Good morning and thank you for joining us for RPC Inc.'s First Quarter 2023 Financial Earnings Conference Call. Today's call will be hosted by Ben Palmer, President and CEO, and Mike Schmit, Chief Financial Officer. Also hosting 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, 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 and reflect a number of known and unknown risks. I’d like to refer you to our press release issued today along with our 2022 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’ll also be referring to several non-GAAP measure of operating performance. These non-GAAP measures are adjusted net income, adjusted diluted earnings per share, adjusted operating profit, EBITDA, and adjusted EBITDA. We're using these non-GAAP measures today because they allow us to compare performance consistently over various periods. 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 measures to operating income, net income and diluted earnings per share, which are the most directly comparable GAAP measures. Please review these disclosures if you're interested in seeing how they're calculated. If you've not received our press release for any reason, please visit our website at rpc.net for a copy. I'll now turn the call over to our President and CEO, Ben Palmer.

Thanks, Jim, and thank you for joining our call this morning. RPC's first quarter financial results reflect a strong operating environment similar to the fourth quarter. Although oil and natural gas prices declined earlier this year, manager services remain tight by total standards. The multiyear period of underinvestment by exploration and production companies, coupled with industry discipline, leaves us constructive on the length of the current cycle. The vast majority of service companies have been using their recovery to replace equipment that was wearing out rather than adding net new capacity. It is our view that this is necessary for the long-term health of the oilfield services industry. We expect to allocate capital over the next several quarters to enhance the service effectiveness of our various lines of businesses while also improving our ESG profile. Our CFO, Mike Schmit, will discuss the quarter's financial results, after which I will provide closing comments.

Thanks, Ben. I'll start with the first quarter 2023 sequential financial overview. First quarter revenue decreased slightly to $476.6 million from $482 million in the prior quarter. The nominal decrease in revenues was primarily caused by weather disruptions and a change in job mix in pressure pumping, RPC's largest service line. Cost of revenues during the first quarter also decreased slightly to $305.3 million from $308.6 million in the prior quarter. As a percentage of revenues, cost of revenues remain the same at 64% compared to the prior quarter. Selling, general and administrative expenses increased to $42.2 million in the first quarter of 2023 compared to $38.2 million in the fourth quarter of 2022. This increase was driven by higher expenses that are typically incurred in the first quarter, including payroll taxes and 401(k) employer match. During the first quarter of 2023, RPC also reported a $17.4 million defined benefit pension plan termination charge. During Q2 2023, we expect to record an additional settlement charge of approximately $1.2 million associated with the final termination of this plan. In connection with the transfer of the plan's liabilities to a third party, RPC made a $4 million cash contribution during the first quarter. Operating profit during the first quarter decreased by 19.3% to $90.7 million from $112.3 million in the prior quarter. Adjusted operating profit was $108 million in the first quarter, a 6.3% decrease compared to $115.2 million in the prior quarter. Adjusted EBITDA also decreased slightly by 3.9% to $132.9 million from $138.4 million in the prior quarter. Our Technical Services revenue segment revenues decreased by 1.3% to $452 million. This segment generated $103.5 million of operating profit compared to $110.5 million in the prior quarter. Support services revenues increased by 3.3% during the first quarter of 2023 compared to the prior quarter, with operating profit of $6.6 million compared to $6.7 million in the prior quarter. I’ll now discuss our current quarter results compared to the same quarter in the prior year. Revenues increased to $476.7 million from $284.6 million. Adjusted operating profit increased to $108 million from an operating profit of $23 million. Adjusted EBITDA increased to $132.9 million from EBITDA of $43 million. These increases were driven by higher customer activity levels and improved pricing, resulting in our adjusted diluted earnings per share improving to $0.39, compared to $0.07 in the same quarter of the prior year. Our Technical Services segment revenues increased 69.7% to $452 million, and segment operating profit increased to $103.5 million from $21.8 million in the same quarter of the prior year. Our Support Services segment revenues increased 35% to $24.7 million and segment operating profit increased to $6.7 million from $2.8 million in the same quarter of the prior year. Now I'll discuss our capital expenditures and horizontal pressure pumping fleet count. Capital expenditures were $65.3 million in the first quarter. We currently estimate full year 2023 capital expenditures to be between $250 million and $300 million. This includes new Tier 4 dual fuel equipment that we recently placed in service. While a similar amount of old equipment has been sent out for refurbishment. Consistent with the prior quarter, we operated 10 highly utilized horizontal pressure pumping fleets during the first quarter of 2023. We expect to continue operating this number of fleets throughout the remainder of the year. I'll now turn it back over to Ben for some closing remarks.

Thanks, Mike. The first quarter of 2023 was an excellent quarter for RPC, notwithstanding some minor weather disruptions. While oil and natural gas prices dropped during the quarter, it did not materially impact demand for our services. With oil prices rebounding early in the second quarter, we are optimistic about the ongoing stream of this cycle as the year goes on. A big thank you is warranted to our employees for delivering the results again this quarter. I want to thank our corporate and enterprise services employees, our business unit leaders, our operations managers, and our well site employees. All of them are working tirelessly to provide quality services to our customers every day. We obviously look to continue our tradition of generating industry-leading return on invested capital and returning capital to our shareholders. In the first quarter of 2023, we repurchased 1.1 million shares for approximately $9 million and doubled our cash dividend to $0.04 per share or $8.7 million per quarter. This morning, we announced RPC's Board approved an increase in our share repurchase authorization and declared another cash dividend of $0.04 per share. Over the last decade, RPC has returned over $554 million to shareholders through a combination of dividends and open market share repurchases. Thanks for joining us this morning. At this time, we're happy to address any questions.

Your first question is from Stephen Gengaro with Stifel. Please go ahead. Your line is open.

Thanks. Good morning, everybody.

Good morning.

I guess a couple of things. You mentioned the expectation to continue to operate 10 fleets throughout the year. Can you give us sort of your perspective on the supply/demand and pricing dynamics in the pressure pumping market right now?

Stephen, this is Ben. As we mentioned, our performance has remained strong. We have had discussions with some customers regarding pricing, and we are collaborating with them to reduce any impact on our results. However, there are some adjustments being made. As is often the case, we are reallocating some fleets and making other operational changes to maintain efficiency during downtime, but we do not anticipate any significant changes at this time. We believe the market remains tight by historical standards, and we continue to feel optimistic about our position.

And when you look at what you see in the order book relative to sort of natural attrition of the fleet, are you seeing much net growth in the overall market over the next three or four quarters?

We see various business information is provided. And as I said in my comments, I think our peers across the oilfield services are doing a pretty good job of trying to not significantly increase capacity. There's certainly new equipment being deployed. What we're doing is the same thing, right, but it's typically to replace existing equipment in the work that allow us to maintain our fleet level, while we send other older equipment out for refurb. The equipment that we're removing now, once it comes back in the coming months, there’ll be another fleet that will be taken out of service. So we expect to remain at 10 fleets for the time being. And we're hopeful that others are doing the same thing. We think there's indication if that's the case, there may be temporary periods where somebody believes that they have extra capacity that they can put an additional fleet in the field for a period of time, but this equipment is wearing out. And you do have to continue spending to maintain. So we're hopeful that that discipline will remain in place going forward.

Great. Thank you. And just one more quick one. Can you run through the revenue by product line for the first quarter?

Yes, David, sure. This is Jim. The values I'm about to give are the percentage of consolidated RPC revenue that's comprised by each of these service lines. So our largest in the first quarter 2023 was pressure pumping at 55.6% of revenues. Our second largest service line was downhole tools and motors, which are Thru Tubing Solutions brand, that's 22.5% of revenues. Number three is coiled tubing, which is 8.4% of revenues. Number four is rental tools, which is 3.7% of revenues, then comes nitrogen at 2.5% of revenues. Finally, Snubbing which constituted 1.5% of consolidated RPC revenues for the first quarter.

That's great. Thank you, Jim.

Your next question is from Don Crist at Johnson Rice. Please go ahead. Your line is open.

Good morning, gentlemen. How are you? I wanted to kind of ask a follow-up as to Stephen's question. I know you had a lot of fleets that were as a percentage of your total fleet count that were dedicated in either the Haynesville or the gas basins. How many of those have kind of moved around or been shifted to more oily basins as gas has been a little bit weaker in the first quarter?

Hey, John, this is Jim. Let us correct you a little bit on that. We haven't had fleets working in the Haynesville for a while. What you might be thinking of is last summer. We reactivated the fleet that was in East Texas, but it's been working in West Texas. So we really have not moved any fleets around. We've still got two in the Mid-Continent and the rest are in the Permian. So there hasn't been any geographic movement.

But our operating model is that we can move the fleets, as Jim indicated, the fleet from East Texas has done a little bit of work in that area, but more it did in West Texas and from time to time depending upon calendar and opportunities and things like that, some of one or two of one, typically, the mid-con fleets might do some work closer to West Texas. So that's something that our managers and sales team work on all the time, determining what's the optimal placement of the fleets given opportunities that we're valuing.

Okay. My mistake there. I was thinking some old data. And kind of talking about the supply chain, I think I heard you correctly that you're going to refurbish two fleets this year. How does that supply chain look? Is inflation kind of subsiding there, or is it kind of status quo as to the way that it has been over the past nine months or so where it takes 12 months to get an engine?

Well, I think, it's a little bit too soon to probably say that it's improved significantly. We think certainly, there are signs that that may be the case. There are some of the very high demand components we've been planning ahead and making sure that we have that availability before we initiate these refurbishment programs. So it's just something we've had to plan through and coordinate with our many valuable suppliers and things like that. So it hasn't been an issue, but there are long lead times. You just have to plan ahead for us. We've got a plan that we've laid out based on expected activity levels and intensity of activity and what we think our equipment needs to be overhauled or refurbished. So we're able to put that planning in place to make commitments and to be able to have the key components available needed to undertake the refurbishment activity. And even when we have to do the same thing leading into this new Tier 4 equipment that we've recently received and placed in service, we had to procure the key components several months ago to complete parts of that assembly. So it takes a little bit of planning, but I don't know that again, we’ve yet seen any significant let up in the pricing. But I wouldn't be surprised if there's a little bit of improvement given some of the volatility we've seen lately.

Okay. I appreciate the color. I'll turn it back. Thank you.

Thank you.

Thanks, Simon.

Your next question is from Derek Podhaizer of Barclays. Please go ahead. Your line is open.

Thanks. Good morning, guys. I just wanted to go back to that.

Good morning, Derek.

Changing job. Hi. The changing job mix in pressure pumping. Just if we can expand on that comment? Just more color around, is that a spot market versus dedicated? Is it a customer type, private versus public? Maybe just a little more color on your changing job mix within pressure pumping.

I think you can add more details. Weather had a slight impact on our job mix. We provided a bit less fuel than anticipated, and since there isn't much margin on fuel, it affected revenue but didn't significantly impact our margins. In one case, an existing customer reconsidered their decision, which might have been a new customer we would have worked with. The mix of our customers has not changed significantly; we still have a lot of private customers and a good balance between public and private. Overall, the situation in the first quarter is similar to what we saw in the fourth quarter of last year.

Yes. The comment is probably more referring to Ben mentioning the mix as the services provided every single job that's slightly different as to what we're doing. And so every job is slightly different, and some jobs are more profitable than others. And so that's probably more rather than the mix of the type of customer. It's more of the specific type of job.

And Derek, this is Jim. I'll jump in, too. Another variable is how much sand we provide versus how much our customers provide. That really didn't change Q4 to Q1; another variable is 24-hour versus 12-hour revenue. We're pretty much maxed out there. That did not change either. So as Ben mentioned, it has to do with fuel; there's nothing else that's meaningful from a macro perspective, i.e., private versus public or any change in what customers are doing. It moves around a little bit, but not a whole lot.

Got you. Okay. That's very helpful. And then maybe just on spot market versus dedicated. I guess, how much percentage of your fleet’s on the spot market versus dedicated? And what are the big differences that you're seeing between those two markets? It seems like there's a bit of bifurcation between those two markets right now. So any comments around that would be helpful.

So it's about 50/50 spot versus dedicated, and dedicated doesn't mean what it meant a long time ago. It means that we have six to nine-month commitments. From our perspective, there's not a lot of discernible difference between those two types of relationships.

Got it. Okay. That's helpful. And then my last question is regarding whether you are noticing any movements in fleets from the Haynesville to the Permian. Is that creating any pressure on your pricing or affecting conversations with your customers due to the risk of being displaced by larger competitors? Any insights on fleet movements from the Haynesville into the Permian that could impact your operations would be appreciated.

I think it's reasonable to say that the decline in natural gas prices will slow down some completions. The drilling of other contracts may continue without issue, but we have heard some peers discussing moving fleets. We weren't primarily focused on diesel or natural gas work in the Haynesville, so it's not clear to us in the first quarter. There is slightly less tightness in the Permian, but this only results in a bit more flexibility in scheduling, and we don't see it as significant at this time.

Our team does a fabulous job of staying up to date across the market. And that's a terrific job of being able to minimize that white space when volatility begins to occur. And I think there has been a little bit more volatility but we respond to that. And we think any impact at this point in time from those changes and the moving around is going to be significant.

Got it. Have you had to move some fleets around the Permian to different customers yet?

Yes, we have done a little bit of that. We're in the process of doing a little bit of that.

That's correct. I think that we're always not great! I want to say it's significantly more than normal for us compared to the last year or so.

Okay, great. Really appreciate the time and color, guys. I'll turn it back.

Thank you.

All right. Thanks, Derek.

Your next question is from John Daniel of Daniel Energy Partners. Please go ahead. Your line is open.

Thank you. Good morning.

Hi, John.

I'd like to ask you a quick question about businesses outside of frac where you have exposure to some of the other basins besides the Permian. We usually focus on the Permian and frac, but could you provide some insight into the visibility in the other basins for your other sources today compared to three to six months ago?

John, this is Jim. Thanks for asking questions about something other than pressure pumping. So Thru Tubing Solutions has a really good market share and really widespread market presence, so they're doing good things. They've talked about some weakness in East Texas and the Haynesville and a little bit of weakness in the Northeast in Pennsylvania, where they have a presence. So that's one thing we've noted in our operational reviews getting ready at quarter end that there's a little bit of weakness in those places, which we would expect that with lower natural gas prices. But at this time, still nothing same and similar to the pressure pumping rate move around from customer to customer.

Would you say that in the Mid-Con or Bakken regions, you have the same level of visibility as in the Permian? Has there been any noticeable change in that regard?

I can't provide a clear comment on that at this point in time, but it's a good question.

If we look back to six to seven weeks ago when oil prices dropped and there was significant market anxiety, many exploration and production companies requested some price relief. Some companies made concessions while others did not. My question is, if you were among those who offered concessions, what discussions took place regarding the possibility of oil prices returning to $80 or $85? How quickly could you potentially recover those concessions?

I mean, I guess I'll just make a comment that we're heavier in the sort of spot market and less long-term contracts than some of our competitors. So we can kind of respond more quickly to higher prices. And so we were impacted differently than maybe some of the others.

I believe to address your point, John, we've been effective in being appropriately aggressive with our pricing strategy. We're ready to make adjustments as needed and feel confident about our position with our customers. Any changes we've implemented focused more on altering the job composition rather than making significant price cuts. Essentially, we aimed to find ways to help reduce their costs. For instance, we might provide a fuel source instead of supplying the fuel ourselves, which doesn't substantially impact us. It's a valid question, and we are aware of the importance of generating sufficient returns to keep investing in our business and meeting our customers' demands.

Right.

John, it goes without saying, but it's worth mentioning that sentiment today is significantly better than it was when prices were lower and during the decline in oil prices. We also have the ability—we haven't done this yet—but we may have indicated to some of our suppliers that we would like to discuss their cost structure with them. What do you think should be done about that?

Fair enough. Okay. Well, thank you for managing that again. Appreciate it.

John, I thought maybe you were calling for some roadside assistance.

Well, I actually love that idea. It would be great to give him the Employee of the Year award because he said that. Anyway, that's alright.

And 20 there, they go a lot faster.

Glad you’re okay.

Yes. Thank you very much. Okay. Take care.

Okay, John.

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

Okay. Thank you. We appreciate everybody who called in to listen this morning, and we appreciate the questions and the conversations. We look forward to talking to everybody soon. Have a good day.

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