Good morning and thank you for joining us for RPC, Inc.'s Second Quarter 2021 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 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, Andria 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 2020 10-K and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net. In today's earnings release and conference call, we will 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 revolving credit facility. Our press release issued today and our website contain 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've not received our press release for any reason, please visit our website at rpc.net. I will now turn the call over to our President and CEO, Rick Hubbell.

Jim, thank you. This morning we issued our earnings press release for RPC's second quarter of 2021. This second quarter represented a transition quarter for RPC. We saw numerous signs of increased demand for our services and have a fully booked calendar for most of the third quarter. This is the most visibility we've had since pre-COVID. Nevertheless, we did experience a dip in customer activity in June due to some jobs being pushed and heavy rains in the Permian. July is shaping up to be substantially better than our second quarter performance, and the remainder of the third quarter appears consistent with July at this point. Our CFO Ben Palmer will discuss this and other financial results in more detail, and I'll provide some closing comments.

Thank you, Rick. Second quarter of 2021 revenues increased to $188.8 million compared to $89.3 million in the second quarter of the prior year. Revenues increased due primarily to higher activity levels and improved pricing compared to the second quarter of the prior year. Revenues also increased in the second quarter of 2021 because the second quarter of the prior year was severely impacted by COVID-19. This impact affected all of our year-over-year comparisons. Our operating loss for the sector was significantly reduced compared to the prior year. EBITDA for the second quarter this year was $17.3 million compared to adjusted EBITDA of negative $17.8 million in the same period of the prior year. We approached breakeven per-share results in the second quarter of 2021 compared to an adjusted loss per share of $0.10 in the second quarter of 2020. Cost of revenues during the second quarter of 2021 was $145.8 million or 77.2% of revenues compared to $80 million or 89.6% of revenues from the second quarter of the prior year. Cost of revenues increased primarily due to increases in expenses consistent with higher activity levels. Cost of revenues as a percentage of revenues decreased due to the leverage of higher revenues over certain direct costs, fixed direct costs. Selling, general and administrative expenses increased to $29.4 million in the second quarter of this year compared to $28.8 million in the second quarter of the prior year. These expenses included higher bad debt expense and expenses consistent with higher activity levels, primarily offset by lower costs. Depreciation and amortization decreased slightly to $17.9 million in the second quarter of 2021 compared to $19.6 million in the second quarter of the prior year as capital expenditures have remained relatively low. Our technical services segment revenues for the quarter increased by 118.7% compared to the same quarter in the prior year due to significantly higher activity and some pricing improvement. Segment operating profit in the second quarter of 2021 was $1.4 million compared to a $34.1 million operating loss in the second quarter of the prior year. Our support services segment revenues for the quarter increased 44.1% compared to the same quarter in the prior year. Segment operating loss this year was $2.4 million compared to an operating loss of $1.9 million in the second quarter of the prior year. On a sequential basis, our second quarter revenues increased 3.4% from $182.6 million in the prior quarter due to activity increases in most of our service lines. The improvement was negatively impacted by multiple job delays. Cost of revenues in the second quarter of 2021 was $145.8 million, relatively unchanged from the prior quarter. As a percentage of revenues, cost of revenues decreased from 80.1% in the first quarter of this year to 77.2% in the second quarter due to a favorable job mix in several service lines, as well as the impact of the Cares Act employee retention credit that we recognized during the quarter. Selling, general and administrative expenses during the second quarter of 2021 decreased 3.9% to $29.4 million compared to $30 million in the prior quarter, and this is also due to the impact of the retention tax credit. RPC incurred an operating loss of $1.2 million during the second quarter of 2021 compared to an operating loss of $10.5 million in the prior quarter. RPC's EBITDA was $17.3 million during the quarter compared to EBITDA of negative $7.8 million in the first quarter. Our technical services revenues increased by $3.5 million, or 2%, to $176.1 million in the second quarter due to increased activity levels in most of the segment's service lines. RPC's technical services segment generated a $1.4 million operating profit in the current quarter compared to an operating loss of $5.8 million in the prior. Support services segment revenues increased by $2.7 million, or 26.8%, to $12.6 million during the second quarter. Operating loss was $2.4 million compared to an operating loss of $2.9 million in the previous quarter. During the second quarter, RPC operated up to six horizontal pressure pumping fleets, and early in the third quarter, we reactivated at minimal cost our seventh fleet to meet incremental demand. In the second quarter, 2021 capital expenditures were $14.1 million, and we currently estimate full-year 2021 capital expenditures to be approximately $65 million composed primarily of capitalized maintenance for our existing equipment and selected growth opportunities. With that, I will turn it back over to Rick for some closing remarks.

Thanks, Ben. Second quarter revenues improved sequentially as drilling and completion activities continued to increase through improving oil prices and a strengthening economy. We were pleased with the increased activity levels and our ability to pass through cost increases to our customers. We have not yet been able to consistently achieve net pricing improvements, but are optimistic that this will change soon. Our ESG-friendly tier four and dual fuel frack equipment is in high demand, and we expect to see pricing power here first. We began the third quarter with indications that our customer base is responding to higher commodity prices with increased drilling and completion plans during the remainder of the year and into 2022. At the end of the second quarter, RPC's cash balance was $121 million, and we remain debt-free. I would like to thank you all for joining us for RPC's conference call this morning, and at this time, we'll open up the lines for your questions.

Your first question comes from the line of Ian Macpherson with Piper Sandler.

So it sounds like third quarter is shaping up nicely, even though you're not giving great net pricing. You have some confidence that that's lurking around the corner. Is the third quarter top line booked up double-digits at this point or could you refine that a little bit for us?

This is Jim. Yes, that's very much in the realm of possibility.

Okay. You mentioned the Cares Act benefit and the Q2 margins. I'm sorry if I missed where that was specified there. If it wasn't, could you help us with that incremental for Q3?

Yeah. Overall number for the quarter was just under $4 million, $3.9 million, and about $0.5 million of that is in our corporate costs, and the remainder, about $3.4 million, is primarily in technical services. So that would be in technical services operating profit. We reported $1.4 million operating profits, so it would have been about a $2 million operating loss without that credit.

Okay. Thanks. And then last one for me just with regards to the optimism on net pricing improvement, do you see that as a possibility by the end of this year? Or are you thinking about that more in terms of the first half of 2022 at this point?

I think we're hopeful that we will see some pricing improvement. We see the market tightening and increasing activity, so we are hopeful, but we remain cautiously optimistic. We are pushing forward and doing everything we can to support that.

Your next question comes from the line of Stephen Gengaro with Stifel.

Thanks. And good morning, gentlemen. So, a couple of things I'll start with: do you mind breaking down the revenue within technical services or for the major product lines?

Yeah. Stephen, this is Jim, happy to do that. So the numbers I'm about to give are the percentage of consolidated revenue for the quarter for our major service lines. Our largest service line is pressure pumping, which accounted for 38.2% of consolidated revenues. Next comes through tubing solutions at 31.2% of consolidated revenues, followed by coiled tubing at 10.8%, then rental tools and our technical services segment, which was 4.5% of consolidated revenues. Finally, nitrogen accounted for 4.3% of consolidated revenues.

Thank you. So when you look at the margin profile, and obviously there are some moving pieces in the quarter that you alluded to, how should we think about the deployment of an additional fleet within pressure pumping and its impact on margins as we try to triangulate that with just the overall revenue growth and how the margins will flush out as we get into the back half of the year?

Stephen, this is Jim again. We wouldn't put a fleet in the field if we didn't think it had acceptable returns. The margin profile right now is such that pressure pumping is a little bit lower margin than some of our other large service lines. It would be bottom-line accretive in dollars; hard to say about margin percentage. It will also absorb some more overhead, so it truly is hard to say, but it will enhance our bottom line in the third quarter.

Okay. Just a quick follow-up to that. When you think about, I don't know if you could talk about incrementals or just margin changes as we get into the third quarter. I know it's always hard when you're dealing with low numbers still and are coming off a bottom, so incrementals can get a little bit tricky. But do you envision if you got to around 10% revenue growth that you said was realistic, would you also envision a positive operating income number, excluding the gain on asset sales and the Cares?

Positive operating income is certainly in the realm of possibility.

Your next question comes from the line of John Daniel with Daniel Energy Partner.

Hey guys, thanks for putting me on. I'm wondering if you guys could just opine on when you might try to deploy an additional fleet number. What's the demand set behind that?

Well, that's a good question, John. As soon as we are comfortable, right? As soon as we have demand visibility, we indicated the frac calendar early in the third quarter is quite full. Our team has done a great job of trying to remain disciplined and not getting too far ahead of ourselves. We have a plan to try to roll things out conservatively and slowly. So I would say right now, there are not aggressive plans. Obviously, to deploy a fleet, you need to have incremental additional personnel. So at this moment, we are not aggressively hiring for an eighth fleet, but we're always ready, and recruiting is an ongoing program. So we can get people in relatively quickly. But at this moment, that's not part of our plans to say that we should put another one in place in the next six or four weeks.

Fair enough. Sort of another, I got two more for you. The next one relates to if you go from seven fleets to six, again, just doing simple math, that's about a 15% increase. Is that type of percent increase representative of the other product lines in terms of the step-up in activity for Q3?

Probably not that significant.

Okay. Fair enough. And then the last one just relates to your general thoughts on labor being as tight as it is and with COVID cases rising. Just how much of a concern do you think that is? Or what's the strategy if you start getting cases popping up out in West Texas?

John, this is Jim, and it'll probably be the same game plan that we've executed over the past year and a half, which is social distancing, checking people in, having more personnel than you theoretically need because of quarantines, but that happened. It wasn't pleasant, and it did increase costs over the past year and a half, but that game plan worked. It was good for our employees, and it complied with customer requirements. It did cost incrementally more, but that's what we would do if it happens.

Okay.

John, this is Ben. We're certainly not experts, but I would say in recent months, the impact has not been as significant. Jim is right that there have been incremental costs over that entire time, but recently we haven't seen any major or direct impact that we're aware of. I'm hopeful or my reading of the tea leaves is that hopefully this will not have a significant impact on us. If there are some incremental impacts, we'll respond to it. We have processes and procedures in place to address it. But once we had all those things in place, it was relatively rare that we were impacted by COVID. So I'm hopeful that the spread of cases won't significantly affect us, but if it does, I believe we can operate through it fairly effectively.

Okay. And then I guess the last one would be just as the customers are looking at this as it's full steam ahead and get the job done, do you sense the same level of conservatism in terms of the policies out in the field? The reason I ask is just because every time we talk to any service company, labor is like the number one issue, and there's not a lot of backup capacity.

Right. We're not hearing a lot of anecdotes about issues with that right now. Certainly labor is a concern, but we're not hearing that it's COVID-related.

Your next question comes from the line of Taylor Zurcher with Tudor, Pickering.

Hey guys, thanks for taking my question. You talked about some customer-related operational delays impacting pressure pumping in Q2, and I'm hoping you could give us a bit more color as to what was going on there and what sort of impact that had on Q2. Also, it sounds like in the same vein that the frac calendar for Q3 is fully booked with at least seven horizontal fleets. I'm just curious if you could help frame what the issues were in Q2 and how we should be thinking about effective utilization for those six to seven horizontal spreads you have?

Taylor, it's Jim. We had some customer operational delays in the second quarter, and I know we've already mentioned that. Some of it was related to heavy rain in West Texas, and some of it was related to job delays that can happen when you're trying to coordinate multiple sets of logistics on a job site. These issues do come up unexpectedly. As a result, our utilization was certainly lower than it was in the first quarter. However, with seven fleets, we see higher utilization in the third quarter. The calendar right now appears to be full, and although we cannot guarantee that there won't be delays, we feel confident that utilization will be practically full in the third quarter.

Okay, great. And maybe shifting gears a bit outside of pressure pumping here, I'm thinking about coiled tubing and through tubing solutions. Just curious how you're thinking about those service lines heading into the back half of the year, perhaps relative to frac? I know coiled tubing is still challenged from a pricing perspective, but are there any signs of improvement from a pricing or activity perspective in those service lines over the back half of the year?

I'd say we probably are seeing a little bit more net pricing improvement in those areas. I wouldn't say it's strong or significantly better, but our teams are doing a good job pushing for it. While we talk about frac increasing capacity from six to seven fleets, there's a relative scaling effect on the other service lines that need larger overall activity to improve significantly, but we are witnessing some improvement in pricing and activity without diminishing the impact of the increased capacity in frac.

Your next question comes from the line of Stephen Gengaro of Stifel.

Thanks. Two quick follow-ups Jim, and I apologize if I missed this. In the quarter, were the utilization rates of those fleets down a bit from the first quarter because of those jobs being pushed out?

Yes, that's what impacted utilization.

And did you give the utilization number Jim? I'm sorry if I missed it.

We didn't provide it, it's hard to portray because everybody's metrics are a bit different, but it was down by about 30% from the first quarter.

Okay. Thank you. And the second question I have relative to the pricing dynamics you see in the market right now, what are you seeing from your perspective on pricing for different assets within pressure pumping? Are you observing any sort of bifurcation that we hear from others, and what are customers looking for? If you could just remind us of the makeup of your assets right now?

Are you talking about pressure pumping, Stephen?

Yes, I am sorry.

So, with the six fleets that we had in the second quarter, four are ESG-friendly, either because they are tier four or dynamic gas blending. I think a good way to characterize it is if you have ESG-friendly pressure pumping equipment, you can achieve decent utilization at today's pricing. You don't get premium pricing, but you can achieve market pricing and decent utilization as there's increased demand, particularly when you can blend dynamic gas with traditional diesel equipment.

Yeah, no, that adds some good color. I appreciate it. I think I'm in good shape. Thanks for the help.

I would now like to turn the call over to Mr. Landers for any closing remarks.

Okay. Well, thank you. Thanks to everybody who called in and participated today. We appreciate it, and hope you have a good day. We'll talk to you soon.

Ladies and gentlemen, this call will be available for replay on www.rpc.net within two hours following the completion of the call. Thank you for your participation. This concludes today's conference call. You may now disconnect.