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WIKI ANALYSIS
Overview
RPC provides a broad range of specialized oilfield services and equipment primarily to independent and major oil and gas companies engaged in the 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 markets. The services and equipment provided include, among others, (1) pressure pumping services, (2) coiled tubing services, (3) snubbing services (also referred to as hydraulic workover services), (4) nitrogen services, (5) the rental of drill pipe and other specialized oilfield equipment, (6) downhole tool rental services and (7) firefighting and well control. RPC acts as a holding company for its operating units, Cudd Energy Services, Patterson Rental and Fishing Tools, Bronco Oilfield Services, Thru Tubing Solutions, Well Control School, and others. As of December 31, 2009, RPC had approximately 2,000 employees.[1]
Business Segments
RPC’s service lines have been aggregated into two reportable oil and gas services business segments: Technical Services and Support Services.
Technical Services
Include RPC’s oil and gas service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer’s well. The demand for these services is generally influenced by customers’ decisions to invest capital toward initiating production in a new oil or natural gas well, improving production flows in an existing formation, or to address well control issues. This business segment consists primarily of pressure pumping, coiled tubing, snubbing, nitrogen, well control, downhole tools, wireline and fishing. The principal markets for this business segment include the United States, including the Gulf of Mexico, mid-continent, southwest, Rocky Mountain, and Appalachian regions, and contract or project work in selected international locations in the last three years including primarily Africa, Canada, China, Eastern Europe, Latin America, the Middle East and New Zealand. Customers include major multi-national and independent oil and gas producers, and selected nationally owned oil companies.
Support Services
Include RPC’s oil and gas service lines that primarily provide equipment for customer use or services to assist customer operations. The equipment and services include drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels. The principal markets for this segment include the United States, including the Gulf of Mexico, mid-continent, Rocky Mountain and Appalachian regions and project work in selected international locations in the last three years including primarily Canada, Latin America and the Middle East. Customers primarily include domestic operations of major multi-national and independent oil and gas producers, and selected nationally owned oil companies.
Financial Analysis
2009 vs 2008
Revenues for 2009 decreased $289.1 million or 33.0 percent compared to 2008. The Technical Services segment revenues for 2009 decreased 31.2 percent from the prior year due primarily to highly competitive pricing coupled with lower equipment utilization. The Support Services segment revenues for 2009 decreased 43.1 percent from the prior year due to decreased customer activity and significantly lower pricing in the rental tool service line, the largest within this segment.
Domestic revenues decreased 36 percent to $543.0 million during 2009 compared to 2008 due to decreased customer activity and competitive pricing in our largest service lines, such as pressure pumping and rental tools. The average price of natural gas decreased by 56 percent and the average price of oil decreased by approximately 38 percent during 2009 compared to the prior year. In conjunction with the decrease in natural gas prices, the average domestic rig count during 2009 was 42 percent lower than in 2008. This decrease in drilling activity had a negative impact on its financial results. RES believes that its activity levels are affected more by the price of natural gas than by the price of oil, because the majority of U.S. domestic drilling activity relates to natural gas, and many of its services are more appropriate for gas wells than oil wells. Foreign revenues, which increased from $30.8 million in 2008 to $44.8 million in 2009, were eight percent of consolidated revenues. These revenue increases were due mainly to higher customer activity levels in New Zealand and Mexico compared to the prior year. Its international revenues are impacted by the timing of project initiation and their ultimate duration.
2008 vs 2007
Revenues for 2008 increased $186.8 million or 27.1 percent compared to 2007. The Technical Services segment revenues for 2008 increased 29.8 percent from the prior year due primarily to a higher drilling rig count and increased capacity driven by higher capital expenditures partially offset by lower pricing for services. The Support Services segment revenues for 2008 increased 13.4 percent from the prior year due to increased capacity driven by higher capital expenditures as well as a more profitable job mix in the rental tool service line, the largest within this segment
Domestic revenues increased 30 percent to $846.2 million during 2008 compared to 2007 due to increased capacity in our largest service lines, such as pressure pumping and rental tools. The average price of natural gas increased by 27 percent and the average price of oil increased by approximately 37 percent during 2008 compared to the prior year. In conjunction with the increase in natural gas prices, the average domestic rig count during 2008 was seven percent higher than in 2007. This increase in drilling activity had a positive impact on its financial results. REP believes that its activity levels are affected more by the price of natural gas than by the price of oil, because the majority of U.S. domestic drilling activity relates to natural gas, and many of its services are more appropriate for gas wells than oil wells. Foreign revenues, which decreased from $41.1 million in 2007 to $30.8 million in 2008, were four percent of consolidated revenues. These revenue decreases were due mainly to lower customer activity levels in Turkmenistan and Hungary compared to the prior year. Its international revenues are impacted by the timing of project initiation and their ultimate duration.
References
2009 REP 10k [2]
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