Good morning, and thank you for joining us for RPC, Inc.'s Third Quarter 2024 Conference Call. Today's call will be hosted by Ben Palmer, President and CEO; and Mike Schmit, Chief Financial Officer. 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. I will now turn the call over to Mr. Schmit.

Thank you, and good morning. Before we begin, I want to remind you that 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. Please refer to our press release issued today, along with our 2023 10-K and other public filings that outline all 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 be referring to several non-GAAP measures of operating performance and liquidity. We believe these non-GAAP measures allow us to compare performance consistently over various periods. Today's press release and our website contain reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. I'll now turn the call over to our President and CEO, Ben Palmer.

Thanks, Mike, and thank you for joining our call. This morning, we reported third-quarter results that reflect the continuing challenges of the OFS market. It remains highly competitive with limited near-term visibility heading into the winter season as customers face budget exhaustion and limited incentive to increase activity amidst current oil prices. Consistent with recent performance, our pressure pumping business is facing relatively more headwinds than our other service lines. The spot and semi-dedicated market has ample supply of horsepower capacity seeking to be deployed, with pricing remaining under pressure as many of our peers seem motivated to maintain utilization. Our other service lines in aggregate were more resilient, posting a modest sequential revenue decline, indicative of the more diversified customer base, which includes larger Tier 1 customers spread across more basins. To illustrate this contrast, our pressure pumping revenues were down 12%, while all of our other businesses in total were down just 4%. The frac market remains highly competitive, and there's definitely a downward pricing bias with calendar white space in the spot market. We've remained disciplined opting to idle assets rather than burn them without adequate returns. We do see a difference in demand within our frac assets for our Tier 4 DGBs, where we see solid demand and have better visibility with dedicated customers. We have commitments for these fleets several quarters out and, in some cases, through the end of 2025. Our crews are delivering gas substitution rates that we believe are among the best in the industry, and our customers are pleased with our efficiency and performance on site with these assets. On the other hand, demand is more challenged with our legacy diesel equipment as those fleets lack the ability to take advantage of low-priced natural gas fuel. Thus, these assets must be priced even more aggressively to compensate for higher fuel costs if we want them utilized to fill the calendar. We remain committed to upgrading our fleet over time and pulling older equipment out of service so as not to add capacity to an already well-supplied marketplace. We also mentioned in our release the impact of the E&P consolidation. As you know, this can be a win-some, lose-some scenario. But beginning in the third quarter, we began to feel a more tangible negative impact, specifically with one meaningful pressure pumping customer that was acquired, and they informed us the acquiring company's incumbent frac supplier will be taking over the business. While we have an outstanding relationship with this customer and delivered excellent service, this was an unfortunate case of being out of our and their hands. We've worked hard to replace these revenues and continue to make progress backfilling our business pipeline. In response to these challenging conditions and without a clear catalyst for near-term rebound, we took additional cost actions during the quarter. These were mostly headcount reductions to bring our cost structure down and align more with current and near-term expected demand. While we don't want to overreact to market slowdowns and hurt our ability to capitalize on quick positive turns in the market, we felt these actions were prudent, and we will evaluate further actions as appropriate. Looking at our non-pressure pumping service lines, we were encouraged but not satisfied with their relative resilience on the top line. Rental Tools revenue was flat, while Cementing and Downhole Tools were down slightly. While not large businesses, we saw nice gains in snubbing, nitrogen, and tubular services. Our newly launched 3.5-inch downhole motor is gaining traction, and we're optimistic about demand for this lower pressure, high rate motor. We are also coming to market with a new innovative solution to reduce reliance on bridge plugs. Our unique and proprietary technology can substitute for the bridge plugs with a release of pods that plug each individual perforation, using well pressure to their advantage as they are forced into the openings and sealing each perforation. There are many efficiency and cost benefits of this newly developed technology. We have proven its effectiveness and are beginning to market it to our customers. Response to recent trials has been impressive, and we look forward to rolling out this technology more broadly in the coming quarters. In coiled tubing, we're looking forward to an emerging opportunity in California to perform specialized plug and abandonment work. We discussed last quarter that we had completed a similar project in Texas to prove out the technology, though the revenues did not repeat in the third quarter. We expect that this ramp-up would be lumpy, driving a sequential decline in coiled tubing, but are looking forward to scaling this proprietary technology and service for a large customer in California next year. As mentioned, these non-pressure pumping service lines in aggregate have a diverse customer base, servicing large and small E&Ps across many basins and exhibit significantly less volatility than our frac operations. We believe these non-pumping service lines help balance our business, positioning us as a diversified OFS player with many capabilities and ways to service the extensive E&P customer pool. Mike will now discuss the quarter's financial results.

Thanks, Ben. Shifting to the third-quarter financial results with sequential comparisons for the second quarter of 2024. Revenues decreased 7% to $338 million, driven primarily by lower pressure pumping activity. Breaking down our operating segments, Technical Services, which represents 93% of our total third-quarter revenues, decreased 8%, driven primarily by pressure pumping. Support Services were up 7% and represented 7% of our total third-quarter revenues. The following is a breakdown of third-quarter revenues by our top five service lines: Pressure pumping was 38.4%, Downhole tools 29%, Coiled tubing 8.8%, Cementing 8%, and Rental tools 5.2%. Together, these five accounted for 89% of our total revenues. Cost of revenues, excluding depreciation and amortization, during the third quarter decreased by $14.8 million to $247.5 million, or a 6% decrease, a point less than the revenue decline. The lower cost of revenues stemmed primarily from lower equipment costs and lower employment costs. We closed a small pumping location and reduced the headcount of this and other operating locations. Cost of revenues also decreased due to lower maintenance and repair expenses and materials and supplies, reflecting lower activity levels. SG&A expenses were $37.7 million, up slightly from $37.4 million, largely reflecting the fixed cost of our support functions. Diluted EPS was $0.09 in the third quarter, down from $0.15 in the second quarter. There were no non-GAAP adjustments to either EPS figures. EBITDA was $55.2 million, down from $68.5 million, with EBITDA margins decreasing 240 basis points sequentially to 16.4%. For the quarter, operating cash flow was $70.7 million. And after CapEx of $51.7 million, free cash flow was $19 million. On a year-to-date basis, operating cash flow was $255.2 million. And after CapEx of $179.5 million, our free cash flow was $75.7 million. We note that while year-to-date free cash flow is down from 2023 and will be lower for the full year as industry conditions have been more challenging. There were some timing benefits, especially in CapEx and working capital that boosted last year's free cash flow at the expense of this year. All told, despite a tough environment, we still expect strong cash flow this year and that our trailing two-year average would still be quite robust. We still expect CapEx to finish 2024 within our guided range of $200 million to $250 million. During the quarter, we paid $8.6 million in dividends, and we maintained a strong balance sheet, including a cash position of $277 million at quarter end. I'll now turn it back over to Ben for some closing remarks.

Thank you, Mike. So as we wrap things up, I just want to reiterate our views on capital allocation and potential investments in the business. Historically, strong cash generation and long-term financial discipline afford us the opportunity to make strategic investments, specifically equipment upgrades and potential acquisitions. Beyond organic investments in our frac fleet and supporting new products and service introductions across the business, we are aggressively looking at M&A and are primarily focused on growing our non-pressure pumping service lines. We think rebalancing our portfolio over time to be less impacted by the swings in the frac market and more driven by a diverse set of oilfield services for a broad customer base will ultimately deliver more attractive and consistent financial results and returns for our investors. We believe there are ample opportunities and targets in the marketplace to execute that rebalancing and look forward to building a track record of acquiring and integrating high-quality companies and generating solid returns. Spinnaker was a good start along that path, and we look forward to potential future transactions over time. I'll close by reiterating that in an often volatile market, our discipline remains consistent with a focus on financial stability and long-term shareholder returns. I also want to thank all of our employees who worked tirelessly to deliver high levels of service and value to our customers. Thanks for joining us this morning. And at this time, we're happy to address any questions.

And your first question comes from the line of Don Crist with Johnson Rice. Please go ahead.

Good morning, guys. How are you all this morning?

Good morning, Don.

Ben, I wanted to ask about the downhole technology. I've heard some field reports that it's pretty revolutionary and didn't know if you could expand on what advances you're making in that. Any kind of color you can provide around that? And what kind of opportunity that can provide specifically in California going forward into next year?

Don, the California opportunity is with coiled tubing for some plug and abandonment work, where there have been some wells impacted by seismic shifts. This takes advantage of some of our steerable tool technology working with coiled tubing. The frac technology that we talked about are these pods that we have used in the past and quite successfully. The improvement we've recently made is on how to deliver those pods downhole. We've come up with a way to do that. We believe it's much more effective and straightforward, which we think will create opportunities for customers if they are comfortable displacing bridge plugs. There are a number of other benefits with that particular technology, and it's exciting. I'm sure you're aware it's a pretty big market, and we're encouraged about it. We actually have a test going on today with a number of customers that are going to be out at our downhole tool facility in Newcastle, Oklahoma.

Okay. I appreciate that. And on the M&A front, how is the bid/ask spread going? Because I know there's a lot of pressure out there from the small mom-and-pop operators and didn't know if that bid/ask spread is narrowing versus the last six to nine months or so?

Yeah. We've talked about that in the past. It's all relative. I think everybody is settling in to the fact or realization that looking at public valuations, privates and others do recognize that people can't pay a substantially higher multiple for private companies than they're trading at. So I think spreads have compressed a bit. I don't know, quite honestly, that I could say that we've looked at a large enough sample and gotten far enough along with targets to quantify that definitively, but it has narrowed. I really can't quantify what that might be.

I appreciate that color. I’ll let somebody else ask some questions and hop back in queue. Thanks.

Thank you, Don.

Your next question comes from the line of John Daniel with Daniel Energy Partners. Please go ahead.

Hey, good morning. Thank you. I'm going to follow along Don's questions if that's all right. On the acquisition opportunities, what is your willingness to use cash? And what's the willingness of potential sellers to take stock?

Discussion around stock is that sellers often have a variety of experiences over the years. It needs to work for both parties. We're fortunate to have a solid cash balance and a strong balance sheet, which allows us flexibility in our approach. We see our stock as valuable, so we are cautious and try not to let too much of it go for too low a price. It varies; cash is usually preferred by private sellers, but there are situations where stock can be a better fit. Therefore, we have both options available.

Okay. Thank you. And then on the frac side of the business, I don't know if you'd be willing to answer, but I'll ask anyway. The U.S. completion market just stays stable for a year or two, right? A little bit of volatility in Q4 because of seasonality and all that normal stuff. But what's the optimal fleet size for you from a marketed perspective? I think you have like 10 or 11 fleets on a regular basis, say a year ago. Is there any color you could provide? Because that obviously has implications for CapEx and everything else.

Yeah. It remains stable, being where it is now. It's obviously going to be lower than that 10 or 11, and that's where we are now.

And as you know, trying to define and say how many are being marketed and all that. If you're anything less than all, it's sort of hard to give a guide. But I think it's lower. It's going to be more about the mix, and we continue to be committed to the frac market. We're just trying to be prudent and then trying to rebalance our portfolio, as we've talked about, and you never know what's going to happen around the corner. I guess we do know there's going to be volatility, but we are committed to continue to upgrade prudently over time. But it's probably a lower number just because of the efficiencies that are lower for us. It would be nice if it was lower than the overall industry. If the discipline can remain overall, that would help everyone. But for us, it's probably lower. And I think with the continued upgrade of our fleet, we could actually, net-net, end up in a better place, right? But that's the question we're trying to ask now. We're going through our planning process next year and, of course, looking at our long-term plans. So we're still contemplating that question. It's a good question.

Okay. And I got one more if I may. Going back to acquisitions, and I know you have to speak in general terms of this, but you alluded to a lot of opportunities. Would you say that those are more characterized by PE firms trying to finally get out of their investments? Or are these distressed opportunities where you can step in, or is it something else, or all of the above?

A combination.

Okay.

I would say a combination, yes, just thinking through kind of the backlog, it’s a combination.

So not a clear theme is what I guess I'm saying.

Right, right.

That’s all I have. Thank you for including me.

Very good. Thanks, John.

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

Thanks. Good morning, everybody.

Good morning, Steve.

So two for me, and maybe I'll stay on the M&A side, and I apologize if I missed a little bit of this. But one of the things we've seen kind of over the last 20-plus years, but clearly over the last 10, was the lack of kind of interest from investors around some of the smaller and very small oil service players. The reason I bring it up is because I'm thinking about consolidation being kind of a key driver of success in creating larger businesses. But when you think about consolidation, how do you balance sort of buying something or a couple of businesses that could be a little more commoditized, but could create critical mass in those businesses versus making sure you buy something that's kind of differentiated or unique in some way?

That wouldn't be our first choice. We want to find strong businesses, regardless of whether they are commoditized or not. This is our primary focus. In the current market, we believe we are well-positioned to be effective purchasers. We understand that some companies prioritize where they want to land, the considerations they receive, and the culture they will join, and we address many of those concerns for companies seeking to exit and find a new home. To answer your question, we do not aim to grow just for the sake of growing. I recognize your point about the importance of scale in investments, and we do want to focus on that, as we believe we are capable of addressing it. When executed properly, investment scale can lead to operational scale and cost advantages as well. That's our goal. We’re working to bring about that change. The topic of consolidation in oilfield services has been discussed for a long time, but there haven’t been many transactions. However, there may be an increase in activity, and we will monitor the situation. That encapsulates our strategy, and we will see how it plays out.

Thank you for the information, it's very helpful. I have another question regarding the pricing dynamics for 2025 in the frac sector. I'm not sure if you addressed this earlier, but we've been hearing mixed signals from some of your competitors. What is your perspective on how pricing may change next year?

As we sit here right now, we’re not going to go into it and spend or do things expecting pricing to improve significantly. So we’re trying to position ourselves to take advantage if things do improve, but trying to be prudent as well. It just feels like it’s more of the same. Hopefully, there’s going to be some discipline. We’ve idled some assets. We’ve reduced our headcount. If others do that, that would help in reducing marketed fleets and things like that. So we’re not counting on pricing to be better in ‘25. There’s certainly the possibility. The discussion about maybe the improvement in the natural gas market might help a bit. Any sort of improvement like that could help, but we’re not counting on it.

Okay. Great. Thank you for the details.

Thanks, Steve.

Your next question comes from the line of Don Crist with Johnson Rice.

Hey. Thanks for letting me back in at the end here. Ben, if you were going to upgrade another fleet, what kind of decision point would that entail, and how long would that take if you wanted to add another Tier 4 DGB fleet?

Don, it's probably still nine months or so to get a full fleet in place. We're looking at a variety of things. We're talking to some of the component manufacturers about alternative technologies. We're talking to some smaller OEMs. Chances are the next firm commitment directly in hand would probably be another Tier 4 fleet for us, but we're looking at a variety of options. There are many different technologies available, so just a few months out, but I think we have a little bit of time.

And would you require like a three-year contract or something to do that, or would you kind of do it more in the spot market?

At this point, yes, we would not require a long-term contract. When we place an order for that type of equipment, it would just be because of where we are in our fleet, the evolution of our fleet and the need to replace and maintain equipment. We would certainly try to pursue that, but at this point in time, we wouldn’t require anything like a three-year contract. Certainly, talking to the team, at least a multi-month contract would be nice and something that would certainly support that decision.

I appreciate the color. Thank you.

Yeah. Thanks, Don.

There are no further questions at this time. I will now turn the conference back over to Mr. Ben Palmer for closing remarks.

All right. Well, thank you, everybody, for listening in. We appreciate it and hope you have a good rest of the day. Take care.

A recording of today's call will be available on rpc.net within 2 hours following the completion of the call. This concludes today's call. You may now disconnect.