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RES RPC

Filed: 30 Jul 21, 2:19pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2021

Commission File No. 1-8726

RPC, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

58-1550825

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

2801 Buford Highway, Suite 300, Atlanta, Georgia 30329

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code -- (404) 321-2140

Securities Registered under Section 12(b) of the Act:

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Common stock, par value $0.10

RES

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of July 23, 2021, RPC, Inc. had 215,725,436 shares of common stock outstanding.

RPC, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2021 AND DECEMBER 31, 2020

(In thousands)

(Unaudited)

June 30, 

December 31, 

    

2021

    

2020

(Note 1)

ASSETS

  

  

Cash and cash equivalents

$

121,015

$

84,496

Accounts receivable, net of allowance for doubtful accounts of $6,405 in 2021 and $5,181 in 2020

180,674

161,771

Inventories

 

81,198

 

82,918

Income taxes receivable

 

51,002

 

82,943

Prepaid expenses

 

5,659

 

9,124

Assets held for sale

4,032

4,032

Other current assets

 

2,648

 

3,075

Total current assets

 

446,228

 

428,359

Property, plant and equipment, less accumulated depreciation of $796,143 in 2021 and $790,712 in 2020

251,396

264,411

Operating lease right-of-use assets

23,321

27,270

Goodwill

 

32,150

 

32,150

Other assets

 

37,111

 

38,315

Total assets

$

790,206

$

790,505

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Accounts payable

$

53,524

$

41,080

Accrued payroll and related expenses

 

21,079

 

18,428

Accrued insurance expenses

 

5,007

 

5,489

Accrued state, local and other taxes

 

3,879

 

2,788

Income taxes payable

 

1,418

 

1,115

Current portion of operating lease liabilities

7,909

9,192

Other accrued expenses

 

3,407

 

1,473

Total current liabilities

 

96,223

 

79,565

Long-term accrued insurance expenses

 

10,481

 

11,822

Long-term pension liabilities

 

32,789

 

33,080

Deferred income taxes

 

9,093

 

13,332

Long-term operating lease liabilities

17,486

21,090

Other long-term liabilities

 

 

49

Total liabilities

 

166,072

 

158,938

Common stock

21,573

21,495

Capital in excess of par value

 

0

 

0

Retained earnings

 

619,756

 

627,778

Accumulated other comprehensive loss

 

(17,195)

 

(17,706)

Total stockholders’ equity

 

624,134

 

631,567

Total liabilities and stockholders’ equity

$

790,206

$

790,505

The accompanying notes are an integral part of these consolidated financial statements.

3

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(In thousands except per share data)

(Unaudited)

Three months ended

Six months ended

June 30, 

June 30,

    

2021

    

2020

    

2021

    

2020

Revenues

$

188,757

$

89,300

$

371,367

$

333,077

Cost of revenues (exclusive of items shown below)

 

145,789

 

80,037

 

292,012

 

261,981

Selling, general and administrative expenses

 

29,403

 

28,775

 

59,998

 

65,305

Impairment and other charges

0

1,639

0

207,175

Depreciation and amortization

 

17,896

 

19,573

 

35,669

 

58,866

Gain on disposition of assets, net

 

(3,111)

 

(3,194)

 

(4,571)

 

(4,013)

Operating loss

 

(1,220)

 

(37,530)

 

(11,741)

 

(256,237)

Interest expense

 

(103)

 

(71)

 

(483)

 

(184)

Interest income

 

14

 

68

 

32

 

402

Other income (expense), net

 

616

 

(1,481)

 

1,123

 

(1,789)

Loss before income taxes

 

(693)

 

(39,014)

 

(11,069)

 

(257,808)

Income tax provision (benefit)

 

33

 

(13,921)

 

(681)

 

(72,292)

Net loss

$

(726)

$

(25,093)

$

(10,388)

$

(185,516)

Loss per share

 

  

 

 

  

 

  

Basic

$

$

(0.12)

$

(0.05)

$

(0.87)

Diluted

$

$

(0.12)

$

(0.05)

$

(0.87)

The accompanying notes are an integral part of these consolidated financial statements.

4

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(In thousands)

(Unaudited)

Three months ended

Six months ended

June 30, 

June 30,

    

2021

    

2020

    

2021

    

2020

Net loss

$

(726)

$

(25,093)

$

(10,388)

$

(185,516)

Other comprehensive income (loss):

  

  

  

  

Pension adjustment and reclassification adjustment, net of taxes

 

153

 

186

 

306

 

918

Foreign currency translation

 

69

 

314

 

205

 

(398)

Comprehensive loss

$

(504)

$

(24,593)

$

(9,877)

$

(184,996)

The accompanying notes are an integral part of these consolidated financial statements.

5

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(In thousands)

(Unaudited)

Six months ended June 30, 2021

Accumulated

Capital in 

Other

Common Stock

Excess of

Retained

Comprehensive

    

Shares

    

Amount

    

Par Value

    

Earnings

    

(Loss) Income

    

Total

Balance, December 31, 2020

 

214,951

$

21,495

$

$

627,778

$

(17,706)

$

631,567

Stock issued for stock incentive plans, net

 

924

 

93

 

1,446

 

 

 

1,539

Stock purchased and retired

 

(140)

 

(14)

 

(1,446)

 

903

 

 

(557)

Net loss

 

 

 

 

(9,662)

 

 

(9,662)

Pension adjustment, net of taxes

 

 

 

 

 

153

 

153

Foreign currency translation

 

 

 

 

 

136

 

136

Balance, March 31, 2021

215,735

$

21,574

$

$

619,019

$

(17,417)

$

623,176

Stock issued for stock incentive plans, net

(9)

(1)

1,472

1,471

Stock purchased and retired

(1)

(1,472)

1,463

(9)

Net loss

(726)

(726)

Pension adjustment, net of taxes

153

153

Foreign currency translation

69

69

Balance, June 30, 2021

 

215,725

$

21,573

$

$

619,756

$

(17,195)

$

624,134

Six months ended June 30, 2020

Accumulated

Capital in 

Other

Common Stock

Excess of

Retained

Comprehensive

    

Shares

    

Amount

    

Par Value

    

Earnings

    

(Loss) Income

    

Total

Balance, December 31, 2019

 

214,423

$

21,443

$

$

832,113

$

(23,223)

$

830,333

Stock issued for stock incentive plans, net

 

1,014

 

100

 

1,997

 

 

 

2,097

Stock purchased and retired

 

(177)

 

(17)

 

(1,997)

 

1,222

 

 

(792)

Net loss

 

 

 

(160,423)

 

 

(160,423)

Pension adjustment, net of taxes

 

 

 

 

 

732

 

732

Foreign currency translation

 

 

 

 

 

(712)

 

(712)

Balance, March 31, 2020

215,260

$

21,526

$

$

672,912

$

(23,203)

$

671,235

Stock issued for stock incentive plans, net

(135)

(4)

2,021

2,017

Stock purchased and retired

(2)

(10)

(2,021)

2,025

(6)

Net loss

(25,093)

(25,093)

Pension adjustment, net of taxes

186

186

Foreign currency translation

314

314

Balance, June 30, 2020

 

215,123

$

21,512

$

$

649,844

$

(22,703)

$

648,653

The accompanying notes are an integral part of these consolidated financial statements.

6

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(In thousands)

(Unaudited)

Six months ended June 30, 

    

2021

    

2020

OPERATING ACTIVITIES

  

  

Net loss

$

(10,388)

$

(185,516)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

  

 

  

Depreciation, amortization and other non-cash charges

 

35,589

 

58,924

Stock-based compensation expense

 

3,010

 

4,114

Gain on disposition of assets, net

 

(4,571)

 

(4,013)

Deferred income tax benefit

 

(4,338)

 

(36,723)

Impairment and other non-cash charges

 

 

206,264

(Increase) decrease in assets:

 

  

 

  

Accounts receivable

 

(18,779)

 

133,223

Income taxes receivable

 

31,941

 

(22,762)

Inventories

 

1,836

 

7,320

Prepaid expenses

 

3,465

 

4,601

Other current assets

 

508

 

235

Other non-current assets

 

1,191

 

(423)

Increase (decrease) in liabilities:

 

  

 

  

Accounts payable

 

12,168

 

(27,451)

Income taxes payable

 

303

 

(1,099)

Accrued payroll and related expenses

 

2,635

 

(6,373)

Accrued insurance expenses

 

(482)

 

(1,228)

Accrued state, local and other taxes

 

1,091

 

1,304

Other accrued expenses

 

49

 

(4,966)

Pension liabilities

 

113

 

(610)

Long-term accrued insurance expenses

 

(1,341)

 

(1,045)

Other long-term liabilities

 

866

 

(1,677)

Net cash provided by operating activities

 

54,866

 

122,099

INVESTING ACTIVITIES

 

  

 

  

Capital expenditures

 

(25,875)

 

(38,659)

Proceeds from sale of assets

 

8,094

 

12,740

Net cash used for investing activities

 

(17,781)

 

(25,919)

FINANCING ACTIVITIES

 

  

 

  

Cash paid for common stock purchased and retired

 

(566)

 

(798)

Net cash used for financing activities

 

(566)

 

(798)

Net increase in cash and cash equivalents

 

36,519

 

95,382

Cash and cash equivalents at beginning of period

 

84,496

 

50,023

Cash and cash equivalents at end of period

$

121,015

$

145,405

Supplemental cash flows disclosure:

Income taxes refund, net

$

(28,386)

$

(9,847)

Supplemental disclosure of noncash investing activities:

Capital expenditures included in accounts payable

$

4,131

$

2,185

The accompanying notes are an integral part of these consolidated financial statements.

7

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.    GENERAL

The accompanying unaudited consolidated financial statements include the accounts of RPC, Inc. and its wholly-owned subsidiaries (“RPC” or the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810, “Consolidation” and Rule 3A-02(a) of Regulation S-X. In accordance with ASC Topic 810 and Rule 3A-02 (a) of Regulation S-X, the Company’s policy is to consolidate all subsidiaries and investees where it has voting control.

In the opinion of management, all adjustments (all of which consisted of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

The balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2020.

A group that includes the Company’s Chairman of the Board, Gary W. Rollins, controls in excess of fifty percent of the Company’s voting power.

2.    RECENT ACCOUNTING STANDARDS

The FASB issued the following applicable Accounting Standards Updates (ASU):

Recently Adopted Accounting Standards:

Accounting Standards Update (ASU) No. 2019-12 — Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing the exceptions to the incremental approach for intra-period tax allocation in certain situations, requirement to recognize a deferred tax liability for a change in the status of a foreign investment, and the general methodology for computing income taxes in an interim period when year-to date loss exceeds the anticipated loss for the year. The amendments also simplify the accounting for income taxes with regard to franchise tax, evaluation of step up in the tax basis goodwill in certain business combinations, allocating current and deferred tax expense to legal entities that are not subject to tax and enacted change in tax laws or rates. The Company adopted these provisions in the second quarter of 2021 and the adoption did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted:

ASU No. 2020-04 — Reference Rate Reform (Topic 848): The amendments in this ASU, provides optional guidance for a limited time to ease the impact of the reference rate reform on financial reporting. The amendments, which are elective, provide expedients to contract modifications, affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or other reference rate that is expected to be discontinued due to reference rate reform. This ASU is effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company will adopt these provisions when LIBOR is discontinued, and does not expect adoption to have a material impact on its consolidated financial statements.

8

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3.    REVENUES

Accounting Policy:

RPC’s contract revenues are generated principally from providing oilfield services. These services are based on mutually agreed upon pricing with the customer prior to the services being delivered and, given the nature of the services, do not include the right of return. Pricing for these services is a function of rates based on the nature of the specific job, with consideration for the extent of equipment, labor, and consumables needed for the job. RPC typically satisfies its performance obligations over time as the services are performed. RPC records revenues based on the transaction price agreed upon with its customers.

Sales tax charged to customers is presented on a net basis within the consolidated statements of operations and therefore excluded from revenues.

Nature of services:

RPC provides a broad range of specialized oilfield services to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international markets. RPC manages its business as either (1) services offered on the well site with equipment and personnel (Technical Services) or (2) services and tools offered off the well site (Support Services). For more detailed information about operating segments, see Note 7.

RPC contracts with its customers to provide the following services by reportable segment:

Technical Services

Includes pressure pumping, downhole tools services, coiled tubing, nitrogen, snubbing and other oilfield related services including wireline, well control, fishing and pump down services.

Support Services

Rental tools – RPC rents tools to its customers for use with onshore and offshore oil and gas well drilling, completion and workover activities.

Other support services include oilfield pipe inspection services, pipe management and pipe storage; well control training and consulting.

Our contracts with customers are generally very short-term in nature and generally consist of a single performance obligation – the provision of oilfield services.

Payment terms:

RPC’s contracts with customers state the final terms of the sales, including the description, quantity, and price of each service to be delivered. The Company’s contracts are generally short-term in nature and in most situations, RPC provides services ahead of payment - i.e., RPC has fulfilled the performance obligation prior to submitting a customer invoice. RPC invoices the customer upon completion of the specified services and collection generally occurs between 30 to 60 days after invoicing. As the Company enters into contracts with its customers, it generally expects there to be no significant timing difference between the date the services are provided to the customer (satisfaction of the performance obligation) and the date cash consideration is received. Accordingly, there is no financing component to our arrangements with customers.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Significant judgments:

RPC believes the output method is a reasonable measure of progress for the satisfaction of our performance obligations, which are satisfied over time, as it provides a faithful depiction of (1) our performance toward complete satisfaction of the performance obligation under the contract and (2) the value transferred to the customer of the services performed under the contract. RPC has elected the right to invoice practical expedient for recognizing revenue related to its performance obligations.

Disaggregation of revenues:

See Note 7 for disaggregation of revenue by operating segment and services offered in each of them and by geographic regions.

Timing of revenue recognition for each of the periods presented is shown below:

Three months ended

Six months ended

June 30, 

June 30, 

(in thousands)

    

2021

    

2020

    

2021

    

2020

Oilfield services transferred at a point in time

$

0

$

0

$

0

$

0

Oilfield services transferred over time

 

188,757

 

89,300

371,367

 

333,077

Total revenues

$

188,757

$

89,300

$

371,367

$

333,077

Contract balances:

Contract assets representing the Company’s rights to consideration for work completed but not billed are included in accounts receivable, net on the consolidated balance sheets are shown below:

June 30, 

December 31, 

June 30,

December 31,

(in thousands)

    

2021

    

2020

    

2020

    

2019

Unbilled trade receivables

$

45,183

$

29,574

 

$

21,578

$

52,052

Substantially all of the unbilled trade receivables disclosed were or are expected to be invoiced during the following quarter.

4.    IMPAIRMENT AND OTHER CHARGES

The Company recorded the following pre-tax charges during the three and six months ended June 30, 2021 and 2020 which are reflected in “Impairment and other charges” in the consolidated statements of operations:

Three months ended

Six months ended

June 30, 

June 30, 

(in thousands)

    

2021

    

2020

    

2021

    

2020

Long Lived Asset Impairments (1)

$

0

$

0

$

0

$

204,765

Severance Costs

 

0

 

1,487

 

0

 

1,882

Other (2)

 

0

 

152

 

0

 

528

Total

$

0

$

1,639

$

0

$

207,175

(1).     Relates solely to the Technical Services segment and primarily includes pressure pumping and coiled tubing assets.

(2).     Includes interest costs related to leased assets that were impaired in the third and fourth quarter of 2019 and additional costs related to abandoned assets.

See Note 7 for details of impairment and other charges by segment.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5.    EARNINGS PER SHARE

Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the respective periods. In addition, the Company has periodically issued share-based payment awards that contain non-forfeitable rights to dividends and are therefore considered participating securities. The following table shows the restricted shares of common stock (participating securities) outstanding and a reconciliation of outstanding weighted average shares:

Three months ended

Six months ended

June 30,

June 30, 

(In thousands)

    

2021

    

2020

    

2021

    

2020

Net loss available for stockholders :

$

(726)

$

(25,093)

$

(10,388)

$

(185,516)

Less: Adjustments for earnings attributable to participating securities

0

0

0

0

Net loss used in calculating earnings per share

$

(726)

$

(25,093)

$

(10,388)

$

(185,516)

Weighted average shares outstanding (including participating securities)

 

215,728

 

215,174

 

215,633

 

215,090

Adjustment for participating securities

 

(2,719)

 

(2,772)

 

(2,663)

 

(2,730)

Shares used in calculating basic and diluted earnings per share

 

213,009

 

212,402

 

212,970

 

212,360

6.    STOCK-BASED COMPENSATION

In April 2014, the Company reserved 8,000,000 shares of common stock under the 2014 Stock Incentive Plan with a term of 10 years expiring in April 2024. This plan provides for the issuance of various forms of stock incentives, including, among others incentive and non-qualified stock options and restricted shares. As of June 30, 2021, there were 3,097,340 shares available for grant.

Stock-based employee compensation expense was as follows for the periods indicated:

Three months ended

Six months ended

June 30, 

June 30,

(in thousands)

    

2021

2020

    

2021

2020

Pre-tax expense

$

1,471

$

2,017

$

3,010

$

4,114

After tax expense

$

1,103

$

1,523

$

2,257

$

3,106

Restricted Stock

The following is a summary of the changes in non-vested restricted shares for the six months ended June 30, 2021:

Weighted Average 

    

Shares

    

Grant-Date Fair Value

Non-vested shares at December 31, 2020

2,235,179

$

6.81

Granted

 

1,010,700

 

3.87

Vested

 

(434,208)

 

14.96

Forfeited

 

(95,260)

 

6.85

Non-vested shares at June 30, 2021

 

2,716,411

$

7.91

The total fair value of shares vested was $1,757,000 during the six months ended June 30, 2021 and $2,467,000 during the six months ended June 30, 2020. Excess tax benefits or deficits realized from tax compensation deductions in excess of, or lower than compensation expense are recorded as either a beneficial or detrimental discrete income tax adjustment. This was a detrimental adjustment of $1,164,000 for the six months ended June 30, 2021 and a detrimental adjustment of $1,655,000 for the six months ended June 30, 2020.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2021, total unrecognized compensation cost related to non-vested restricted shares was $41,793,000 which is expected to be recognized over a weighted-average period of 4.4 years.

7.    BUSINESS SEGMENT INFORMATION

RPC’s reportable segments are the same as its operating segments. RPC manages its business under Technical Services and Support Services. Technical Services is comprised of service lines that generate revenue based on equipment, personnel or materials at the well site and are closely aligned with completion and production activities of the customers. Support Services is comprised of service lines which generate revenue from services and tools offered off the well site and are more closely aligned with the customers’ drilling activities. Selected overhead including centralized support services and regulatory compliance are classified as Corporate.

Technical Services consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline and fishing. The services offered under Technical Services are high capital and personnel intensive businesses. The Company considers all of these services to be closely integrated oil and gas well servicing businesses, and makes resource allocation and performance assessment decisions based on this operating segment as a whole across these various services.

Support Services consist primarily of drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training and consulting services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels.

The Company’s Chief Operating Decision Maker (“CODM”) assesses performance and makes resource allocation decisions regarding, among others, staffing, growth and maintenance capital expenditures and key initiatives based on the operating segments outlined above.

Segment Revenues:

RPC’s operating segment revenues by major service lines are shown in the following table:

Three months ended

Six months ended

June 30, 

June 30, 

(in thousands)

    

2021

    

2020

    

2021

    

2020

Technical Services:

  

  

  

  

Pressure Pumping

$

72,179

$

23,717

$

147,079

$

120,481

Downhole Tools

 

58,853

 

35,151

115,230

 

121,059

Coiled Tubing

 

20,399

 

8,973

35,167

 

25,212

Nitrogen

 

8,039

 

5,621

19,199

 

15,553

Snubbing

 

3,105

 

1,093

6,937

 

3,397

All other

 

13,544

 

5,977

25,148

 

22,530

Total Technical Services

$

176,119

$

80,532

$

348,760

$

308,232

Support Services:

 

  

 

  

 

  

 

  

Rental Tools

$

8,549

$

5,069

$

14,581

$

15,475

All other

 

4,089

 

3,699

 

8,026

 

9,370

Total Support Services

$

12,638

$

8,768

$

22,607

$

24,845

Total revenues

$

188,757

$

89,300

$

371,367

$

333,077

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following summarizes revenues for the United States and separately for all international locations combined for the three and six months ended June 30, 2021 and 2020. The revenues are presented based on the location of the use of the equipment or services. Assets related to international operations are less than 10 percent of RPC’s consolidated assets, and therefore are not presented.

    

Three months ended

    

Six months ended

June 30, 

June 30, 

(in thousands)

    

2021

    

2020

    

2021

    

2020

United States revenues

$

181,530

$

82,506

$

354,459

$

310,500

International revenues

 

7,227

 

6,794

16,908

 

22,577

Total revenues

$

188,757

$

89,300

$

371,367

$

333,077

The accounting policies of the reportable segments are the same as those referenced in Note 1 to these consolidated financial statements. RPC evaluates the performance of its segments based on revenues, operating profits and return on invested capital. Gains or losses on disposition of assets are reviewed by the CODM on a consolidated basis, and accordingly the Company does not report gains or losses at the segment level. Inter-segment revenues are generally recorded in segment operating results at prices that management believes approximate prices for arm’s length transactions and are not material to operating results.

Summarized financial information with respect RPC’s reportable segments for the three and six months ended June 30, 2021 and 2020 are shown in the following table:

Three months ended

Six months ended

June 30, 

June 30, 

(in thousands)

    

2021

    

2020

    

2021

    

2020

Revenues:

 

  

 

  

 

  

 

  

Technical Services

$

176,119

$

80,532

$

348,760

$

308,232

Support Services

 

12,638

 

8,768

 

22,607

 

24,845

Total revenues

$

188,757

$

89,300

$

371,367

$

333,077

Operating income (loss):

 

 

 

 

Technical Services

$

1,428

$

(34,100)

$

(4,334)

$

(46,307)

Support Services

 

(2,402)

 

(1,846)

 

(5,298)

 

(299)

Corporate Expenses

 

(3,357)

 

(3,139)

 

(6,680)

 

(6,469)

Impairment and Other Charges (1)

0

(1,639)

0

(207,175)

Gain on disposition of assets, net

 

3,111

 

3,194

 

4,571

 

4,013

Total operating loss

$

(1,220)

$

(37,530)

$

(11,741)

$

(256,237)

Interest expense

 

(103)

 

(71)

 

(483)

 

(184)

Interest income

 

14

 

68

 

32

 

402

Other income (expense), net

 

616

 

(1,481)

 

1,123

 

(1,789)

Loss before income taxes

$

(693)

$

(39,014)

$

(11,069)

$

(257,808)

(1)

Represents $541 related to Corporate and the remainder to Technical Services.

As of and for the six months ended

Technical

Support

June 30, 2021

    

Services

    

Services

    

Corporate

    

Total

(in thousands)

 

  

 

  

 

  

 

  

Depreciation and amortization

$

31,189

$

4,344

$

136

$

35,669

Capital expenditures

 

21,295

 

4,347

 

233

 

25,875

Identifiable assets

$

485,058

$

73,815

$

231,333

$

790,206

As of and for the six months ended

Technical

Support

June 30, 2020

    

Services

    

Services

    

Corporate

    

Total

(in thousands)

Depreciation and amortization

$

54,615

$

4,111

$

140

$

58,866

Capital expenditures

 

31,296

 

7,027

 

336

 

38,659

Identifiable assets

$

474,670

$

62,867

$

245,331

$

782,868

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8.    CURRENT EXPECTED CREDIT LOSSES

The Company utilizes an expected credit loss model for valuing its accounts receivable, a financial asset measured at amortized cost. The Company is exposed to credit losses primarily from providing oilfield services. The Company’s expected credit loss allowance for accounts receivable is based on historical collection experience, current and future economic and market conditions and a review of the current status of customers’ account receivable balances. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers’ financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible and recoveries of amounts previously written off are recorded when collected. Estimates used to determine the allowance for current expected credit losses are based on an assessment of anticipated payment and all other historical, current and future information that is reasonably available.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected:

Six months ended June 30,

    

2021

    

2020

(in thousands)

Beginning balance

$

4,815

$

5,181

Provision (benefit) for current expected credit losses

2,113

 

(828)

Write-offs

(530)

 

(302)

Recoveries collected (net of expenses)

7

 

Ending balance

$

6,405

$

4,051

9.    INVENTORIES

Inventories of $81,198,000 at June 30,2021 and $82,918,000 at December 31, 2020 consist of raw materials, parts and supplies.

Inventories, which consist principally of (i) raw materials and supplies that are consumed providing services to the Company’s customers, (ii) spare parts for equipment used in providing these services and (iii) components and attachments for manufactured equipment used in providing services, are recorded at the lower of cost or net realizable value.

10.     COMMITMENTS AND CONTINGENCIES

Sales and Use Taxes - The Company has ongoing sales and use tax audits in various jurisdictions and may be subjected to varying interpretations of statute that could result in unfavorable outcomes. In accordance with ASC 450-20, Loss Contingencies, any probable and reasonable estimate of assessment costs have been included in accrued state, local and other taxes.

The Company recently received a state tax notification of audit results related to sales and use tax on July 12, 2021. The Company and its outside legal counsel are currently evaluating the perceived merits of the tax assessment. The Company believes the likelihood of a material loss related to this contingency is remote and cannot be reasonably estimated at this time. Therefore, no loss has been recorded and the Company currently does not believe the resolution of this claim will have a material impact on its consolidated financial position, results of operations or cash flows.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11.    EMPLOYEE BENEFIT PLAN

The following represents the net periodic benefit cost and related components of the Company’s multiple employers Retirement Income Plan:

Three months ended June 30, 

Six months ended June 30, 

(in thousands)

    

2021

    

2020

    

2021

    

2020

Interest cost

 

$

247

 

$

412

 

$

494

 

$

823

Expected return on plan assets

 

(377)

 

(396)

 

(754)

 

(791)

Amortization of net losses

 

202

 

247

 

404

 

493

Net periodic benefit cost

$

72

$

263

$

144

$

525

The Company did not make a contribution to this plan during the six months ended June 30, 2021 or June 30, 2020.

In October 2020, the Company amended the Retirement Income Plan to add a limited lump-sum payment window for vested terminated participants who had terminated employment before July 1, 2020 and for active employees who reached age 59 ½ by December 1, 2020, with a vested balance. The participants could elect to receive their vested balance immediately as a lump-sum or by initiating a monthly annuity payment. The lump-sum payment window offering ended during the fourth quarter of 2020 and plan assets were used to fund participant elections. The resulting non-cash settlement charges represent the accelerated recognition of actuarial losses reflected in Accumulated Other Comprehensive Income (Loss) (AOCI). A settlement loss of $4.7 million associated with the acceptance of these lump-sum payments was included as part of impairment and other charges during the fourth quarter of 2020.

The Company permits selected highly compensated employees to defer a portion of their compensation into the non-qualified Supplemental Retirement Plan (“SERP”). The Company maintains certain securities primarily in mutual funds and company-owned life insurance (“COLI”) policies as a funding source to satisfy the obligation of the SERP that have been classified as trading, and are stated at fair value totaling $31,183,000 as of June 30, 2021 and $32,039,000 as of December 31, 2020. Trading gains related to the SERP assets totaled approximately $1,599,000 during the three months ended June 30, 2021, compared to trading gains of approximately $4,029,000 during the three months ended June 30, 2020. Trading gains related to the SERP assets totaled approximately $2,070,000 during the six months ended June 30, 2021, compared to trading losses of approximately $958,000 during the six months ended June 30, 2020. The SERP assets are reported in non-current other assets on the consolidated balance sheets and changes in the fair value of these assets are reported in the consolidated statements of operations as compensation cost in selling, general and administrative expenses.

The SERP liabilities includes participant deferrals net of distributions and are stated at fair value of approximately $30,998,000 as of June 30, 2021 and $29,733,000 as of December 31, 2020. The SERP liabilities are reported on the consolidated balance sheets in long-term pension liabilities and any change in the fair value is recorded as compensation cost within selling, general and administrative expenses in the consolidated statements of operations. Changes in the fair value of the SERP liabilities represented unrealized gains of approximately $1,703,000 during the three months ended June 30, 2021, compared to unrealized gains of approximately $4,156,000 during the three months ended June 30, 2020. Changes in the fair value of the SERP liabilities represented unrealized gains of approximately $2,290,000 during the six months ended June 30, 2021, compared to unrealized losses of approximately $713,000 during the six months ended June 30, 2020.

12.    NOTES PAYABLE TO BANKS

The Company has a revolving Credit Agreement with Bank of America and 4 other lenders which provides for a line of credit of up to $100 million, including a $35 million letter of credit subfacility, and a $35 million swingline subfacility. The facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. The revolving credit facility includes a full and unconditional guarantee by the Company's 100 percent owned domestic subsidiaries whose assets equal substantially all of the consolidated assets of the Company and its subsidiaries. Certain of the Company’s minor subsidiaries are not guarantors. The Credit Agreement’s maturity date is July 26, 2023.

15

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On September 25, 2020, the Company entered into Amendment No. 5 to Credit Agreement (the “Amendment”). This Amendment (1) reduced the maximum amount available for borrowing under the credit facility from $125 million to $100 million, (2) decreased the minimum tangible net worth covenant level from not less than $600 million to not less than $400 million, and (3) increased the margin spreads and commitment fees payable by RPC by 37.5 and 5 basis points, respectively, at each pricing level of the applicable rate without any changes to the leverage ratios used to calculate such spreads.

The Credit Agreement includes the following covenants: (i) when RPC’s trailing four quarter EBITDA (as calculated under the Credit Agreement) is equal to or greater than $50 million, a maximum consolidated leverage ratio of 2.50:1.00 and a minimum debt service coverage ratio of 2.00:1.00, and (ii)  when RPC’s trailing four quarter EBITDA is less than $50 million, a minimum tangible net worth of no less than $400 million.

As of June 30, 2021, the Company was in compliance with these covenants.

Revolving loans under the amended revolving credit facility bear interest at one of the following two rates at the Company’s election:

the Eurodollar Rate, which is the rate per annum equal to the London Interbank Offering Rate (“LIBOR”); plus, a margin ranging from 1.5% to 2.5%, based on a quarterly consolidated leverage ratio calculation; or
the Base Rate, which is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) Bank of America’s publicly announced “prime rate,” and (c) the Eurodollar Rate plus 1.00%; in each case plus a margin that ranges from 0.5% to 1.5% based on a quarterly consolidated leverage ratio calculation.

In addition, the Company pays an annual fee ranging from 0.20% to 0.30%, based on a quarterly consolidated leverage ratio calculation, on the unused portion of the credit facility.

The Company has incurred total loan origination fees and other debt related costs associated with this revolving credit facility in the aggregate of approximately $3.4 million. These costs are being amortized to interest expense over the remaining term of the loan, and the remaining net balance of $0.3 million at June 30, 2021 is classified as part of non-current other assets.

As of June 30, 2021, RPC had 0 outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $17.9 million; therefore, a total of $82.1 million of the facility was available. Interest incurred, which includes facility fees on the unused portion of the revolving credit facility and the amortization of loan cost, and interest paid on the credit facility were as follows for the periods indicated:

Three months ended

Six months ended

June 30, 

June 30, 

(in thousands)

    

2021

    

2020

    

2021

    

2020

Interest incurred

$

65

$

40

$

106

$

153

Interest paid

40

40

82

80

13.  INCOME TAXES

The Company generally determines its periodic income tax expense or benefit based upon the current period income or loss and the annual estimated tax rate for the Company adjusted for discrete items including changes to prior period estimates. In certain instances the Company uses the discrete method when it believes the actual year-to-date effective rate provides a more reliable estimate of its income tax rate for the period. The estimated tax rate is revised, if necessary, as of the end of each successive interim period during the fiscal year to the Company’s current annual estimated tax rate.

For the three months ended June 30, 2021, the effective rate reflects a provision of 4.8 percent compared to a benefit of 35.7 percent for the comparable period in the prior year. For the six months ended June 30, 2021, the effective rate reflects a benefit of 6.2 percent compared to a benefit of 28.0 percent for the comparable period in the prior year. The beneficial effective tax rate is mainly related to the unfavorable permanent adjustments together with detrimental discrete adjustments related to restricted stock vesting and the employee retention credit.

16

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14.  FAIR VALUE DISCLOSURES

The various inputs used to measure assets at fair value establish a hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of six broad levels as follows:

1.

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

2.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

3.

Level 3 – Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use.

The following table summarizes the valuation of financial instruments measured at fair value on a recurring basis in the balance sheets as of June 30, 2021 and December 31, 2020:

Fair Value Measurements at June 30, 2021 with:

Quoted prices in

Significant 

active markets

 other 

Significant 

 for identical

observable

unobservable 

(in thousands)

    

Total

    

assets

    

 inputs

    

inputs

  

(Level 1)

(Level 2)

(Level 3)

Assets:

Equity securities

$

184

$

184

$

$

Investments measured at net asset value

$

31,183

 

  

 

  

 

  

Fair Value Measurements at December 31, 2020 with:

Quoted prices in

Significant 

active markets

 other 

Significant 

 for identical

observable

unobservable 

(in thousands)

    

Total

    

assets

    

 inputs

    

inputs

 

  

 

(Level 1)

 

(Level 2)

 

(Level 3)

Assets:

Equity securities

$

132

$

132

$

$

Investments measured at net asset value

$

32,039

 

  

 

  

 

  

The Company determines the fair value of equity securities that have a readily determinable fair value through quoted market prices. The total fair value is the final closing price, as defined by the exchange in which the asset is actively traded, on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs. Marketable securities comprised of the SERP assets, are recorded primarily at their net cash surrender values, calculated using their net asset values, which approximates fair value, as provided by the issuing insurance or investment company. Significant observable inputs, in addition to quoted market prices, were used to value the trading securities. The Company’s policy is to recognize transfers between levels at the beginning of quarterly reporting periods. For the quarter ended June 30, 2021, there were no significant transfers in or out of levels 1, 2 or 3.

Under the Company’s revolving credit facility, there was no balance outstanding at June 30, 2021 and December 31, 2020. Borrowings under our revolving credit facility are typically based on the quote from the lender (level 2 inputs), which approximates fair value, and bear variable interest rates as described in Note 11. The Company is subject to interest rate risk on the variable component of the interest rate.

The carrying amounts of other financial instruments reported in the balance sheet for current assets and current liabilities approximate their fair values because of the short maturity of these instruments. The Company currently does not use the fair value option to measure any of its existing financial instruments and has not determined whether it will elect this option for financial instruments acquired in the future.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company’s real estate classified as held for sale has been stated at fair value less costs. The fair value measurement was based on observable market data that includes estimated values per square foot involving comparable properties in similar locations.

The non-recurring fair value measurement of both these asset categories are reflected in the table below:

Fair Value Measurements at June 30, 2021 with:

Quoted prices in

Significant

active markets

other

Significant

for identical

observable

unobservable

(in thousands)

    

Total

    

assets

    

inputs

    

inputs

(Level 1)

(Level 2)

(Level 3)

Assets:

 

  

 

  

 

  

 

  

Assets held for sale

$

4,032

$

$

4,032

$

Fair Value Measurements at December 31, 2020 with:

    

    

Quoted prices in

    

Significant

    

active markets

other

Significant

for identical

observable

unobservable

(in thousands)

Total

assets

inputs

inputs

(Level 1)

(Level 2)

(Level 3)

Assets:

  

  

  

  

Assets held for sale

$

4,032

$

$

4,032

$

15.  ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Accumulated other comprehensive (loss) income consists of the following (in thousands):

Foreign

Pension

Currency

    

Adjustment

    

Translation

    

Total

Balance at December 31, 2020

$

(15,181)

$

(2,525)

$

(17,706)

Change during the period:

 

 

 

Before-tax amount

 

 

205

 

205

Reclassification adjustment, net of taxes:

 

 

 

Amortization of net loss (1)

 

306

 

 

306

Total activity for the period

 

306

 

205

 

511

Balance at June 30, 2021

$

(14,875)

$

(2,320)

$

(17,195)

(1)Reported as part of selling, general and administrative expenses.

Foreign

Pension

Currency

    

Adjustment

    

Translation

    

Total

Balance at December 31, 2019

$

(20,908)

$

(2,315)

$

(23,223)

Change during the period:

 

 

 

Before-tax amount

 

 

(398)

 

(398)

Reclassification adjustment, net of taxes:

 

 

  

 

Amortization of net loss (1)

 

918

 

 

918

Total activity for the period

 

918

 

(398)

 

520

Balance at June 30, 2020

$

(19,990)

$

(2,713)

$

(22,703)

(1)

Reported as part of selling, general and administrative expenses.

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RPC, INC. AND SUBSIDIARIES

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following discussion should be read in conjunction with the Consolidated Financial Statements included elsewhere in this document. See also “Forward-Looking Statements” on page 26.

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

The discussion of our key business and financial strategies set forth under the Overview section in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2020 is incorporated herein by reference. In 2021, the Company’s strategy of utilizing equipment in unconventional basins has continued. During the six months ended June 30, 2021, capital expenditures totaled $25.9 million, primarily for capitalized maintenance and upgrages of our existing equipment and selected new revenue-producing equipment.

The oil and gas industry experienced an unprecedented disruption during 2020 due to the substantial decline in global demand for oil caused by the combined impact of the OPEC disputes, and the COVID-19 pandemic that has continued during the second quarter of 2021. The pandemic has significantly impacted the economic conditions in the United States, as federal, state and local governments have reacted to the public health crisis, creating significant uncertainties in the United States, as well as the global economy. RPC continued our regular operations during the period since we function as an essential infrastructure business in the energy sector under guidance issued by the Department of Homeland Security. In response to the pandemic, RPC instituted strict procedures to assess employee health and safety while in its facilities or on operational locations.

During the second quarter of 2021, revenues of $188.8 million increased by $99.5 million or 111.4 percent compared to the same period in the prior year. The increase in revenues is due to significantly higher activity levels within all of RPC’s major service lines. The economic slowdown that occurred due to the COVID-19 pandemic began at the end of the first quarter of 2020, therefore the second quarter of 2020 reflects the significant decline in business activity levels, explaining the significant increase in revenues during the second quarter of 2021 when compared to the prior year. International revenues for the second quarter of 2021 increased 6.0 percent to $7.2 million compared to the same period in the prior year. We continue to pursue international growth opportunities, but the nature of this work is unpredictable and we believe that international revenues will continue to be less than ten percent of RPC’s consolidated revenues in the future.

Cost of revenues increased during the second quarter of 2021 in comparison to the same period of the prior year primarily due to increases in expenses consistent with higher activity levels, as well as higher fuel costs. Cost of revenues as a percentage of revenues decreased primarily due to the positive leverage of these expenses over higher revenues, in the second quarter of 2021 as compared to the prior year.

Selling, general and administrative expenses were $29.4 million in the second quarter of 2021 compared to $28.8 million in the second quarter of 2020. The expenses for the second quarter of 2021 include higher bad debt expense and expenses consistent with higher activity levels.

In connection with the preparation of our financial statements for the quarter ended June 30, 2020, we recorded impairment and other charges totaling $1.6 million. These charges represent primarily severance costs due to cost reduction initiatives. For the six months ending June 30, 2020, impairment and other charges include long-lived asset impairment and other charges of $205.5 million.

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RPC, INC. AND SUBSIDIARIES

Loss before income taxes was $0.7 million for the three months ended June 30, 2021 compared to $39.0 million loss before income taxes in the same period of 2020. Diluted loss per share was $0.00 for the three months ended June 30, 2021 compared to diluted loss per share of $0.12 in the same period of 2020. Cash provided by operating activities decreased to $54.9 million for the six months ended June 30, 2021 compared to $122.1 million in the same period of 2020 primarily due to a significantly smaller favorable change in working capital.

We expect capital expenditures in 2021 will be approximately $65 million, and will be directed mostly towards capitalized maintenance and upgrades of our existing equipment, including upgrades of selected pressure pumping equipment for dual-fuel capability.

Outlook

Drilling activity in the U.S. domestic oilfields, as measured by the rotary drilling rig count, reached a cyclical peak of 1,083 during the fourth quarter of 2018. Beginning in the fourth quarter of 2018, the drilling rig count began to decline and by the third quarter of 2020, the U.S. domestic drilling rig count fell 77 percent reaching the lowest level recorded up to that time. The principal catalyst for this steep rig count decline was the decrease in the price of oil in the world markets resulting from the decline in global oil demand associated with the COVID-19 pandemic which began in the second quarter of 2020.

RPC monitors rig count efficiencies and well completion trends because the majority of our services are directed toward well completions. Improvements in drilling rig efficiencies have increased the number of potential well completions for a given drilling rig count; therefore, the statistics regarding well completions are more meaningful indicators of the outlook for RPC’s activity levels and revenues. Annual well completions during 2018 increased by approximately 25 percent compared to 2017, and by approximately five percent in 2019 compared to 2018. Well completions in 2020 decreased by approximately 49 percent compared to 2019.

The current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity. Following the trough of the most recent oilfield downturn in the second quarter of 2020, the average price of oil has risen by more than 66 percent in the second quarter of 2021 compared to the average price of oil in the second quarter of 2020. The average price of natural gas has also risen by more than 74 percent during the same time period, due to steady demand for natural gas. Following a low price of $0.23 per gallon in the first quarter of 2020, the price of benchmark natural gas liquids has risen to $0.88 per gallon in the second quarter of 2021, an increase of almost 283 percent. The price increases in these commodities during the past three quarters are encouraging, and RPC believes that they have encouraged our customers to increase drilling and completion activities.

The majority of the U.S. domestic rig count remains directed towards oil. Early in the second quarter of 2021, approximately 79 percent of the U.S. domestic rig count was directed towards oil, a decrease compared with approximately 85 percent during the same period in the prior year. We believe that oil-directed drilling will remain the majority of domestic drilling, and that natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near term. We believe that this relationship will continue due to relatively low prices for natural gas, high production from existing natural gas wells, and industry projections of limited increases in domestic natural gas demand during the near term.

We continue to monitor the market for our services and the competitive environment. An increasingly important factor impacting the demand for our services is the growing efficiency with which oilfield completion crews are providing services. We began to observe this in 2018, and we believe that this higher efficiency has contributed to the oversupplied nature of the oilfield services market. In addition, the U.S. domestic rig count began to decline during the second quarter of 2019, and by the beginning of the second quarter of 2020 had fallen to the lowest level ever recorded. Combined with the long-term trend of increased efficiency, the U.S. domestic rig count decline has caused significant decreases in activity levels and pricing for our services.

RPC expanded its fleet of revenue-producing equipment in 2019, while also retiring older equipment which could no longer function effectively in service-intensive operating environments. We continue to selectively upgrade our existing equipment to operate using multiple fuel sources and to take advantage of advances in technology and data collection. We will continue to monitor current and expected customer activity levels and projected financial returns as we consider activating additional idle equipment during the near term. Our consistent response to the near-term potential of lower activity levels and competitive pricing has been to undertake moderate fleet expansions which we believe will allow us to maintain a strong balance sheet, while also positioning RPC for long-term growth and strong financial returns.

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Results of Operations

Three months ended

Six months ended

    

June 30,

June 30,

    

2021

    

2020

    

2021

    

2020

Consolidated revenues [in thousands]

$

188,757

$

89,300

$

371,367

$

333,077

Revenues by business segment [in thousands]:

Technical

$

176,119

$

80,532

$

348,760

$

308,232

Support

12,638

8,768

22,607

24,845

Consolidated operating loss [in thousands]

$

(1,220)

$

(37,530)

$

(11,741)

$

(256,237)

Operating income (loss) by business segment [in thousands]:

Technical

$

1,429

$

(34,100)

$

(4,334)

$

(46,307)

Support

(2,402)

(1,846)

(5,298)

(299)

Corporate

(3,358)

(3,139)

(6,680)

(6,469)

Impairment and other charges (1)

1,639

-

207,175

Gain on disposition of assets, net

3,111

3,194

4,571

4,013

Percentage cost of revenues to revenues

77.2

%

89.6

%

78.6

%

78.7

%

Percentage selling, general & administrative expenses to revenues

15.6

%

32.2

%

16.2

%

19.6

%

Percentage depreciation and amortization expense to revenues

9.5

%

21.9

%

9.6

%

17.7

%

Average U.S. domestic rig count

453

392

425

589

Average natural gas price (per thousand cubic feet (mcf))

$

2.98

$

1.71

$

3.29

$

1.82

Average oil price (per barrel)

$

66.6

$

27.32

$

62.4

$

37.3

(1)

Includes $541 related to Corporate and the remainder to Technical Services.

THREE MONTHS ENDED JUNE 30, 2021 COMPARED TO THREE MONTHS ENDED JUNE 30, 2020

Revenues. Revenues of $188.8 million for the three months ended June 30, 2021 increased 111.4 percent compared to the three months ended June 30, 2020. Domestic revenues of $181.5 million increased 120.0 percent for the three months ended June 30, 2021 compared to the same period in the prior year. The increase in revenues was due to significantly higher activity levels compared to the second quarter of the prior year which was negatively impacted by COVID-19 shutdowns. International revenues of $7.2 million increased 6.0 percent for the three months ended June 30, 2021 compared to the same period in the prior year.

During the second quarter of 2021, the average price of natural gas was 74.3 percent higher and the average price of oil was 143.7 percent higher, both as compared to the same period in the prior year. The average domestic rig count during the second quarter of 2021 was 15.6 percent higher than the same period in 2020.

The Technical Services segment revenues for the second quarter of 2021 increased by 118.7 percent compared to the same period of the prior year due to significantly higher activity and pricing. Technical Services reported operating income of $1.4 million during the second quarter of 2021 compared to an operating loss of $34.1 million in the second quarter of 2020 due to higher activity levels. The Support Services segment revenues for the second quarter of 2021 increased by 44.1 percent compared to the same period in the prior year. This increase was due principally to higher activity levels for rental tools. Support Services reported an operating loss of $2.4 million for the second quarter of 2021 compared to an operating loss of $1.8 million for the second quarter of 2020 due to lower pricing on rental tools.

Cost of revenues. Cost of revenues increased 82.2 percent to $145.8 million for the three months ended June 30, 2021 compared to $80.0 million for the three months ended June 30, 2020. Cost of revenues increased primarily due to increases in expenses consistent with higher activity levels, as well as higher fuel costs. Cost of revenues as a percentage of revenues decreased primarily due to labor and other cost efficiencies resulting from higher activity levels.

Selling, general and administrative expenses. Selling, general and administrative expenses were $29.4 million for the three months ended June 30, 2021 compared to $28.8 million for the three months ended June 30, 2020. These expenses for the three months ended June 30, 2021 include higher bad debt expense and expenses consistent with higher activity levels. Selling, general and

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administrative expenses decreased from 32.2 percent of revenues in the second quarter of 2020 to 15.6 percent of revenues in the second quarter of 2021 due to the fixed nature of many of these expenses during the short term.

Depreciation and amortization. Depreciation and amortization decreased 8.6 percent to $17.9 million for the three months ended June 30, 2021, compared to $19.6 million for the three months ended June 30, 2020. Depreciation and amortization decreased due lower capital expenditures in recent years, coupled with assets becoming fully depreciated for book purposes during the previous quarters.

Impairment and other charges. There were no impairment and other charges for the three months ended June 30, 2021 and $1.6 million for the three months ended June 30, 2020. See Note 4 of the notes to the consolidated financial statements for a detail of these charges.

Gain on disposition of assets, net. Gain on disposition of assets, net was $3.1 million for the three months ended June 30, 2021 compared to a gain on disposition of assets, net of $3.2 million for the three months ended June 30, 2020. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.

Other income (expense), net. Other income, net was $616 thousand for the three months ended June 30, 2021 compared to other expense, net of $1.5 million for the same period in the prior year.

Interest expense. Interest expense was $103 thousand for the three months ended June 30, 2021 compared to $71 thousand for the three months ended June 30, 2020. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan costs.

Income tax provision (benefit). Income tax provision was $33 thousand during the three months ended June 30, 2021 compared to a $13.9 million income tax benefit for the same period in 2020. The effective tax rate was 4.8 percent for the three months ended June 30, 2021 compared to a 35.7 percent effective benefit rate for the three months ended June 30, 2020. The effective rate reflects a provision due to a net detrimental impact related to the employee retention credit.

SIX MONTHS ENDED JUNE 30, 2021 COMPARED TO SIX MONTHS ENDED JUNE 30, 2020

Revenues. Revenues of $371.4 million for the six months ended June 30, 2021 increased 11.5 percent compared to the six months ended June 30, 2020. Domestic revenues of $354.5 million increased 14.2 percent for the six months ended June 30, 2021 compared to the same period in the prior year. The increase in revenues was due to higher activity levels compared to the prior year which was negatively impacted during the second quarter of 2020 by COVID-19 shutdowns. International revenues of $16.9 million decreased 25.1 percent for the six months ended June 30, 2021 compared to the same period in the prior year.

During the first six months of 2021, the average price of natural gas was 81.0 percent higher and the average price of oil was 67.3 percent higher, both as compared to the same period in the prior year. The average domestic rig count during the first six months of 2021 was 27.8 percent lower than the same period in 2020.

The Technical Services segment revenues for the first six months of 2021 increased by 13.1 percent compared to the same period of the prior year due to higher activity levels. Technical Services reported an operating loss of $4.3 million during the first six months of 2021 compared to an operating loss of $46.3 million for the first six months of 2020. The Support Services segment revenues for the first six months of 2021 decreased by 9.0 percent compared to the same period in the prior year. This decrease was due principally to lower activity levels for rental tools. Support Services reported an operating loss of $5.3 million for the first six months of 2021 compared to operating loss of $0.3 million for the first six months of 2020 due to lower revenues from reduced activity levels.

Cost of revenues. Cost of revenues increased 11.5 percent to $292.0 million for the six months ended June 30, 2021 compared to $262.0 million for the six months ended June 30, 2020. Cost of revenues increased primarily due to increases in expenses consistent with higher activity levels, partially offset by efficiencies resulting from RPC’s cost reduction initiatives. Cost of revenues as a percentage of revenues was essentially unchanged in the first six months of 2021 as compared to the prior year.

Selling, general and administrative expenses. Selling, general and administrative expenses were $60.0 million for the six months ended June 30, 2021 and $65.3 million for the six months ended June 30, 2020. These expenses decreased due to lower employment costs, primarily the result of cost reduction initiatives during previous quarters. Selling, general and administrative expenses decreased

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from 19.6 percent of revenues in the six months ended June 30, 2020 compared to 16.2 percent of revenues for the six months ended June 30, 2021 primarily due to cost reduction initiatives during previous quarters, coupled with the fixed nature of many of these expenses during the short term.

Depreciation and amortization. Depreciation and amortization decreased 39.4 percent to $35.7 million for the six months ended June 30, 2021, compared to $58.9 million for the six months ended June 30, 2020. Depreciation and amortization decreased significantly because of the asset impairment charges recorded during the first quarter of 2020.

Impairment and other charges. There were no impairment and other charges for the six months ended June 30, 2021 and $207.2 million for the six months ended June 30, 2020. This amount represents primarily the total amount by which several of our asset groups’ carrying amounts exceeded their fair value, coupled with severance costs. See Note 4 of the notes to the consolidated financial statements for further discussion of these charges.

Gain on disposition of assets, net. Gain on disposition of assets, net was $4.6 million for the six months ended June 30, 2021 compared to a gain on disposition of assets of $4.0 million for the six months ended June 30, 2020. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.

Other income (expense), net. Other income, net was $1.1 million for the six months ended June 30, 2021 compared to other expense, net of $1.8 million for the same period in the prior year.

Interest expense. Interest expense was $483 thousand for the six months ended June 30, 2021 compared to $184 thousand for the six months ended June 30, 2020. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan costs. The increase in interest expense during the first six months of 2021 is primarily due to the interest charged in connection with resolution of a state well servicing tax audit.

Income tax benefit. Income tax benefit was $0.7 million during the six months ended June 30, 2021 compared to $72.3 million tax benefit for the same period in 2020. The effective benefit rate was 6.2 percent for the six months ended June 30, 2021 compared to a 28.0 percent effective benefit rate for the six months ended June 30, 2020. The effective rate reflects a detrimental discrete adjustment related to restricted stock in addition to a net detrimental impact related to the employee retention credit.

Liquidity and Capital Resources

Cash Flows

The Company’s cash and cash equivalents increased $36.5 million to $121.0 million as of June 30, 2021 compared to cash and cash equivalents of $84.5 million as of December 31, 2020.

The following table sets forth the historical cash flows for the six months ended June 30, 2021 and 2020:

Six months ended June 30, 

(In thousands)

    

2021

    

2020

Net cash provided by operating activities

$

54,866

$

122,099

Net cash used for investing activities

(17,781)

(25,919)

Net cash used for financing activities

(566)

(798)

Cash provided by operating activities for the six months ended June 30, 2021 was $54.9 million. Net loss of $10.4 million was offset by a favorable change in the primary components of our working capital (taxes receivable, accounts receivable, inventories and accounts payable) of $27.1 million, mainly due to an increase in taxes receivable, primarily due to a federal tax refund collected during the period.

Cash used for investing activities for the six months ended June 30, 2021 decreased by $8.1 million compared to the six months ended June 30, 2020, primarily because of a reduction in capital expenditures, partially offset by a decrease in proceeds from the sale of assets.

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Cash used for financing activities for the six months ended June 30, 2021 decreased by $0.2 million primarily as a result of the lower cost of repurchases of the Company’s shares for taxes related to the vesting of restricted shares.

Financial Condition and Liquidity

The Company’s financial condition as of June 30, 2021 remains strong. We believe the liquidity provided by our existing cash and cash equivalents and our overall strong capitalization will provide sufficient liquidity to meet our requirements for at least the next twelve months. The Company’s decisions relating to the amount of cash to be used for investing and financing activities are influenced by our capital position, and the expected amount of cash to be provided by operations. RPC does not expect to utilize our revolving credit facility to meet these liquidity requirements.

The Company currently has a $100 million revolving credit facility that matures in July 2023, as recently amended. The facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. On September 25, 2020, the Company further amended the revolving credit facility. Among other matters, the amendment (1) reduced the maximum amount available for borrowing from $125 million to $100 million, (2) decreased the minimum tangible net worth covenant level from not less than $600 million to not less than $400 million, and (3) increased the margin spreads and commitment fees payable by 37.5 and 5 basis points, respectively, at each pricing level of the applicable rate without any changes to the leverage ratios used to calculate such spreads. As of June 30, 2021, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $17.9 million; therefore, a total of $82.1 million of the facility was available. The Company was in compliance with the credit facility financial covenants as of June 30, 2021. For additional information with respect to RPC’s facility, see Note 12 of the Notes to Consolidated Financial Statements included in this report.

Cash Requirements

The Company currently expects that capital expenditures will be approximately $65 million during 2021, of which $25.9 million has been spent as of June 30, 2021. We expect capital expenditures for the remainder of 2021 will be directed mostly towards capitalized maintenance and upgrades of our existing equipment, including upgrades of selected pressure pumping equipment for dual-fuel capability. The actual amount of 2021 capital expenditures will depend primarily on equipment maintenance requirements, expansion opportunities, and equipment delivery schedules.

The Company has ongoing sales and use tax audits in various jurisdictions subject to varying interpretations of statutes. The Company has recorded the exposure from these audits to the extent issues are resolved or are reasonably estimable. There are issues that could result in unfavorable outcomes that cannot be currently estimated. See note Note 10 of the Notes to Consolidated Financial Statements for additional information.

The Company’s Retirement Income Plan, a multiple employer trusteed defined benefit pension plan, provides monthly benefits upon retirement at age 65 to eligible employees. During the six months ended June 30, 2021, the Company did not make a cash contribution to the plan and does not currently expect to make any additional contributions for the remainder of 2021.

As of June 30, 2021, the Company’s stock buyback program authorizes the aggregate repurchase of up to 41,578,125 shares, including an additional 10,000,000 shares authorized for repurchase by the Board of Directors on February 12, 2018. No shares have been purchased on the open market during the six months ended June 30, 2021, and 8,248,184 shares remain available to be repurchased under the current authorization. The Company may repurchase outstanding common shares periodically based on market conditions and our capital allocation strategies considering restrictions under our credit facility. The stock buyback program does not have a predetermined expiration date.

On July 22, 2019, the Board of Directors voted to suspend RPC’s dividend to common stockholders. The Company expects to resume cash dividends to common stockholders, subject to the earnings and financial condition of the Company and other relevant factors. The Company has no timetable for the resumption of dividends.

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INFLATION

The Company purchases its equipment and materials from suppliers who provide competitive prices, and employs skilled workers from competitive labor markets. If inflation in the general economy increases, the Company’s costs for equipment, materials and labor could increase as well. In addition, increases in activity in the domestic oilfield can cause upward wage pressures in the labor markets from which it hires employees, especially if employment in the general economy increases. Also, higher activity can cause increases in the costs of certain materials and key equipment components used to provide services to the Company’s customers. In addition, labor costs decreased during 2020 due to the significant decline in oilfield activity. However, during the fourth quarter of 2020 and the first six months of 2021, the price of labor has begun to rise due to increasing oilfield activity and the departure of skilled labor from the domestic oilfield industry during 2020. Also, the prices of raw materials used in the Company’s operations have begun to increase because many suppliers of these materials ceased operations or other supply chain disruptions have occurred. The Company is attempting to pass these price increases along to our customers, but due to the competitive nature of the oilfield services business, there is no assurance that these efforts will be successful.

OFF BALANCE SHEET ARRANGEMENTS

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

RELATED PARTY TRANSACTIONS

Marine Products Corporation

In conjunction with the spin-off of its former power boat manufacturing segment conducted through Chaparral Boats, Inc., RPC and Marine Products Corporation (Marine Products) entered into various agreements that define the companies’ relationship. RPC charged Marine Products for its allocable share of administrative costs incurred for services rendered on behalf of Marine Products Corporation totaling $437,000 for the six months ended June 30, 2021 and $433,000 for the comparable period in 2020.

Other

The Company periodically purchases, in the ordinary course of business, products or services from suppliers who are owned by officers or significant stockholders of, or affiliated with the directors of RPC. The total amounts paid to these affiliated parties were $514,000 for the six months ended June 30, 2021 and $610,000 for the six months ended June 30, 2020.

RPC receives certain administrative services and rents office space from Rollins, Inc. (a company of which Mr. Gary W. Rollins is also Chairman, and which is controlled by Mr. Rollins and his affiliates). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include office space, selected administration services for certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated $52,000 for the six months ended June 30, 2021 and $52,000 for the six months ended June 30, 2020.

RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of $100,000 for each of the six months ended June 30, 2021 and 2020.

CRITICAL ACCOUNTING POLICIES

The discussion of Critical Accounting Policies is incorporated herein by reference from the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2020. There have been no significant changes in the critical accounting policies since year-end.

IMPACT OF RECENT ACCOUNTING STANDARDS

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

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SEASONALITY

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

FORWARD-LOOKING STATEMENTS

Certain statements made in this report that are not historical facts are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements that relate to our business strategy, plans and objectives, and our beliefs and expectations regarding future demand for our equipment and services and other events and conditions that may influence the oilfield services market and our performance in the future. Forward-looking statements made elsewhere in this report include without limitation statements regarding natural gas prices, production levels and drilling activities; our expectation to continue to focus on the development of international growth opportunities; our belief that international revenues will continue to be less than ten percent (10%) of our consolidated revenues; our belief that recent price increases have encouraged our customers to increase drilling and completion activities; our belief that oil-directed drilling will remain the majority of domestic drilling and that natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near-term; our belief that this relationship will continue due to relatively low prices for natural gas, high production from existing natural gas wells, and industry projections of limited increases in domestic natural gas demand during the near term; our expectation that we will not meaningfully increase our fleet capacity until the projected financial returns for such an investment are justified; our belief that limited or no access to outside capital for exploration and production financing will remain in place for the foreseeable future and impact the volume of drilling and completion of new wells; our expectations about contributions to the defined benefit pension plan in 2021; our ability to meet our cash requirements in the future; the estimated amount and focus of our capital expenditures; our belief that we will not need our revolving credit facility to meet our liquidity requirements; our expectations to resume payments of cash dividends; estimates made with respect to our critical accounting policies; the effect of new accounting standards; the effect of the changes in foreign exchange rates on our consolidated results of operations or financial condition; and the impact of lawsuits, legal proceedings and claims on our financial position and results of operation.

The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “focus,” “plan,” and similar expressions generally identify forward-looking statements. Such statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RPC to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Risk factors that could cause such future events not to occur as expected include the following: the combined impact of the OPEC disputes and the COVID-19 pandemic on our operating results, the declines in the price of oil and natural gas, which tend to result in a decrease in drilling activity and therefore a decline in the demand for our services, the actions of the OPEC cartel, the ultimate impact of current and potential political unrest and armed conflict in the oil producing regions of the world, which could impact drilling activity, adverse weather conditions in oil or gas producing regions, including the Gulf of Mexico, competition in the oil and gas industry, the Company’s ability to implement price increases, the potential impact of possible future regulations on hydraulic fracturing on our business, risks of international operations, and reliance on large customers. Additional discussion of factors that could cause actual results to differ from management’s projections, forecasts, estimates and expectations is contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in this 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to interest rate risk exposure through borrowings on its credit facility. As of June 30, 2021, there were no outstanding interest-bearing advances on our credit facility, which bear interest at a floating rate.

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

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ITEM 4. CONTROLS AND PROCEDURES

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

As of the end of the period covered by this report, June 30, 2021 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the Evaluation Date.

Changes in internal control over financial reporting – Management’s evaluation of changes in internal control did not identify any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

RPC is involved in litigation from time to time in the ordinary course of its business. RPC does not believe that the outcome of such litigation will have a material adverse effect on the financial position or results of operations of RPC.

ITEM 1A. RISK FACTORS

See the risk factors described in the Company’s annual report on Form 10-K for the year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Shares repurchased by the Company and affiliated purchasers in the second quarter of 2021 are outlined below.

    

    

    

Total Number

    

Maximum

of Shares (or

Number (or

 

 

 

Units)

 

Approximate

Purchased as

Dollar Value) of 

Part of

Shares (or Units)

 

Total Number of 

 

Average Price 

 

Publicly 

 

that May Yet Be 

 

Shares 

Paid Per

 

Announced

 

Purchased Under

(or Units)

Share

 

Plans or

 

the Plans or

Period

Purchased

(or Unit)

 

Programs (1)

 

Programs (1)

April 1, 2021 to April 30, 2021

 

1,578

(2)

$

5.65

 

 

8,248,184

May 1, 2021 to May 31, 2021

 

 

 

 

8,248,184

June 1, 2021 to June 30, 2021

 

 

 

 

8,248,184

Totals

 

1,578

$

5.65

 

 

8,248,184

(1)

The Company has a stock buyback program initially adopted in 1998 (and subsequently amended in 2013 and 2019) that authorizes the aggregate repurchase of up to 41,578,125 shares, including an additional 10,000,000 shares authorized for repurchase by the Board of Directors on February 12, 2018. There were no shares purchased on the open market during 2021 and 8,248,184 remain available to be repurchased under the current authorization as of June 30, 2021. Currently the program does not have a predetermined expiration date.

(2)

Represent shares repurchased in connection with taxes related to the vesting of certain restricted shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit
Number

    

Description

3.1(a)

Restated certificate of incorporation of RPC, Inc. (incorporated herein by reference to Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1999).

3.1(b)

Certificate of amendment of the certificate of incorporation of RPC, Inc. (incorporated by reference to Exhibit 3.1(b) to Registrant’s Quarterly Report on Form 10-Q filed on May 8, 2006).

3.1(c)

Certificate of amendment of the certificate of incorporation of RPC, Inc. (incorporated by reference to Exhibit 3.1(c) to the Registrant’s Quarterly Report on Form 10-Q filed on August 2, 2011).

3.2

Amended and Restated Bylaws of RPC, Inc. (incorporated by reference to Exhibit 99 to the Registrant’s Current Report on Form 8-K filed on February 2, 2021).

4

Form of Stock Certificate (incorporated herein by reference to Exhibit 4 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998).

31.1

Section 302 certification for Chief Executive Officer.

31.2

Section 302 certification for Chief Financial Officer.

32.1

Section 906 certifications for Chief Executive Officer and Chief Financial Officer.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

29

Table of Contents

RPC, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

RPC, INC.

/s/ Richard A. Hubbell

Date:  July 30, 2021

Richard A. Hubbell

President and Chief Executive Officer

(Principal Executive Officer)

/s/ Ben M. Palmer

Date:  July 30, 2021

Ben M. Palmer

Vice President, Chief Financial Officer and Corporate Secretary

(Principal Financial and Accounting Officer)

30