by 15.6% to $420.8 million, primarily due to the acquisition of Pintail Alternative Energy, L.L.C.
• Net income for the second quarter of 2025 decreased by 68.7% to $10.1 million, or $0.05 diluted earnings per share, compared to $32.4 million, or $0.15 diluted earnings per share, in the prior year.
• Operating income for the second quarter of 2025 was $15.5 million, a 56.2% decrease from $35.5 million in the same period of 2024.
• Adjusted EBITDA for the second quarter of 2025 was $65.6 million, down 4.3% from $68.5 million in the prior year, with Adjusted EBITDA margin declining to 15.6% from 18.8%.
• Cash provided by operating activities for the six months ended June 30, 2025, decreased by $91.5 million to $92.9 million, primarily due to unfavorable changes in working capital and lower net income.
• Free cash flow for the six months ended June 30, 2025, decreased by 68.9% to $17.6 million from $56.7 million in the prior year.
• The acquisition of Pintail Alternative Energy, L.L.C. on April 1, 2025, involved $170 million in cash, $25 million in restricted RPC common stock, and a $50 million secured note.
• Pintail contributed $98.9 million in revenues and $6.9 million in net income (excluding acquisition-related employment costs) for the period from April 1, 2025, to June 30, 2025.
• Acquisition-related employment costs of $6.6 million were recognized in Q2 2025, with an expected aggregate of $78.6 million over 12 quarters.
• The Technical Services segment's operating income decreased by 30.1% due to lower pricing in pressure pumping, despite a 16.2% revenue increase driven by the Pintail acquisition.
• The average domestic rig count for Q2 2025 was 5.3% lower than in Q2 2024, and the average oil price was 20.8% lower, while natural gas prices were 54.6% higher.
• The Board of Directors declared a regular quarterly cash dividend of $0.04 per share payable September 10, 2025.

Sentiment

Score: 3

Explanation: The sentiment is negative due to significant declines in net income, operating income, and cash flow, despite revenue growth driven by an acquisition. The core pressure pumping business is struggling with oversupply and pricing pressure. While liquidity remains strong and dividends are maintained, the overall profitability trend is concerning, and the identified material weaknesses in the acquired entity's internal controls add a layer of risk.

Positives

• Total revenues increased by 15.6% in Q2 2025 compared to Q2 2024, primarily driven by the Pintail acquisition.
• The Pintail acquisition diversifies the oilfield services platform and strengthens geographic concentration in the Permian Basin.
• Support Services segment revenues increased by 6.1% in Q2 2025, with operating income increasing by $260 thousand, driven by higher activity levels in rental tools.
• The company maintains a strong financial condition with $162.1 million in cash and cash equivalents as of June 30, 2025.
• No outstanding borrowings were reported under the $100 million revolving credit facility as of June 30, 2025, with $84.2 million available.
• The company continues to pay a regular quarterly cash dividend of $0.04 per share, demonstrating commitment to shareholder returns.
• A stock buyback program remains active with 12,768,870 shares available for repurchase.

Negatives

• Net income for Q2 2025 significantly decreased by 68.7% to $10.1 million compared to $32.4 million in Q2 2024.
• Operating income for Q2 2025 fell by 56.2% to $15.5 million compared to $35.5 million in Q2 2024.
• Diluted earnings per share decreased by 66.7% to $0.05 in Q2 2025 from $0.15 in Q2 2024.
• Net income margin declined sharply to 2.4% in Q2 2025 from 8.9% in Q2 2024.
• Adjusted EBITDA decreased by 4.3% in Q2 2025, and Adjusted EBITDA margin declined to 15.6% from 18.8%.
• Cash provided by operating activities for the six months ended June 30, 2025, decreased by 49.6% to $92.9 million.
• Free cash flow for the six months ended June 30, 2025, decreased by 68.9% to $17.6 million.
• Pressure pumping results were negatively impacted by pricing pressure, weather, third-party non-productive time, and customer startup delays.
• The pressure pumping market remains highly competitive and over-supplied, with efficiency gains consistently adding pump hour capacity.
• Interest expense increased significantly to $1.0 million in Q2 2025 from $99 thousand in Q2 2024, primarily due to the Seller Note from the Pintail acquisition.
• Interest income decreased to $1.6 million in Q2 2025 from $3.3 million in Q2 2024 due to a lower average cash balance following the Pintail acquisition.
• The effective tax rate increased to 41.3% in Q2 2025 from 17.8% in Q2 2024, primarily due to non-deductible acquisition-related employment costs.

Risks

• Volatility of oil and natural gas prices can significantly impact demand for services and financial results.
• Concentration of customers in the energy industry makes the company vulnerable to periodic downturns in the sector.
• Dependence on customer capital spending, which often relies on outside financing, poses a risk if financing is unavailable or unfavorable.
• Ability to attract and retain skilled workers is crucial, and labor shortages or upward wage pressures could increase costs.
• Reliance on a limited number of suppliers for equipment and materials could lead to supply disruptions and higher costs.
• Increasing expectations from customers, investors, and other stakeholders regarding environmental, social, and governance (ESG) practices may require additional investments or changes in operations.
• Compliance with regulations and environmental laws, including potential future regulations on hydraulic fracturing, could impact business operations and costs.
• Competition in the oil and gas industry, particularly in pressure pumping, remains intense, leading to pricing pressures and potential adverse impacts from oversupply.
• Operations rely on digital systems and processes that are subject to cyber-attacks or other threats, which could disrupt business or compromise data.
• Cash and cash equivalents are held primarily at a single financial institution, posing a concentration risk.
• Material weaknesses in the internal control over financial reporting of the newly acquired Pintail Alternative Energy, L.L.C. were identified for fiscal year ended December 31, 2024, which, if not remediated, could adversely affect the ability to report financial results accurately and timely.
• The ultimate impact of current and potential political unrest and armed conflict in oil-producing regions, such as the conflict involving Israel and the Gaza Strip, could affect drilling activity.

Future Outlook

The company expects capital expenditures, including those for the recently acquired Pintail, to be between $165 million and $215 million in 2025, primarily for maintenance. It plans to continue evaluating future investments and options to upgrade equipment. The company believes current oil prices are sufficient to motivate customer drilling and completion activities, but acknowledges that recent declines and potential volatility could lead to delays. Long-term, projected higher demand for oil and natural gas is expected to drive increased activity in operating basins. The pressure pumping market is anticipated to remain intensely competitive and over-supplied. The company is evaluating the financial impact of the recently passed One Big Beautiful Bill Act (OBBBA) on corporate taxation. The ERP system implementation will continue through a phased approach with costs incurred over the next few years. The company expects to continue paying cash dividends, subject to industry conditions and financial performance.

Management Comments

• "The increase in revenues was primarily due to revenues from recently acquired Pintail of $98.9 million, partially offset by lower pressure pumping activity levels compared to the prior year."
• "Pressure pumping results for the second quarter of 2025 were negatively impacted by pricing pressure, weather, third-party non-productive time and customer startup delays."
• "Management believes the industry continues to be over-supplied and efficiency gains are consistently adding pump hour capacity to the industry."
• "These challenges, as well as a declining rig count, have impacted activity, asset utilization, and pricing."
• "We believe that international revenues will continue to be less than 10% of RPCs consolidated revenues in the foreseeable future."
• "The Company's financial condition remains strong."
• "We believe the liquidity provided by our existing cash and cash equivalents and our overall strong capitalization will provide sufficient liquidity to meet our requirements for at least the next twelve months."
• "RPC does not expect to utilize our revolving credit facility to meet these liquidity requirements in the near term."
• "The Company is in the process of evaluating the OBBBA and has not estimated its financial impact at this time."
• "The Company is allocating capital to maintain its pressure pumping fleet and continues to evaluate future investments and options to further upgrade our equipment across the business."
• "The Company currently plans to distribute the balances [of the SERP] within the next 12 months by liquidating assets currently held in the Rabbi Trust."
• "We plan to continue the ERP implementation through a phased approach with costs being incurred over the next few years."
• "The Company expects to continue to pay cash dividends to common stockholders, subject to industry conditions and RPCs earnings, financial condition, and other relevant factors."
• "RPC believes that oil prices currently remain at levels sufficient to motivate our customers to maintain drilling and completion activities, however the recent decline of oil prices and potential further volatility could result in the Company's customers opting to delay completion activity."
• "Long-term, projected higher demand for oil and natural gas should drive increased activity in most of the basins in which RPC operates."
• "We continue to monitor the supply and demand for our services and the competitive environment, including trends such as increasing customer preferences for lower emission and more efficient equipment."
• "We believe that competition will remain intense."

Industry Context

The oilfield services industry is experiencing significant competitive pressures, particularly in the pressure pumping sector, which is characterized by oversupply and efficiency gains that add pump hour capacity. This environment, coupled with a declining domestic rig count (down 5.3% in Q2 2025 compared to Q2 2024) and lower average oil prices (down 20.8% in Q2 2025), is impacting activity, asset utilization, and pricing. While natural gas prices increased, the overall market conditions for oilfield services remain challenging. RPC's acquisition of Pintail, a wireline perforating service provider in the Permian Basin, aims to strengthen its position in a key active oil-producing region, diversifying its platform amidst these broader industry trends.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to global benchmarks. It notes that the pressure pumping market remains highly competitive and over-supplied, indicating that RPC's challenges in this segment are reflective of broader industry conditions rather than unique company-specific issues compared to peers like Halliburton, Schlumberger, or Baker Hughes, which also face market cyclicality and pricing pressures in their respective pressure pumping operations.
• Pintail's conventional and electric wireline units are described as among the newest in the industry, suggesting a competitive advantage in equipment quality within its specific service line, potentially comparable to modern fleets operated by larger integrated service providers or specialized wireline companies.

Corporate Governance

Legal Proceedings

• The company is a party to various routine legal proceedings primarily involving commercial claims, employee liability and workers' compensation claims, and claims for personal injury. Management believes the outcome of such litigation will not have a material adverse effect on the financial position or results of operations.

Related Party Transactions

• RPC provides certain administrative services to Marine Products Corporation (a spin-off), with charges totaling $552 thousand for the six months ended June 30, 2025.
• All of RPC's directors are also directors of Marine Products, and executive officers are employees of both companies.
• The company periodically purchases products or services from suppliers owned by officers or significant stockholders, totaling $32 thousand for the six months ended June 30, 2025.
• A group including Amy R. Kreisler and Timothy C. Rollins (directors), their family members, and controlled companies, controls over fifty percent of the company's voting power.
• RPC and Marine Products jointly own 255 RC, LLC, for corporate aircraft, with RPC recording $96 thousand in net operating costs for the six months ended June 30, 2025.
• A Form S-3 shelf registration statement was filed and became effective for the resale of up to 127,235,202 shares of common stock held by LOR, Inc. and its affiliates, the largest stockholder group.

Stakeholder Impact

• **Shareholders:** Experienced a significant decline in diluted EPS and net income, but the company continues to pay quarterly dividends and has an active stock buyback program. The shelf registration for potential capital raise could dilute existing shareholders if new shares are issued.
• **Employees:** Acquisition-related employment costs are being recognized, indicating potential integration and retention efforts for Pintail employees. The termination of the Supplemental Retirement Plan (SERP) will result in distribution of participant balances within 12 months.
• **Customers:** The company's core pressure pumping services face pricing pressure and lower activity, potentially benefiting customers with more competitive rates. The Pintail acquisition expands service offerings, particularly in the Permian Basin.
• **Suppliers:** The company notes that increases in activity can cause supply disruptions and higher costs for materials and key equipment components, potentially impacting supplier relationships and pricing.
• **Creditors:** The company maintains a strong financial condition with no outstanding borrowings on its revolving credit facility, indicating low immediate credit risk. However, the new Seller Note from the Pintail acquisition adds debt obligations.

Next Steps

• Finalize the purchase price allocation for the Pintail acquisition within the measurement period (not exceeding one year from acquisition date).
• Finalize the post-closing adjustment for Pintail's working capital by the end of fiscal year 2025.
• Continue making interest payments on the Seller Note, with the first principal payment of $20 million due within the next 12 months, and the remaining $30 million over two years thereafter.
• Distribute Supplemental Retirement Plan (SERP) participant balances within the next 12 months by liquidating assets held in the Rabbi Trust.
• Continue the multi-year ERP system implementation through a phased approach, incurring costs over the next few years.
• Evaluate the financial impact of the One Big Beautiful Bill Act (OBBBA) on corporate taxation.
• Monitor supply and demand for services and the competitive environment, including trends like customer preferences for lower emission and more efficient equipment.
• Continue to evaluate future investments and options to further upgrade equipment across the business.
• Repurchase outstanding common shares periodically based on market conditions and capital allocation strategies, subject to credit facility restrictions.
• Continue to pay cash dividends to common stockholders, subject to industry conditions and financial performance.

Key Dates

Recommendation

The company's Q2 2025 results show a substantial decline in profitability (net income down 68.7%, operating income down 56.2%) and cash generation, despite a revenue increase driven by the Pintail acquisition. While the acquisition adds strategic assets and revenue, it also introduces significant costs and debt, and the identified material weaknesses in Pintail's internal controls are a concern. The core pressure pumping business faces intense competition, oversupply, and pricing pressure, which are significant headwinds. However, RPC maintains a strong liquidity position with no outstanding credit facility borrowings and continues to pay a consistent dividend, which may appeal to income-focused investors. The active stock buyback program also provides some support. Given the mixed signals – strategic growth via acquisition versus deteriorating core profitability and operational challenges – a 'hold' recommendation is appropriate. Investors should monitor the integration of Pintail, the remediation of its internal control weaknesses, and any signs of stabilization or improvement in the pressure pumping market.

Keywords

Oilfield Services, Pressure Pumping, Pintail Alternative Energy, Permian Basin, Wireline Perforating, Technical Services, Support Services, SEC Filing, 10-Q, Energy Sector, Oil & Gas, Acquisition, Financial Results, EBITDA, Cash Flow, Rig Count, Corporate Governance, Share Repurchase, Dividends