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RPC Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 6, 2010 03:32PM
RPC Inc. (RES) filed Quarterly Report for the period ended 2010-06-30.
Highlight of Business Operations:
Income before income taxes increased to $51.3 million for the three months ended June 30, 2010 compared to a loss of $19.4 million in the same period of 2009 primarily because of higher revenues. The effective tax rate for the three months ended June 30, 2010 was 38.4 percent compared to 40.0 percent in the same period of the prior year. Diluted earnings per share increased to $0.32 for the three months ended June 30, 2010 compared to diluted loss per share of $0.12 in the same period of 2009. Cash flows from operating activities were $47.8 million for the three months ended June 30, 2010 compared to $103.5 million in the same period of 2009 due to increased working capital requirements consistent with higher revenues and business activity levels. The notes payable to banks declined to $100.9 million as of June 30, 2010 compared to $123.6 million as of June 30, 2009.
Capital expenditures were $56.8 million during the first six months of 2010. We currently expect capital expenditures to be approximately $210 million during full year 2010. Our capital expenditures for the remainder of 2010 will be directed towards growth opportunities, as well as capitalized maintenance costs, and equipment related to specific projects in which we have a contract with a customer.
Drilling activity in the U.S. domestic oilfields, as measured by the rotary drilling rig count, had been gradually increasing since about 2003 when rig count was just over 800 through the latter half of 2008 when the U.S. rig count peaked at 2,031 during the third quarter. The global recession that began in the fourth quarter of 2007 precipitated the steepest annualized decline in U.S. domestic oilfield history. From the third quarter of 2008 to the second quarter of 2009, the U.S. domestic rig count dropped almost 57 percent, reaching a trough of 876 in June 2009. Since June 2009, the rig count has increased by 81 percent to 1,585 early in the third quarter of 2010. The outlook for U.S. domestic oilfield activity remains positive for the remainder of 2010. The price of oil fell by 77 percent from $147 per barrel in the third quarter of 2008 to $34 early in 2009. Since that time, the price of oil has increased by over 100 percent to approximately $79 per barrel in the third quarter of 2010. The price of natural gas fell by 85 percent from approximately $13 per Mcf in the second quarter of 2008 to slightly below $2 per Mcf in the third quarter of 2009. Since that time, the price of natural gas has increased to almost $5 per Mcf early in the third quarter of 2010.
Interest expense and interest income. Interest expense was $502 thousand for the three months ended June 30, 2010 compared to $527 thousand for the quarter ended June 30, 2009. The decrease in 2010 is due to a lower average balance on our revolving credit facility, net of interest capitalized on equipment and facilities under construction. Interest income was $9 thousand for the three months ended June 30, 2010 and $52 thousand for the three months ended June 30, 2009.
Interest expense and interest income. Interest expense was $1.0 million for the six months ended June 30, 2010 compared to $1.1 million for the same period in the prior year. The decrease in 2010 is due to a lower average balance on our revolving line of credit, net of interest capitalized on equipment and facilities under construction. Interest income was $32 thousand for the six months ended June 30, 2010 and $85 thousand for the six months ended June 30, 2009.
The Company s financial condition as of June 30, 2010 remains strong. We believe the liquidity provided by our existing cash and cash equivalents, our overall strong capitalization, cash expected to be generated from operations and proceeds from a refinanced and expanded credit facility that we believe will be in place by the end of the third quarter will provide sufficient capital to meet our requirements for at least the next twelve months. The Company currently has a $200 million revolving credit facility (the “Revolving Credit Agreement”) that matures in September 2011. The Revolving Credit Agreement contains customary terms and conditions, including certain financial covenants including covenants restricting RPC s ability to incur liens or merge or consolidate with another entity. Our outstanding borrowings were $100.9 million at June 30, 2010 and approximately $17.6 million of the credit facility supports outstanding letters of credit relating to self-insurance programs or contract bids. A total of $81.5 million was available under our facility as of June 30, 2010. Additional information regarding our Revolving Credit Agreement is included in Note 10 to our Consolidated Financial Statements included in this report. The Company expects to refinance and increase the size of our credit facility.