# RPC Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [RPC Inc](/companies/res.md) (CIK 742278)
- Form: 10-Q
- Filed: 2023-10-26
- Accepted by EDGAR: Oct 26, 2023, 15:36 ET
- Period: 2023-09-30
- Accession: 0001558370-23-016835
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/742278/000155837023016835/res-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/742278/000155837023016835/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $330.4m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.22bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $239.1m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $810.1m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $42.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $127.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $22.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $195.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $101.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $246.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $6.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $48.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $18.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $154.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.08 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.71 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.08 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.71 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 212,790,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 213,082,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $299.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $148.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $25.9m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $12.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $171.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $686.4m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $1.25bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $140.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $249.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $997.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,512 characters.

### Overview

The following discussion should be read in conjunction with the Consolidated Financial Statements included elsewhere in this document. See also Forward-Looking Statements on page 30.

RPC, Inc. (RPC or the Company) provides a broad range of specialized oilfield services primarily to independent and major oilfield companies engaged in exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest, Rocky Mountain and Appalachian regions, and in selected international locations. The Company’s revenues and profits are generated by providing equipment and services to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells. We continuously monitor factors that impact current and expected customer activity levels, such as the prices of oil and natural gas, changes in pricing for our services and equipment, and utilization of our equipment and personnel. Our financial results are affected by geopolitical factors such as political instability in the petroleum-producing regions of the world, the actions of the OPEC oil cartel, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers’ drilling and production activities.

The discussion of our key business and financial strategies set forth under the Overview section in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022 is incorporated herein by reference. In 2023, the Company’s strategy of utilizing equipment in unconventional basins has continued. During the nine months ended September 30, 2023, capital expenditures totaled $148.8 million, including the purchase of a new tier four dual fuel equipment that was placed into service, coupled with capitalized maintenance and upgrades of our existing equipment. We currently expect capital expenditures, excluding the acquisition of Spinnaker, to be $200 million to $250 million during 2023 and to be directed primarily towards capitalized maintenance of our existing equipment and selected growth opportunities.

During the third quarter of 2023, total revenues of $330.4 million decreased by $129.2 million or 28.1 percent compared to the same period in the prior year. The decrease in revenues is primarily due to lower activity levels and more competitive pricing, partially offset by financial results from the Company’s recent acquisition of Spinnaker. Domestic revenues of $323.1 million decreased 28.2 percent for the three months ended September 30, 2023 compared to the same period in the prior year. International revenues for the third quarter of 2023 decreased 21.5 percent to $7.3 million compared to the same period in the prior year. We continue to pursue international growth opportunities, but the nature of this work is unpredictable and we believe that international revenues will continue to be less than ten percent of RPC’s consolidated revenues in the foreseeable future.

Cost of revenues decreased in the third quarter of 2023 compared to the same period in the prior year, primarily due to decreases in expenses consistent with lower activity levels, such as materials and supplies expenses, maintenance and repairs expenses and fuel costs. Cost of revenues as a percentage of revenues increased primarily due to a decrease in revenues, coupled with the relatively fixed nature of direct employment costs.

Selling, general and administrative expenses increased to $42.0 million in the third quarter of 2023 from $38.2 million in the third quarter of 2022 primarily due to expenses incurred from recently acquired Spinnaker, coupled with consulting fees related to ongoing projects. Selling, general and administrative expenses increased to 12.7 percent of revenues in the third quarter of 2023 from 8.3 percent of revenues in the third quarter of 2022 due to lower revenues over costs that are relatively fixed during the short term.

Income before income taxes was $24.9 million for the three months ended September 30, 2023 compared to $92.3 million during the same period of 2022. Diluted earnings per share were $0.08 for the three months ended September 30, 2023 compared to $0.32 per share in the same period of 2022. Net cash provided by operating activities increased to $299.1 million for the nine months ended September 30, 2023 compared to $40.9 million in the same period of 2022 primarily due to lower working capital needs resulting from a decrease in business activity levels in the third quarter of 2023 coupled with an increase in earnings during the first nine months of 2023.

### Outlook

The current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity. Following the trough of the most recent oilfield downturn in the second quarter of 2020, the price of oil rose by more than 250 percent in the third quarter of 2022 compared to the average price of oil in the second quarter of 2020. The price of natural gas rose by over 300 percent during the same time period. Following a low price of $0.23 per gallon in the second quarter of 2020, the price of benchmark natural gas liquids rose to $1.25 per gallon in the third quarter of 2022 (Source: U.S. Energy Information Administration). In addition, oil and gas prices experienced increases beginning in February 2022 due to concerns about potential world-wide supply constraints resulting from the Russian invasion of Ukraine. The price increases in these commodities moderated from their highs in the first six months of 2023, however oil prices increased during the third quarter of 2023 due primarily to the recent unrest in the Middle East. RPC believes that commodity prices will remain above levels sufficient to motivate our customers to maintain drilling and completion activities.

The Russian invasion of Ukraine during the first quarter of 2022 prompted Western European countries to curtail or eliminate their purchases of natural gas from Russia. As a result, the demand for liquified natural gas from the United States increased significantly, which increased the price for natural gas in the United States to its highest level since 2008 and encouraged additional investment in liquified natural gas production facilities in the United States. These factors have been offset by warm weather and the idling of a major liquified natural gas facility in the U.S. contributing to the decline in price of natural gas during the first six months of 2023. Despite the decline in price, we believe the favorable long-term outlook for natural gas provided by the U.S. oil and gas industry is sufficient to encourage our customers to maintain their natural gas-directed exploration and production activities.

The majority of the U.S. domestic rig count remains directed towards oil. In the third quarter of 2023, approximately 79 percent of the U.S. domestic rig count was directed towards oil, compared to 82 percent in the same quarter of the prior year. We believe that oil-directed drilling will remain the majority of domestic drilling, and that natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near term. However, we believe that natural gas-directed drilling will increase in the future because of favorable long-term market dynamics. This 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 market for our services and the competitive environment, including the current trends and expectations with regard to environmental concerns and related impact on our equipment fleets. The growing efficiency in recent years with which oilfield completion crews are providing services is a catalyst for the oversupplied nature of the oilfield services market. We believe that most of the feasible efficiency gains have been realized, and a number of our smaller competitors have ceased operations. These factors, combined with the increase in drilling and completion activities and the improvement in commodity prices, led to improved demand for our services during 2022 and the first six months of 2023, and despite what we believe was a temporary moderation of customer drilling and completion activity during the third quarter of 2023, we expect demand will improve in the fourth quarter of 2023.

We have selectively upgraded our existing equipment to operate using multiple fuel sources and to take advantage of advances in technology and data collection. RPC continues to maintain and upgrade our current fleet capacity of revenue-producing equipment. We will remain highly disciplined about adding new incremental revenue-producing equipment capacity and will only expand when we believe the projected financial returns of such capital expenditures meet our financial return criteria. The Company is allocating capital to maintain the capacity of our pressure pumping fleet to offset anticipated future fleet retirements. During the second quarter of 2023 the Company placed into service a new pressure pumping fleet, replacing existing older equipment sent out for refurbishment.

Effective July 1, 2023, the Company acquired Spinnaker, a leading provider of oilfield cementing services in the Permian and Mid-Continent basins. The acquisition of Spinnaker will expand RPC’s cementing business from its presence in South Texas to basins in which we currently provide other services.

### Results of Operations

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 | ​ ​ ​ ​ ​ 2022 | ​ ​ ​ Nine months ended September 30, 2023 | ​ ​ ​ ​ 2022 ​ |
| --- | --- | --- | --- | --- | --- |
| Consolidated revenues \[in thousands\] | **​** | **$330,417** ​ | $459,601 **​** | **$1,222,943** ​ | $1,119,732 ​ |
| Revenues by business segment \[in thousands\]: | ​ | **​** **​** ​ | ​ — ​ | ​ ​ ​ | ​ ​ ​ |
| Technical | **​** | **$303,069** ​ | $435,775 **​** | **$1,145,078** ​ | $1,058,227 ​ |
| Support | **​** | **​** **27,348** ​ | ​ 23,826 **​** | **​** **77,865** ​ | ​ 61,505 ​ |
| ​ | ​ | ​ **​** ​ | ​ — ​ | ​ ​ ​ | ​ ​ ​ |
| Consolidated operating income \[in thousands\] | **​** | **$22,711** ​ | $92,170 **​** | **$195,737** **​** | $175,620 ​ |
| Operating income (loss) by business segment \[in thousands\]: | ​ | ​ **​** ​ | ​ — ​ | ​ ​ ​ | ​ ​ ​ |
| Technical | **​** | **$18,912** ​ | $89,455 **​** | **$199,462** ​ | $171,093 ​ |
| Support | **​** | **​** **6,861** ​ | ​ 5,278 **​** | **​** **21,425** ​ | ​ 11,392 ​ |
| Corporate | **​** | **​** **(4,840)** ​ | ​ (4,106) **​** | **​** **(14,593)** ​ | ​ (13,160) ​ |
| Pension settlement charges | **​** | **​** **—** ​ | ​ — **​** | **​** **(18,286)** ​ | ​ — ​ |
| Gain on disposition of assets, net | **​** | **​** **1,778** ​ | ​ 1,543 **​** | **​** **7,729** ​ | ​ 6,295 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| Percentage cost of revenues(1) to revenues | **​** | **​** **72.4%** | ​ 67.4% | **​** **66.2%** | ​ 69.6% |
| Percentage selling, general & administrative expenses to revenues | **​** | **​** **12.7%** | ​ 8.3% | **​** **10.5%** | ​ 9.9% |
| Percentage depreciation and amortization expense to revenues | **​** | **​** **8.6%** | ​ 4.6% | **​** **6.4%** | ​ 5.4% |
| Average U.S. domestic rig count | ​ | ​ **649** ​ | ​ 761 ​ | **​** **709** ​ | ​ 705 ​ |
| Average natural gas price (per thousand cubic feet (mcf)) | ​ | **$2.6** ​ | $8.0 ​ | **$2.5** ​ | $6.7 ​ |
| Average oil price (per barrel) | ​ | **$82.2** ​ | $92.8 ​ | **$77.2** ​ | $99.0 ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| ​ | ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ |
| (1) Depreciation and amortization excluded from cost of revenues \[in thousands\] | **​** | **$25,590** ​ | $18,795 **​** | **$71,249** ​ | $53,942 ​ |

#### THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2022

*Revenues.* Revenues of $330.4 million for the three months ended September 30, 2023 decreased 28.1 percent compared to the three months ended September 30, 2022. Domestic revenues of $323.1 million decreased 28.2 percent for the three months ended September 30, 2023 compared to the same period in the prior year. The decrease in revenues is primarily due to lower customer activity levels and competitive pricing, partially offset by financial results from the Company’s recent acquisition of Spinnaker. International revenues of $7.3 million decreased 21.5 percent for the three months ended September 30, 2023 compared to the same period in the prior year.

During the third quarter of 2023, the average price of oil was 11.4 percent lower and the average price of natural gas was 67.5 percent lower, both as compared to the same period in the prior year. Oil and gas prices have moderated since the price increases in the prior year due to the Russian invasion of Ukraine but remain at sufficient levels to encourage customer drilling and completion activities. The average domestic rig count (Source: Baker Hughes, Inc.) for the three months ended September 30, 2023 was 14.7 percent lower than the same period in 2022.

The Technical Services segment revenues for the third quarter of 2023 decreased by 30.5 percent compared to the same period of the prior year due to a decrease in Pressure Pumping revenues due to lower customer activity, partially offset by financial results from the Company’s recent acquisition of Spinnaker. Technical Services reported operating income of $18.9 million during the third quarter of 2023 compared to operating income of $89.5 million in the third quarter of 2022. The decrease in Technical Services operating income was primarily due to a decrease in pressure pumping revenues. Support Services segment revenues for the third quarter of 2023 increased by 14.8 percent compared to the same period in the prior year, primarily due to higher activity levels within rental tools. Support Services reported operating income of $6.9 million for the third quarter of 2023 compared to operating income of $5.3 million for the third quarter of 2022. Third quarter 2023 Support Services operating profit increased by $1.6 million compared to the third quarter of the prior year due to higher activity levels and leverage of higher revenues over costs that are fixed during the short term.

*Cost of revenues.* Cost of revenues decreased 22.8 percent to $239.1 million for the three months ended September 30, 2023 compared to $309.8 million for the three months ended September 30, 2022. Cost of revenues decreased primarily due to decreases in expenses consistent with lower activity levels, such as materials and supplies expenses, maintenance and repairs expenses and fuel costs. Cost of revenues as a percentage of revenues, increased from 67.4 percent in the third quarter of 2022 to 72.4 percent in the third quarter of 2023 primarily due to a decrease in revenues, coupled with the relatively fixed nature of direct employment costs. In accordance with Staff Accounting Bulletin (SAB) Topic 11.B, cost of revenues presented on the Consolidated Statements of Operations excludes depreciation and amortization totaling $25.6 million for the third quarter of 2023 compared to $18.8 million for the third quarter of 2022.

*Selling, general and administrative expenses.* Selling, general and administrative expenses increased to $42.0 million for the three months ended September 30, 2023 compared to $38.2 million for the three months ended September 30, 2022, primarily due to expenses incurred from recently acquired Spinnaker, coupled with consulting fees related to ongoing projects. Selling, general and administrative expenses increased from 8.3 percent of revenues in the third quarter of 2022 to 12.7 percent of revenues in the third quarter of 2023 due to lower revenues over costs that are relatively fixed during the short term.

*Depreciation and amortization.* Depreciation and amortization increased 35.6 percent to $28.4 million for the three months ended September 30, 2023, compared to $20.9 million for the three months ended September 30, 2022. Depreciation and amortization increased due to capital expenditures in the past year, coupled with additional depreciation from the acquisition of Spinnaker.

*Gain on disposition of assets, net.* Gain on disposition of assets, net was $1.8 million for the three months ended September 30, 2023 compared to a gain on disposition of assets, net of $1.5 million for the three months ended September 30, 2022. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.

*Other income (expense), net.* Other income, net was $804 thousand for the three months ended September 30, 2023 compared to other expense, net of $67 thousand for the same period in the prior year.

*Interest expense and interest income.* Interest expense was $101 thousand for the three months ended September 30, 2023 compared to $143 thousand for the three months ended September 30, 2022. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan costs. Interest income increased to $1.5 million compared to $329 thousand in the prior year due to a higher average cash balance coupled with higher investment yields.

*Income tax provision.* Income tax provision was $6.5 million during the three months ended September 30, 2023 compared to $22.9 million tax provision for the same period in 2022. The effective tax rate was 26.3 percent for the three months ended September 30, 2023 compared to 24.9 percent for the three months ended September 30, 2022. The increase in the 2023 effective tax rate is primarily due to a decrease in pretax income and larger unfavorable discrete adjustments.

#### NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2022

*Revenues.* Revenues of $1.2 billion for the nine months ended September 30, 2023 increased 9.2 percent compared to the nine months ended September 30, 2022. Domestic revenues of $1.2 billion increased 9.8 percent for the nine months ended September 30, 2023 compared to the same period in the prior year. The increase in revenues was primarily due to improved pricing, higher customer activity levels and a larger active fleet of pressure pumping equipment. International revenues of $21.0 million decreased 16.8 percent for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to a decrease in revenues from Algeria.

During the first nine months of 2023, the average price of oil was 22.0 percent lower, and the average price of natural gas was 63.3 percent lower, both as compared to the same period in the prior year. The average domestic rig count for the nine months ended September 30, 2023 was 0.6 percent higher than the same period in 2022.

The Technical Services segment revenues for the first nine months of 2023 increased by 8.2 percent compared to the same period of the prior year due to higher customer activity levels, improved pricing and a larger fleet of pressure pumping equipment in service. Technical Services reported operating income of $199.5 million during the first nine months of 2023 compared to operating income of $171.1 million in the same period of 2022. Support Services segment revenues for the first nine months of 2023 increased by 26.6 percent compared to the same period in the prior year, primarily due to higher activity levels and improved pricing within rental tools.

Support Services reported operating income of $21.4 million for the first nine months of 2023 compared to operating income of $11.4 million for the same period of 2022.

*Cost of revenues.* Cost of revenues increased 3.9 percent to $810.1 million for the nine months ended September 30, 2023 compared to $779.5 million for the nine months ended September 30, 2022. Cost of revenues increased primarily due to increases in expenses consistent with higher activity levels, such as materials and supplies expenses, maintenance and repairs expenses, employment costs and fuel costs. Cost of revenues as a percentage of revenues, decreased from 69.6 percent for the nine months ended September 30, 2022 to 66.2 percent for the nine months ended September 30, 2023 primarily due to improved pricing for our services, as well as reduced maintenance expense due to a decrease in the average age of our equipment. In accordance with SAB Topic 11.B, cost of revenues presented on the Consolidated Statements of Operations excludes depreciation and amortization totaling $71.2 million for the nine months ended September 30, 2023, compared to $53.9 million for the nine months ended September 30, 2022.

*Selling, general and administrative expenses.* Selling, general and administrative expenses increased to $127.8 million for the nine months ended September 30, 2023 compared to $110.4 million for the nine months ended September 30, 2022, primarily due to costs related to the settlement of a vendor dispute coupled with expenses incurred from recently acquired Spinnaker, as well as increases in variable costs consistent with higher activity levels. Selling, general and administrative expenses, as a percentage of revenues, increased from 9.9 percent in the first nine months of 2022 to 10.5 percent in the same period of 2023 primarily due to the settlement of a vendor dispute and the acquisition of Spinnaker during the first nine months of 2023.

*Pension settlement charges.* Pension settlement charges were $18.3 million for the nine months ended September 30, 2023. There was no pension settlement charge for the nine months ended September 30, 2022. See note 14 of the notes to the Consolidated Financial Statements for more information.

*Depreciation and amortization.* Depreciation and amortization increased 30.1 percent to $78.7 million for the nine months ended September 30, 2023, compared to $60.5 million for the nine months ended September 30, 2022. Depreciation and amortization increased due to capital expenditures in the past year coupled with additional depreciation from the acquisition of Spinnaker.

*Gain on disposition of assets, net.* Gain on disposition of assets, net was $7.7 million for the nine months ended September 30, 2023 compared to a gain on disposition of assets, net of $6.3 million for the nine months ended September 30, 2022. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.

*Other income, net.* Other income, net was $2.2 million for the nine months ended September 30, 2023 compared to other income, net of $516 thousand for the same period in the prior year.

*Interest expense and interest income.* Interest expense was $246 thousand for the nine months ended September 30, 2023 compared to $543 thousand for the nine months ended September 30, 2022. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan costs. Interest income increased to $6.0 million compared to $472 thousand in the prior year due to a higher average cash balance coupled with higher investment yields.

*Income tax provision.* Income tax provision was $48.8 million during the nine months ended September 30, 2023 compared to $44.7 million tax provision for the same period in 2022. The effective tax rate was 24.0 percent for the nine months ended September 30, 2023 compared to a 25.4 percent effective tax rate for the nine months ended September 30, 2022. The decrease in the 2023 effective tax rate is primarily due to smaller unfavorable discrete adjustments.

### Liquidity and Capital Resources

#### Cash Flows

The Company’s cash and cash equivalents increased $45.5 million to $171.9 million as of September 30, 2023 compared to cash and cash equivalents of $126.4 million as of December 31, 2022. This increase is primarily due to favorable changes in working capital coupled with an increase in net income during 2023 compared to the prior year, partially offset by the cash acquisition of Spinnaker during 2023.

The following table sets forth the historical cash flows for the nine months ended September 30, 2023 and 2022:

*(In thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Nine months ended September 30, 2023 | ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2022 | ​ |
| --- | --- | --- | --- | --- | --- |
| Net cash provided by operating activities | **​** | **$299,142** | ​ | $40,928 | ​ |
| Net cash used for investing activities | **​** | **​** **(215,045)** | ​ | ​ (78,655) | ​ |
| Net cash used for financing activities | **​** | **​** **(38,647)** | ​ | ​ (8,821) | ​ |

Cash provided by operating activities for the nine months ended September 30, 2023 increased by $258.2 million compared to the nine months ended September 30, 2022. Cash provided by operating activities for the nine months ended September 30, 2023 includes net income of $154.9 million, coupled with a favorable change in accounts receivable of $102.6 million, offset by unfavorable changes in other components of our working capital (accounts payable and taxes receivable) totaling $52.1 million primarily due to the timing of payments and receipts.

Cash used for investing activities for the nine months ended September 30, 2023 increased by $136.4 million compared to the nine months ended September 30, 2022, primarily due to cash paid for the acquisition of Spinnaker during the second quarter of 2023, coupled with an increase in capital expenditures primarily due to the timing of new equipment deliveries and consistent with higher business activity levels.

Cash used for financing activities for the nine months ended September 30, 2023 increased by $29.8 million primarily due to an increase in cash dividends paid to common stockholders, coupled with repurchases during 2023 of the Company’s common shares in the open market and repurchases for taxes related to the vesting of employees’ restricted shares. The Company resumed dividend payments to common stockholders during the third quarter of 2022.

#### Financial Condition and Liquidity

The Company’s financial condition as of September 30, 2023 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. The Company’s decisions relating to the amount of cash to be used for investing and financing activities are influenced by our capital position, and the expected amount of cash to be provided by operations. RPC does not currently expect to utilize our revolving credit facility to meet these liquidity requirements.

The majority of our cash and cash equivalents are held at a single financial institution and are in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC). This financial institution is among the largest in the United States and we believe it is a safe place to hold our deposits.

The Company currently has a $100.0 million revolving credit facility that matures in June 2027 as amended. The facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. In the second quarter of 2022, the Company amended the revolving credit facility. Among other matters, the amendment (1) extends the termination date for revolving loans from July 26, 2023 to June 22, 2027, (2) replaces LIBOR with Term SOFR as an interest rate option in connection with revolving loan borrowings and reduces the applicable rate margins by approximately 0.25% at each pricing level, (3) introduces a 1.00% per annum floor for base rate borrowings, (4) permits the issuance of letters of credit in currencies other than U.S. dollars. As of September 30, 2023, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $16.4 million; therefore, a total of $83.6 million of the facility was available. The Company was in compliance with the credit facility financial covenants as of September 30, 2023. For additional information with respect to RPC’s facility, see Note 15 of the Consolidated Financial Statements.

#### Cash Requirements

The Company currently expects capital expenditures, excluding the acquisition of Spinnaker, to be $200 million to $250 million in 2023 and to be directed towards both capitalized maintenance of our existing equipment and selected growth opportunities. The Company is allocating capital to maintain the capacity of its pressure pumping fleet to offset anticipated future fleet retirements. During the second quarter of 2023 the Company placed into service a new pressure pumping fleet, replacing existing older equipment sent out for refurbishment. The actual amount of capital expenditures in 2023 will depend primarily on equipment maintenance requirements, expansion opportunities, and equipment delivery schedules.

The Company has ongoing sales and use tax audits in various jurisdictions subject to varying interpretations of statutes. The Company has recorded the exposure from these audits to the extent issues are resolved or are probable and reasonably estimable. There are issues that could result in unfavorable outcomes that cannot be currently estimated. See Note 13 of the Notes to Consolidated Financial Statements for additional information.

During the first nine months of 2023, the Company made cash contributions of $5.4 million to its Retirement Income Plan and currently expects to make minimal contributions for the remainder of the year.

The Company has a stock buyback program to repurchase up to 49,578,125 shares in the open market, including an additional 8,000,000 shares authorized for repurchase by the Board of Directors in the second quarter of 2023. As of September 30, 2023, 14,979,128 shares remained available to be repurchased. During the three months ended September 30, 2023 there were 136,692 shares repurchased in the open market. During the first nine months of 2023 the Company repurchased 1,269,056 shares in the open market. The Company may repurchase outstanding common shares periodically based on market conditions and our capital allocation strategies considering restrictions under our credit facility. The stock buyback program does not have a predetermined expiration date. For additional information with respect to RPC’s stock buyback program, see Note 19 of the Consolidated Financial Statements.

On October 24, 2023, the Board of Directors declared a regular quarterly cash dividend of $0.04 per share payable December 11, 2023 to common stockholders of record at the close of business on November 10, 2023. The Company expects to continue to pay cash dividends to common stockholders, subject to industry conditions and RPC’s earnings, financial condition, and other relevant factors.

#### INFLATION

The Company purchases its equipment and materials from suppliers who provide competitive prices and employ skilled workers from competitive labor markets. If inflation in the general economy increases, the Company’s costs for equipment, materials and labor could increase as well. In addition, increases in activity in the domestic oilfield can cause upward wage pressures in the labor markets from which it hires employees, especially if employment in the general economy increases. Also, activity increases can cause supply disruptions and higher costs of certain materials and key equipment components used to provide services to the Company’s customers. In recent years, the price of labor and raw materials increased due to higher oilfield activity and labor shortages caused by the departure of skilled labor from the domestic oilfield industry in prior years. These cost increases moderated during 2023 but remain high by historical standards.

#### OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any material off balance sheet arrangements.

#### RELATED PARTY TRANSACTIONS

#### Marine Products Corporation

In conjunction with the spin-off of its former power boat manufacturing segment conducted through Chaparral Boats, Inc., RPC and Marine Products Corporation (Marine Products) entered into various agreements that define the companies’ relationship. RPC charged Marine Products for its allocable share of administrative costs incurred for services rendered on behalf of Marine Products Corporation totaling $786 thousand for the nine months ended September 30, 2023 and $682 thousand for the comparable period in 2022.

#### Other

The Company periodically purchases, in the ordinary course of business, products or services from suppliers that are owned by officers or significant stockholders of, or affiliated with certain directors of RPC. The total amounts paid to these affiliated parties were $1.3 million for both the nine months ended September 30, 2023 and for the nine months ended September 30, 2022.

RPC receives certain administrative services and rents office space from Rollins, Inc. (a company of which Mr. Gary W. Rollins is Chairman, and which is controlled by Mr. Rollins and his affiliates). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on three months’ notice. The services covered by these agreements include selected administrative services for certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated $3 thousand for the nine months ended September 30, 2023 and $52 thousand for the nine months ended September 30, 2022.

RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of $150 thousand for each of the nine months ended September 30, 2023 and September 30, 2022.

#### CRITICAL ACCOUNTING POLICIES

The discussion of Critical Accounting Policies is incorporated herein by reference from the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022. There have been no significant changes in the critical accounting policies since year-end.

#### IMPACT OF RECENT ACCOUNTING STANDARDS

See Note 2 of the Notes to Consolidated Financial Statements for a description of recent accounting standards, including the expected dates of adoption and estimated effects on results of operations and financial condition.

#### SEASONALITY

Oil and natural gas prices affect demand throughout the oil and natural gas industry, including the demand for the Company’s products and services. The Company’s business depends in large part on the economic conditions of the oil and gas industry, and specifically on the capital expenditures of its customers related to the exploration and production of oil and natural gas. There is a positive correlation between these expenditures and customers’ demand for the Company’s services. As such, when these expenditures fluctuate, customers’ demand for the Company’s services fluctuates as well. These fluctuations depend on the current and projected prices of oil and natural gas and resulting drilling activity, and are not seasonal to any material degree.

#### FORWARD-LOOKING STATEMENTS

Certain statements made in this report that are not historical facts are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “focus,” “plan,” and similar expressions generally identify forward-looking statements. Such forward-looking statements may include, without limitation, statements that relate to our business strategy, plans and objectives, and our beliefs and expectations regarding future demand for our equipment and services and other events and conditions that may influence the oilfield services market and our performance in the future. Forward-looking statements made elsewhere in this report include, without limitation, statements regarding: our expectations that the acquisition of Spinnaker will expand RPC’s cementing business from its presence in South Texas to basins in which we currently provide other services, our ability to continue to monitor factors that impact current and expected customer activity levels, such as the prices of oil and natural gas, changes in pricing for our services and equipment, and utilization of our equipment and personnel; the effect of geopolitical factors such as political instability in the petroleum-producing regions of the world, the actions of the OPEC oil cartel, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers’ drilling and production activities on our financial results; our strategy of utilizing equipment in unconventional basins; our expectation that capital expenditures will be $200 million to $250 million during 2023 and our expectation that such expenditures will be directed primarily towards capitalized maintenance of our existing equipment and selected growth opportunities; our plans to continue to pursue international growth opportunities; our belief that international revenues will continue to be less than ten percent of our consolidated revenues in the foreseeable future; our belief that current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity; our belief that commodity prices will stay above levels sufficient to motivate our customers to maintain drilling and completion activities; our belief that the favorable long-term outlook for natural gas provided by the U.S. oil and gas industry is sufficient to encourage our customers to maintain their natural gas-directed exploration and production activities; our belief that oil-directed drilling will remain the majority of domestic drilling and that natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near-term; our belief that natural gas-directed drilling will increase in the future because of favorable long-term market dynamics and our belief that this projected higher demand should drive increased activity in most of the basins in which we operate; our plans to continue to monitor the market for our services and the competitive environment including the current trends and expectations with regard to environmental concerns and related impact on our equipment fleets; our belief that the growing efficiency with which oilfield completion crews are providing services is a catalyst for the oversupplied nature of the oilfield services market; our belief that most of the feasible efficiency gains have been realized and that a number of our smaller competitors have ceased operations; our belief that demand for our services will continue to improve over the next several quarters; our plans to remain highly disciplined for about adding new incremental revenue-producing equipment capacity and to expand only when we believe the projected financial returns of such capital expenditures meet our financial return criteria; our plans to allocate capital to maintain the capacity of our pressure pumping fleet to offset anticipated fleet requirements; the strength of our financial condition; our plans with respect to our stock buyback program; our belief that 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; our belief that we will not need our revolving credit facility to meet our liquidity requirements; our expectations to continue to pay cash dividends to common stockholders, subject to industry conditions and RPC earnings, financial condition and other relevant factors; estimates made with respect to our critical accounting policies; the effect of new accounting standards; the effect of the changes in foreign exchange rates on our consolidated results of operations or financial condition; and the impact of lawsuits, legal proceedings and claims on our financial position and results of operation.

Such forward-looking statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RPC to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Risk factors that could cause such future events not to occur as expected include the following: the volatility of oil and natural gas prices; our concentration of customers in the energy industry and periodic downturns; our business depends on capital spending by our customers, many of whom rely on outside financing to fund their operations; dependence on our key personnel; our ability to identify or complete acquisitions; our ability to attract and retain skilled workers; some of our equipment and several types of materials used in providing our services are available from a limited number of suppliers; whether outside financing is available or favorable to us; increasing expectations from customers, investors and other stakeholders regarding our environmental, social and governance practices; our compliance with regulations and environmental laws; the combined impact of the OPEC disputes and the COVID-19 pandemic on our operating results; possible declines in the price of oil and natural gas, which tend to result in a decrease in drilling activity and therefore a decline in the demand for our services; the ultimate impact of current and potential political unrest and armed conflict in the oil producing regions of the world, including the current conflict involving Israel and the Gaza Strip, which could impact drilling activity, adverse weather conditions in oil or gas producing regions, including the Gulf of Mexico; competition in the oil and gas industry; the Company’s ability to implement price increases; the potential impact of possible future regulations on hydraulic fracturing on our business; risks of international operations; reliance on large customers; our operations rely on digital systems and processes that are subject to cyber-attacks or other threats; and our cash and cash equivalents are held primarily at a single financial institution. Additional discussion of factors that could cause actual results to differ from management’s projections, forecasts, estimates and expectations is contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, and in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 541 characters.

The Company is subject to interest rate risk exposure through borrowings on its credit facility. As of September 30, 2023, there were no outstanding interest-bearing advances on our credit facility, which bear interest at a floating rate.

Additionally, the Company is exposed to market risk resulting from changes in foreign exchange rates. However, since the majority of the Company’s transactions occur in U.S. currency, this risk is not expected to have a material effect on its consolidated results of operations or financial condition.

## Controls and procedures

As filed, 1,579 characters.

*Evaluation of disclosure controls and procedures –* The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, September 30, 2023 (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the Evaluation Date.

*Changes in internal control over financial reporting –* There were no changes in the Company’s internal control over financial reporting during the third quarter of 2023 which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 256 characters.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as updated in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

Filed Oct 26, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-016835. Last ingested by Listed: Oct 29, 2026, 17:36 ET. No prices; not investment advice.