Despite coming up with better-than-expected first-quarter results, RPC, Inc. (RES - Free Report) has seen a 7.5% decline in share price since May 6. Demand destruction caused by coronavirus-induced lockdowns and travel bans has kept crude prices in the bearish territory, thereby hurting upstream companies. This has reduced demand for oilfield services provided by RPC. The market outlook seems bearish at the moment.
Better-Than-Expected Q1 Results
RPC reported first-quarter 2020 loss of 4 cents, narrower than the Zacks Consensus Estimate of a loss of 6 cents on successful cost-containment efforts. However, the company reported break-even earnings in the year-ago quarter. The weakness can be primarily attributed to lower activity levels and pricing, along with a smaller fleet of pressure pumping equipment.
Total revenues of $243.8 million beat the Zacks Consensus Estimate of $229 million. However, the top line declined from the year-ago figure of $334.7 million.
Operating loss in the Technical Services segment totaled $12.2 million compared with the year-ago loss of $4.5 million. The underperformance was mainly caused by lower pricing and activity levels. A smaller fleet of equipment within pressure pumping also affected the segment.
Operating profit in the Support Services segment came in at $1.5 million, down from $3.1 million in the year-ago quarter.
Total operating loss in the quarter increased to $218.7 million from the year-ago level of $2.2 million. Average domestic rig count was 785 in the first quarter, indicating 24.7% fall from the year-ago level.
Cost and Expenses
Cost of revenues contracted from $252.4 million in first-quarter 2019 to $181.9 million due to lower materials and supplies expenses, as well as employment costs stemming from reduced activity levels. Moreover, selling, general and administrative expenses fell to $36.5 million in the quarter from the year-ago figure of $45.4 million due to a decline in employment expenses. However, the company incurred impairment and other charges of $205.5 million.
RPC’s total capital expenditure in the March quarter of 2020 amounted to $25 million. As of Mar 31, the company had cash and cash equivalents of $82.6 million, higher than the fourth-quarter level of $50 million, and no long-term debt.
Slowdown in U.S. drilling activities and persistent weakness in crude prices have hurt demand for oilfield services. Although the company witnessed a slight improvement in the first quarter and ended the period on a strong note, it is uncertain of how things will turn out in the near term. It now expects 2020 capital expenditures to be $50 million, lower than the previous guidance of $80 million.
Zacks Rank & Other Stocks to Consider
Currently, RPC has a Zacks Rank #2 (Buy). Other top-ranked players in the energy space include EnLink Midstream LLC (ENLC - Free Report) , CNX Resources Corporation (CNX - Free Report) and Comstock Resources, Inc. (CRK - Free Report) , each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
EnLink Midstream’s 2020 earnings per share are expected to rise 97.9% year over year.
CNX Resources beat earnings estimates thrice and met once in the last four quarters, with average positive surprise of 111.5%.
Comstock Resources’ 2020 sales are expected to gain 32.7% year over year.
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