Rpc Inc Q4 FY2020 Earnings Call

Good morning and thank you for joining us for RPC, Inc.'s Fourth Quarter 2020 Financial Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Services. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to advise everyone that this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer.

Thank you, and good morning. Before we begin our call today, I want to remind you that in order to talk about our company, we're going to mention a few things that are not historical facts. Some of the statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks. I'd like to refer you to our press release issued today along with our 2019 10-K and other public filings that outline those risks, all of which can be found on RPC's website. In today's earnings release and conference call, we'll be referring to several non-GAAP measures of operating performance. These non-GAAP measures are adjusted net loss, adjusted loss per share, adjusted operating loss, EBITDA, and adjusted EBITDA. We're using these non-GAAP measures today because they allow us to compare performance consistently over various periods without regard to non-recurring items. In addition, RPC is required to use EBITDA to report compliance with financial covenants under our credit facility. Our press release contains reconciliations of these non-GAAP financial measures to operating loss, net loss, and loss per share, which are the nearest GAAP financial measures. Please review these disclosures if you're interested in seeing how they are calculated. If you haven't received our press release yet and would like one, please see our website for a copy. I will now turn the call over to our CEO and President, Rick Hubbell.

Thank you, Jim. This morning we issued our earnings press release for RPC's fourth quarter of 2020, and we will discuss the quarter in a moment. Before we start though, I'd like to thank our employees for working through this incredibly challenging year of 2020. Through their efforts, our company is positioned to benefit from improving business conditions. We appreciate your dedication. Fortunately, several COVID vaccines have been approved and are now in their early stages of distribution. This development paves the way for a worldwide recovery in hydrocarbon demand. On the supply side, we have experienced a lack of investment in drilling the past several years, a declining production base, and OPEC plus discipline. This would appear supply and demand are heading in opposite directions. This confluence of events could potentially lead to an upcycle in our industry. RPC's fourth quarter activity levels improved sequentially for the first time since 2016, consistent with several oilfield key metrics. Our CFO, Ben Palmer, will discuss this and other financial results in more detail, after which I'll provide some closing comments.

Okay. Thank you, Rick. For the fourth quarter of 2020, revenues decreased to $148.6 million compared to $236 million in the fourth quarter of the prior year. Revenues decreased due to lower activity levels and pricing compared to the fourth quarter of the prior year. Adjusted loss for the fourth quarter was $11.3 million compared to an adjusted operating loss of $17.3 million in the fourth quarter of the prior year. Adjusted EBITDA for the fourth quarter was $7.8 million compared to adjusted EBITDA of $23.2 million in the same period of the prior year. For the fourth quarter of 2020, RPC reported a $0.03 adjusted loss per share, compared to a $0.07 adjusted loss per share in the fourth quarter of the prior year. Cost of revenues during the fourth quarter of 2020 was $117.9 million or 79.3% of revenues compared to $176.9 million or 75% of revenues during the fourth quarter of 2019. Cost of revenues declined primarily due to decreases in expenses consistent with lower activity levels and RPC's cost reduction initiatives. Cost of revenues as a percentage of revenues increased primarily due to lower pricing for our services and labor inefficiencies resulting from lower activity levels in the fourth quarter as compared to the prior year. Selling, general, and administrative expenses decreased to $26 million in the fourth quarter of 2020, compared to $36.8 million in the fourth quarter of the prior year. These expenses decreased due to lower employment costs, primarily the result of cost reduction initiatives during previous quarters. Depreciation and amortization decreased to $18 million in the fourth quarter of 2020, compared to $40.3 million in the fourth quarter of the prior year. Depreciation and amortization decreased significantly, primarily due to asset impairment charges recorded in previous quarters, which reduced RPC's depreciable property, plant, and equipment coupled with lower capital expenditures. Technical Services segment revenues for the quarter decreased 36.5% compared to the same quarter in the prior year. Segment operating loss in the fourth quarter of this year was $11.3 million, compared to a $17.2 million operating loss in the fourth quarter of the prior year. Our Support Services segment revenues for the quarter decreased 43.6% compared to the same quarter in the prior year. Segment operating loss in the fourth quarter of 2020 was $2.6 million compared to an operating profit of $1.2 million in the fourth quarter of the prior year. Now on a sequential basis, RPC's fourth quarter revenues increased 27.5%, again to $148.6 million from $116.6 million in the prior quarter. This was due to activity increases in most of the segment service lines resulting from higher completion activity. Cost of revenues during the fourth quarter of 2020 increased by $17 million or 16.9% to $117.9 million due to expenses, which increased with higher activity levels, such as materials and supplies and maintenance expenses. As a percentage of revenues, cost of revenues decreased from 86.5% in the third quarter of 2020 to 79.3% in the fourth quarter due to the leverage of higher revenues over certain costs, including more efficient labor utilization. Selling, general, and administrative expenses during the fourth quarter of 2020 decreased 19.6% to $26 million from $32.4 million in the prior quarter. This was primarily due to the accelerated vesting of stock recorded in the prior quarter related to the death of RPC's Chairman. RPC recorded impairment and other charges of $10.3 million during the quarter. These charges included a non-cash pension settlement loss of $4.6 million and the cost to finalize the disposal of our former sand facility. RPC incurred an operating loss of $11.3 million during the fourth quarter of 2020, compared to an adjusted operating loss of $31.8 million in the prior quarter. RPC's adjusted EBITDA was $7.8 million in the current quarter, compared to adjusted EBITDA of negative $12.3 million in the prior quarter. Technical Services segment revenues increased by $29.7 million or 27.2% to $139 million in the fourth quarter, due to increased activity levels in several service lines. RPC's Technical Services segment incurred $11.3 million operating loss in the current quarter compared to an operating loss of $24.9 million in the prior quarter. Support Services segment revenues increased by $2.3 million or 32.1% to $9.7 million in the fourth quarter. Operating loss narrowed slightly from $3.8 million in the prior quarter to $2.6 million in the current quarter. So during the fourth quarter, RPC operated 5 horizontal pressure pumping fleets, the same as the third quarter, but with improved utilization. At the end of the fourth quarter, RPC's pressure pumping capacity remained at approximately 728,000 hydraulic horsepower. Fourth quarter 2020 capital expenditures were $12.8 million. We currently estimate 2021 capital expenditures to be approximately $55 million. This will be comprised primarily of capitalized maintenance of our existing equipment and selected growth opportunities. With that, I'll now turn it back over to Rick for some closing remarks.

Ben, thank you. As 2021 begins, we have greater visibility into the near-term activity levels than in the recent past. Commodity prices have improved and our customers have a more constructive outlook. However, while we expect activity levels to continue to improve as the year progresses, we remain committed to capital discipline. We'll remain disciplined and will not increase our equipment fleets until we have clarity into economic returns justifying investments. Currently, our operating plans for 2021 include low capital spending, continued expense management, and scrutiny of customer relationships for acceptable profitability. At the end of the fourth quarter, RPC's cash balance was $84.5 million, and we remain debt-free. I'd like to thank you for joining us for RPC's conference call this morning. And at this time, we will open up the lines for your questions.

Your first question comes from Chris Voie with Wells Fargo. Your line is open.

Thanks. Good morning.

Hey, Chris.

First question, I guess on the fourth quarter, you know, the declining cash is pretty strong. Obviously, a big building working capital. Is there anything unusual in there? And given that build do you expect working capital to be a source over the course of '21 or headwind as revenues grow, just curious can you give a little color on that?

Yes, good question. During the fourth quarter, we talked about the sand mine facility that we sold. There were a lot of benefits to executing on that, which did cost us a little bit of cash but it did generate a lot of tax benefits. You'll notice on the balance sheet that we have $80 million in income tax receivables. Some of that is being generated from the CARES Act, but also because of the closing of Chippewa mine, we were able to finalize that and generate a large amount of tax benefits. The collection of those receivables, we're expecting that the vast majority of that will come in over the next nine months fairly steadily. I mean, it'll come in chunks, but we think it'll be kind of over that nine-month timeframe. So, that's a good thing. Also, our cash was absorbed to some degree because of the increase in the revenues obviously an increase in our trade accounts receivable. So we're expecting to continue to maintain a very strong cash balance, and with our focus on expense management and capital expenditures, we expect the cash balance to remain at these levels or even higher going forward.

Okay, thanks for that. And then my second question. In the release, you mentioned some visibility for growth as 2021 progresses, just curious if you could explain a little bit more whether you expect that to be from private companies or public E&Ps, you know, where the growth is coming from, maybe regionally as well. And whether there's been any pricing improvement coming with that growth?

Well, it's a - the growth will come from a variety of different customers. We have both the public key E&Ps and the private ones, and we have strong relationships with them. We obviously have a larger presence in West Texas, and we think that'll continue to be an area of improvement. And I'll comment briefly on pricing and Jim can add some more to it. But, we are seeing ourselves and hearing anecdotes of pricing improvements. We're going to remain disciplined, we certainly don't feel that any or many people in the industry are in a position to aggressively increase pricing. But certainly, we hear that there's discussion to make that happen. So we're very pleased with that. We're trying to play along, we're trying to be someone who's viewed as assisting in maintaining and having an upward pricing move. One of the reasons our fleet count has remained steady is that we don't want to deploy anymore until we are able to get sufficient work at sufficient contributions. So again, it's all about the discipline. We do think we have some good, even better visibility here early in 2021, especially given that in the fourth quarter, we didn't see the normal slowdown. So we didn't have the slow ramp-up in the first quarter. So we're pleased that we're off to a reasonable start. So we're expecting the first quarter to be able to generate some strong results. But we're going to expect it's going to be more slow and steady than other upturns. So we're going to react to what we see and not get ahead of ourselves. Jim, is there anything else you want to add on?

Chris, this is Jim. Not a whole lot except that, you know, our frac calendar has much less whitespace in it than it has in the past and much more visibility. It's a mix of customers that tend to be more private companies and small publics. We have not, you know, the financials we use do not have any pricing improvement in them. But we do have a lot of cases where other service providers have gone to customers for price increases, and now they're testing, they're doing price checks that doesn't yet translate into pricing improvement on the P&L, but it's an early good sign. So that's where we think we are right now.

Okay, thank you. Very helpful.

Your next question comes from Stephen Gengaro with Stifel. Your line is open.

Thanks. Good morning, gentlemen.

Hey, Stephen.

Two things, one, administrative, if you don't mind giving us the segment revenue breakdowns that will be helpful. But, and then the second question kind of from a bigger picture perspective. If we assume that you're not going to see a whole lot of pricing over the next three or four quarters, any guidance on how we should think about incremental margin performance?

Stephen, this is Jim, let me answer the first one for you. So I'm going to give you percentages of revenue by our service lines for RPC consolidated for the fourth quarter. So pressure pumping is our largest service line at 39.0% of consolidated revenues. Our downhole tools and motors service business was the second largest at 31.5% of revenues. Coiled tubing was the third at 9.4% of revenues, following that you have nitrogen which was 4.3% of revenues, rental tools which is in support as a percentage of consolidated revenue was 4.1% of fourth quarter revenue. And then it kind of drops off from there, but snubbing was 1.8% of revenues in the fourth quarter.

Great -

And your second question about -

And then on the incremental margins standpoint, you know, with what we're hearing in the market and some of the things that we've experienced directly, we expect there will be some price improvement. But I think absent that, and who knows what the strength and timing of that will be, but I think, typically looking back historically, in a normal sort of increasing revenue environment, incremental EBITDA margin improvements of 20% to 40% are normal. We are not at this point in time expecting, repeating myself, but being that we don't expect this to be a straight uphill shot with revenues. We're playing it close to the vest. And again, we want to remain disciplined. We don't want to get ahead of ourselves where we don't want to get busy just to get busy and hope for pricing improvements later. We're trying to ensure that the work we are winning helps us move forward and not just working hard to wait for pricing improvements sometime down the road. But that's kind of our objective currently.

Very good. Thank you, gentlemen.

Thank you.

Thanks, Stephen.

And our next question comes from Connor Lynagh with Morgan Stanley. Your line is open.

Yeah, thanks. I was wondering if we could just dial in the first quarter expectations a little bit. I appreciate there is a lot of moving pieces and you don't want to get ahead of yourselves. But you've had two quarters of ballpark 30% revenue growth sequentially. Can you maybe help us understand, should we be thinking about sequential single-digit revenue growth? Double-digit? Can it be anywhere close to what you've seen over the past couple of quarters? I'm just trying to make sure we think about the activity run rate leaving the year versus the end of the third quarter?

Yeah, so it's a valid question. We think that first quarter will be a little bit better than the fourth quarter, even seasonally adjusted. As you know, the seasonal impact for the fourth quarter was less pronounced this year than in 2020, compared to what it usually is. We see a bit of continued improvement in Q1. But you know, revenue growth might be in the high single-digits. And keep in mind, we've got a couple of things going on. One is, as we've discussed, we don't see a lot of pricing improvement right now. Another one is that we've got 5 pressure pumping fleets in the field, and they're fairly highly utilized at this point. So we can eliminate more whitespace in the calendar, but we've already done a lot of that. So we're fairly utilized in pressure pumping as well. Some of the other businesses can improve some, can grow some; weather is a little iffy at this point. It wasn't really an impact in the fourth quarter but we still have a couple of months of winter left. So put all that together, maybe high single-digit revenue growth would be a way to think about it.

Yeah, that's very helpful. Maybe just a higher-level one here. So, you know, generally speaking, the perception of RPC is that you may have a bit of a bias towards smaller private customers. You know, I guess, holding that to be true, and you can correct me if that's wrong, but one thing that we've been wondering is, certainly lots has been made of the capital discipline argument on the larger public E&Ps, but the wildcard is, of course, how much privates will choose to grow versus, you know, maybe there's some balance sheet repair required. And I appreciate we're talking about a large swath here. So maybe there's a couple of groups you want to discuss, but how would you characterize the desire of private or smaller public E&Ps to increase capital spending this year?

Well, I can tell you that whether it's private or large or small E&Ps, we're certainly hearing from our customers that they have ESG in mind and they want the right amount of equipment, they want equipment that they can feel that they need to have or want to have or be able to say that they have out in locations. So, we have responded to that, whether it was directly to that or in anticipation of that with some of the equipment that we added back in 2019, some of the Tier 4 equipments. So that's been desirable to our customers, and that is working at a very high utilization level. We have converted some of our earlier Tier equipment to dual-fuel capacity and that effort continues. It's not a significant investment, but we're implementing those plans, and that also is desirable to all of our customers, big and small. So that is benefiting us and we think it'll continue to give us additional capacity to meet those requirements going forward. So we are responding; we have not announced or talked about that we're adding complete new fleets with newer technology. We believe it's too early to make that decision. We're hopeful that things will improve and the environment, and again, the pricing and commitments from customers will improve to the point where that's an easy decision. But right now, we are return-focused, and it's going to take some time to get back there. So as we said, we're going to remain disciplined in that regard.

Yeah, thanks. I guess one of the points of the question, if you could just expand on a little bit is just, you know, expectations for activity growth sort of building on Chris's question, but maybe less in the near-term and just sort of customer sentiment. You know, we hear a lot, obviously, from the public E&Ps. But if you look at sort of the smaller side of your customer book, do you think there'll be growing activity a lot over the next couple of quarters? Or, you know, year or two here? What - what's your thinking on that the risk appetite from that group?

You know, so clearly that - that's a hard one, we do think that oil being over $50 is a nice psychological barrier to break through. You know, not speaking of financial returns, but we think that a sustained level of $50 has improved some activity. If you think back on it, not too long ago the strip showed us not getting to $50 oil until 2030. So I think that's a nice surprise that maybe springs on some of the animal spirits of the smaller companies, but really great questions. We don't have much more visibility.

I guess the read-through in terms of our comments, otherwise, are that, you know, we're not seeing things headed straight up, we don't have people knocking down our door saying, 'Please come out, and we want to get you on our calendar in May and June or whatever.' I think everybody's trying to figure out COVID and recovery and commodity prices going forward. I think across the sector, clearly there's more capital discipline on the E&Ps, both private and public. So at least anecdotally, we're saying that we're not expecting right now to definitively have a significant addition to our fleet count until work comes to fruition, that it comes to us at a sufficient level that will pay us back for putting that additional equipment out to work. So that's how I would say it; everybody across the industry is similarly disciplined.

Got it, that's helpful. Thank you.

Sure.

Thanks.

Your next question comes from Taylor Zurcher from Tudor, Pickering, Holt. Your line is open.

Hey, thank you. Ben, I want to try to expand a little bit on your last response there, you talked about not reactivating any additional equipment or you seem to suggest that you wouldn't reactivate any additional equipment until pricing improved, your fleet count stayed at 5. It sounds like last quarter and that's where it's at today. So could you just help us understand, to get into 6, 7 fleets out in the field, and what you're looking for is just pricing? Is it something else? Just help us understand that a little bit more?

Yes, I would say it's obviously with the work that we have across all of our service lines, some is better than others. We're trying to go after obviously the best work that we can get. Again, it's not all about getting busy. It's about generating sufficient returns. So that's what we're focused on, and to get more fleets working, we'll have to have the average of our work needs to be moving up. There are opportunities to drop out any customers that we may have or work that we may have taken on a few months ago that was marginal. We can, you know, there's always an opportunity to try to be selective; that's very difficult to do at many levels. But there are examples where we have done that, and we'll continue to do that. So we'll have to have a sufficient portfolio of work before we put additional amounts of equipment to work. We'll need better pricing or job characteristics. We'll have to feel that the work we're doing is contributing sufficiently to our financial results so that we're making progress with respect to our results.

Okay, fair enough. From a cash flow perspective, last call you talked about the goal of positive free cash flow for 2021, in the Q&A section of this call it sounded like maintaining the cash balance in and around $80 million where it's at now is the goal for 2021. Should we read that to mean that the positive free cash flow target for 2021 is still intact absent some working capital build that may happen as activity continues to trend higher?

Yes, yes. My comment was we would stay at least at the level of $80 million.

Okay, got it. Thanks, guys. That's it for me.

Thank you.

And your next question comes from John Daniel from Daniel Energy Partners. Your line is open.

Guys, thank you for the detail. Sort of a big picture question here. But if you envision, we're in a stable to slightly improving scenario from an activity standpoint, where OFS pricing gains are a bit elusive, is this the year we finally see the industry come together and consolidate within the OFS sector? Whether you choose to participate or not, just your thoughts on that?

This is Ben. You know, certainly there was a lot of discussion about that last year when everyone was highly uncertain about whether we would get back to the point that where we are right now. I think there's always a possibility. You know, the ability to take out costs will help the industry, can help individual companies. But I wouldn't doubt that there could be some consolidation. But today, I would say it's less critical than it was six months ago. So I wouldn't be surprised if it happened, but not shocked if it continued to be sort of a slow grind and it takes some additional time for those types of transactions to happen.

So you've seen a step change increase in deals being fixed to you or not?

I would say recently, probably not as many.

Okay.

Again, I think many people have either gone bankrupt or gone quiet or whatever. I think it's a little quieter now. It was certainly mid-June to November last year that was quite active, but not as much right now.

Now, I guess the question is, you see companies that are restructuring, creditors become owners, do they really want to sit down and run the thing or not? That's we'll see.

Yeah.

And John, this is Jim. Valuations would not be compelling if everybody's dragging it around book. Why not just keep it?

Yeah. Actually the flip side is, no one's really making any money. And to your earlier point, you need to take costs out of the business, and it's too fragmented such that we can't get pricing. Just for I mean kind of stating the obvious that's something needs to happen. Input costs, Jim, you know as we talked - it seems like asset costs, trucking costs are all moving up fairly sharply recently. Are you able to pass that through right now to customers? Or are you going to leave that one? Can you just walk us through what you're seeing from an input cost?

Yeah, so we are seeing - we've started to see or know about what's coming and that would be price increases for some of the - some grades of sand that type of thing. Increased utilization brings with it increased maintenance expense. And it is possible that component costs will increase a little bit. So, it's a management issue; we have to go to the customer and say our costs are increasing. And it's a management issue, you have to do that. We're historically pretty good at doing it. But we also think that supply and demand are in a position right now where we can do that back to our earlier comment that people are at least testing; we can go to customers and say, 'Look, my input costs are increasing,' and you can see that because you're buying sand too. Customers now know a lot more because of what they've been doing with logistics. So we think we can, and it's certainly our goal.

Got it, okay. Well, thank you. And then just the housekeeping and I missed the comment on 2020 CapEx. Can you tell us what that was?

In 2021?

No, in 2020, I got 2021. I just wanted '20.

It was $12.8 million, I believe.

For the quarter.

Yeah, for the quarter.

And for the year for the semi-truck.

It was $65 million.

$65 million, okay. All right, guys. Thanks for letting me on.

Thanks.

John, thank you.

Your next question comes from Blake Gendron with Wolfe Research. Your line is open.

Yeah, thanks. Good morning, guys. I want to dig into the upgrades that you mentioned, you know, appreciate you're approaching 2021 with capital conservatism here, but can you just walk us through the economics of the dual fuel upgrade? And, you know, in the context of one of your Permian peers having announced a new build that DGB new build that, you know, meaningfully lower pricing than we had thought maybe for new builds, is there a way that we should think about new build costs today versus what we thought about it, you know, say a year and a half or two years ago? And, you know, is that a pretty low threshold to upgrade this equipment from a capital perspective?

Hey, Blake, this is Jim. We can't really speak to new build costs because we aren't doing any. So I can't tell you whether component costs or equipment costs are lower or higher where that is, so sorry. Regarding dual fuel fleets, we have completed an upgrade of a dual fuel fleet and we are planning to do another one during the first quarter. We think the economics on that proposition are pretty good because upgrading an existing diesel fleet to dual fuel doesn't cost all that much. It allows you to win work that you might not have won otherwise. So it is a strong idea.

And our team, this is Ben. Our team is looking at the various alternatives that are available in the industry. So, you know, I can't say we're actively running the numbers right now because who knows what the future is going to hold, but we know kind of what the contribution margins are and we have an idea about what it would take based on the technology and how it runs with some assumed costs. But as we indicated earlier, we're ways from making a commitment for expanding our work because we do have other equipment that's available and some other equipment that we think is also convertible to dual fuel that would further expand our capacity of equipment that is desirable by many of our customers.

Yep, that's totally fair. I appreciate that detail. Want to dig into the sand commentary. Is this transitory or do you think that we've found a structural bottom in sand pricing? And then could you maybe fine-tune it with respect to northern white versus in-basin? I would assume, you know, in-basin supplies is fairly elastic. So if there's any tightness there, perhaps it's not as structural and not as longer-term, a theme here this coming quarters.

You know it's like, Jim, again, we don't know of any price increases for in-basin sand. Let's remember that drilling and completion activity remains historically low. So there's plenty of supply there. And I can't quote any grades for you but of northern white might be increasing in price. But many sand mines have shut down up there. So any increase in demand would result in price increases there. We don't think we talked to our operations people; we don't see any sort of secular shift back to northern white from in-basin. It's customer preference and it depends on which customer wants what, et cetera. So we don't see any real shifts in the market, just probably a momentary price increase based on just very tactical supply and demand issues.

Got it, that makes sense. One more, if I could sneak it in, a lot has been made of what's going on with the Biden administration in the federal lands, a moratorium, and it's probably an overreaction that's playing out in the equities right now. And there's certainly plenty of inventory over the coming years, but just high-level conceptual question for you, if you saw the mix of activity maybe move away from the Permian and specifically the Delaware, New Mexico side to some of the other basins as E&Ps maybe rationalize the balance. Would you say that that would be directionally positive or neutral or negative for your operations? Not necessarily just frac, but kind of everything in Technical Services?

Like it's hard - it's a great question. It's hard to say. There would probably be some short-term friction as operators move away from the federal lands in New Mexico. That's what we're talking about here. And there's certainly some, I won't say fear, but concern and some vigilance over what this might actually mean. We want to emphasize, though, that for the short-term, this is, at this point, a drilling permit moratorium. So wells which had been drilled, which we were going to complete in February, we will still complete. But certainly there's concern, at least in our part of the world, being New Mexico. But as we always say, our equipment has wheels on it, and some activities in the eastern part of the Permian instead of in the Delaware, we can certainly work there too or in other areas. So probably a non-event unless you just think about any short-term friction that might happen.

Yep, that's totally fair. Appreciate the time, guys. Thanks.

Yeah, Blake, thanks.

Your next question comes from Waqar Syed with ATB Capital Markets. Your line is open.

Thank you for taking my question, good morning. What's your maintenance CapEx running productively to where you expect it to be in 2021?

Waqar, this is Jim. We have that. It's, you know, it's at this point, less than $1 million per fleet. It's somewhere in that $700,000 to $800,000 range per fleet.

Is that - that's an annual number or quarterly number?

That will be annualized.

Well, okay. Do you think that's sustainable or is that not, this is for the active fleet, right?

Yes. Is it sustainable? We don't know. It depends a lot on activity and job intensity. So it's probably going to move up from here, I would say.

No, is it low because you know, you take equipment off some of the stacked equipment or is it low because of something else structural that's going on in the industry?

Well, this would be a RPC specific answer. As you know, we've disposed of a lot of our fleet, the average age of our equipment is a lot lower today than it was a year and a half ago. So other things equal, we've got newer equipment, that operates more efficiently and doesn't need that much maintenance. Also, we have our 3,000 horsepower pumps which certainly when they need something, they're expensive, but they run pretty well. So maintenance CapEx on that equipment is lower also. And fourth quarter had some nice utilization. But let's not forget that previous to that utilization was a good bit lower. So it's a function of utilization and newer equipment for us. But understand that there are a lot of variables in that maintenance CapEx number, and it can really move around.

Fair enough. Now, what's the average age of the 5 fleets that are working versus the other 9 fleets, I believe that are not working right now?

I would say, with that given a specific number of obviously, the larger pumps we bought in 2019 so and that they are heavily utilized. So the average age of the ones that are working are slightly lower. But there's not a - the equipment that we disposed of back in the third quarter of '19, all of the equipment at that point in time, other than the 3,000s were other similar vintage, we're not prioritized, we're not using the newer non-3000 horsepower pumps. So they're all reasonably comparable.

Fair enough. And then what would be the incremental costs were you to reactivate an additional fleet?

Obviously, the - well, maybe not obviously, the first fleet that comes back will be lower. It could be - it's not significant. If the question is how much CapEx would be needed? It would not; it should not be significant. Definitely maybe, obviously their hiring costs and training costs and things like that of new employees and things like that, but the cost should be minimal.

And after what number of fleets activity, would it be like after you have 8 fleets active that the costs start to go up? Or how many you could place in without significant incremental capital?

We currently, you know, don't know. We have a total of 12 or 13 fleets we could put in the field. I can't - we've done a lot over the past year and a half. So the last fleet that we put in the field will cost a lot more than the first fleet. But overall, it's not; it doesn't make a big economic impact difference. I'm sorry, that's probably the best I can give you.

Fair enough. And then just one last question, of your 728,000 hydraulic horsepower, what percentage would be kind of run by these Tier 4 engines?

So the Tier 4 equipment we have 2 Tier 4 fleets right now.

Okay.

Out of 5 working fleets.

And how many would be dual fuel? Total?

We will have at the end of first quarter, and this is a separate answer, a total of 50 dual fuel pumps at the end of the first quarter.

Okay, great. Thank you very much. That's very helpful. Appreciate it.

Thank you.

All right, thanks, Waqar.

Your next question comes from Stephen Gengaro with Stifel. Your line is open.

Thanks for taking the follow-up. Waqar asked a lot of what I was going to hit on, but just one quick one, when you are in conversations with customers, and you're talking about the dual fuel capabilities, and you mentioned this a little bit earlier as far as the value you drive and the ability for people to get paid ultimately for e-fleets, et cetera. But when you bring a dual fuel fleet to the negotiations, how does that impact the pricing discussions? It seems like it clearly helps utilization right now, but is there anything on price yet or do you think that will evolve as we go through 2021?

Stephen, this is Jim. It doesn't get you better pricing, it just gets you the job. So if I'm an employee at gambling terms, it's just the table stakes increased a little bit. It's having that dual fuel capability.

And I think there are a couple of different, you know, to the extent that when, if and when things begin to tighten, I think it will have more of a pronounced difference. I think at this point or up to this point, I think as Jim said, I think it has little impact on pricing; you really need it for the most part to be in the game. But as the fleet across the industry tightens, it will become more important, and we think you'll have some pricing power at that point.

Okay, great. Thanks. I appreciate all the color on the call today. Thanks, gentlemen.

Thanks, Stephen. Talk to you later.

There are no further questions at this time. I will now turn the call back to Jim Landers for closing remarks.

Thank you, and thanks for everybody who listened in today and for the questions as well. Good to talk to everyone. Hope you have a good day, and we will talk to you soon. Thanks.

Ladies and gentlemen, this concludes today's conference call. A replay of this conference call will be available on our website within two hours following the completion of the call. Thank you for participating. You may now disconnect.