Jim Landers - VP, Corporate Finance Rick Hubbell - President and CEO Ben Palmer - VP and CFO.

James West - Evercore ISI Rob MacKenzie - IBERIA Capital Marc Bianchi - Cowen & Company Chase Mulvehill - SunTrust Klayton Kovac - Tudor, Pickering, Holt Ken Sill - Global Hunter Scott Gruber - Citigroup Waqar Sayed - Goldman Sachs Jim Wicklund - Credit Suisse John Daniel - Simmons & Company.

Good day and welcome to the RPC Incorporations Fourth Quarter 2014 Earnings Conference Call. Today’s conference is being recorded. And at this time I would like to turn the call over to Jim for the disclaimer. Jim go ahead..

Good morning everybody. This is the RPC Earnings Conference Call. We have Rick Hubbell, today, who is our President and CEO and Ben Palmer our Chief Financial Officer. I'm Jim Landers, the Vice President of Corporate Finance.

Before we start our call today, I want to remind you that in order to talk about our Company, we are going to mention a few things that are not historical facts. Some of the statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks.

I’d like to refer you to our press release issued today along with our 2013 10-K and other public filings that outline those risks, all of which can be found on RPC’s Web site at www.rpc.net.

I also need to tell you that in today’s earnings release and perhaps in our conference call, we’ll be referring to EBITDA, which is a non-GAAP measure of operating performance.

RPC uses EBITDA as a measure of operating performance because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. We are also required to use EBITDA to report compliance with financial covenants under our revolving credit facility.

Our press release and our Web site provide a reconciliation of EBITDA to net income, which is the nearest GAAP financial measure. Please review that disclosure if you'd like to see how we calculate it. If you’ve not received the press release and would like one, please visit our Web site at www.rpc.net for a copy.

I will now turn the call over to our President and CEO, Rick Hubbell..

Thanks, Jim. This morning, we issued our earnings press release for RPC’s fourth quarter of 2014. Our revenues, which represented a quarterly record for RPC, increased due to higher activity levels, and service intensity in our major service lines, and a slightly larger fleet of revenue producing equipment.

RPC’s revenue for the quarter, increased 30% compared to the fourth quarter of 2013, and approximately 2% sequentially. The sequential increase occurred in spite of holidays and other seasonal factors typically experienced during this time of year.

Fourth quarter operating profit and net income and EBITDA all improved both sequentially and year-over-year. Quarterly EBITDA represented a record as well. Yesterday the Board of Directors declared a quarterly dividend of $0.105 per share. Earlier this month RPC announced the repurchase of more than 2 million shares of stock during the fourth quarter.

This amount of cash used to repurchase the stock was the most we have invested in any quarter since the inception of the repurchase program 16 years ago. In fact our quarterly repurchase was greater than any annual period in our history.

Our CFO Ben Palmer will now review our financial results in more detail, after which I will have a few comments about the current difficult market conditions..

Thank you Rick. For the fourth quarter, revenues increased to a record $632.2 million, compared to $487 million in the prior year.

These higher revenues resulted primarily from increased service intensity in pressure pumping, coupled with a slightly larger fleet of pressure pumping equipment and increased activity levels in several service lines including quality ph.

EBITDA for the fourth quarter increased by 56.5% to $187 million, compared to $119.4 million for the same period last year. Operating profit for the quarter increased 93.9% to $125 million, compared with $64.5 million in the prior year. Our diluted earnings per share were $0.36 compared to $0.17 in the prior year.

While record revenues during the quarter were driven by a continued increase in activity levels and service intensive work, pressure pumping stage counts and top end volumes per stage continued to increase significantly, a trend that benefited all [indiscernible] results.

Cost of revenues increased from $318.9 million in the fourth quarter of the prior year to $390.5 million in the current year, due primarily to higher activity levels.

Cost of revenue as a percentage of revenues decreased from 65.5% in the prior year to 61.8% due to favorable pressure pumping [indiscernible] and improved supply chain sourcing and logistics. Selling, general and administrative expenses increased from $45.5 million in the fourth quarter in prior year $50.9 million this year.

SG&A expenses as a percentage of revenues decreased from 9.4% last year to 8.1% this year due to leverage of relatively fixed cost over higher revenues. Depreciation and amortization was $61.6 million during the fourth quarter of 2014, an increase of 13.3% compared to $54.3 million in the prior year.

Net loss from disposition of assets increased from $3.7 million in the fourth quarter of the prior year $4.2 million as RPC’s completion work continued to transition from vertical to horizontal wells. Operating profit for the fourth quarter of 2014 was $125 million or 19.8% of revenues, compared to $64.5 million or 13.2% in the prior year.

Our technical services segment revenues for the quarter increased 30.6% compared to the prior year. Operating profit increased 87.3% to $122.5 million or 20.7% of revenues compared to $65.4 million or 14.4% of revenues in the prior year.

Revenues increased primarily due to higher activity levels and operating profit increased primarily due to improved equipment and personnel utilization coupled with SG&A cost leverage. Our fourth quarter support services segment revenues increased 19.6% and operating profit increased 65%, compared to the same period in the prior year.

This improvement was due primarily to higher activity levels and improved mix within the rental tool service line, as well as higher activity levels in the other service lines which comprised this segment. On a sequential basis, RPC’s fourth quarter revenues increased to $632.2 million from $620.7 million in the third quarter.

Cost of revenues decreased from $398.3 million to $390.5 million due to improved job mix and better material sourcing and logistics. Cost of revenues as a percentage of revenues decreased from 64.2% in the third quarter to 61.8% in the fourth quarter.

SG&A expenses as a percentage of revenues were essentially unchanged from 8.2% in the prior quarter to 8.1% in the quarter before. RPC’s operating margin improved from 17.2% of revenues in the third quarter to 19.8% of revenues in the fourth quarter.

RPC’s effective tax rate decreased slightly to 37.8% compared to 38.6% in the prior year -- prior quarter. RPC’s sequential EBITDA increased to $187 million in the fourth quarter from $163.4 million, while the EBITDA margin increased to 29.6% from 26.3%.

Our technical services segment generated revenues of $592.2 million, 2.6% higher than revenues of $576.6 million in the prior quarter. Operating profit was $122.5 million compared to $102.9 million. Our operating margin in this segment increased to 20.7% of revenues from 17.8%.

Revenues increased primarily due to higher activity levels in the service lines within this segment and operating profit margin increased due to favorable job mix and improved supply chain sourcing and logistics. Revenues in our support services segment declined 8.6% due to decreased activity in rental tools.

Support services operating profit decreased $11.3 million in the fourth quarter compared to $14.7 million. Our operating margin in this segment was 28.3% in the fourth quarter, compared to 33.7%. RPC’s pressure pumping fleet increased by 47,000 hydraulic horsepower during the quarter to 798,000.

Most of this equipment went to work in the Eagle Ford Shale and in the Permian Basin. Fourth quarter 2014 capital expenditures were $134 million. A large percentage of these capital expenditures were directed towards our pressure pumping service line.

RPC’s full year 2015 capital expenditures are currently projected to be approximately $200 million, of which $70 million relates to completing our pressure pumping expansion. The majority of the remainder will be directed towards maintenance capital expenditures. By the end of the first quarter of 2015, our total available horsepower will be 920,000.

RPC’s outstanding debt under its credit facility at December 31, 2014 was $224.5 million, an increase of $72.5 million compared to the end of the third quarter. This increase was due primarily to capital expenditures and working capital requirements associated with higher activity levels. Our ratio of debt to total capitalization was 17.2%.

With that, I’ll now turn it back over to Rick for some closing remarks..

Thanks Ben. As we begin 2015, we are experiencing another industry downturn, the severity and duration of which are not yet known. RPC’s financial results in the coming months will be negatively impacted by the combination of lower pricing and lower activity levels.

We are always prepared for these potential downturns by maintaining a strong financial position and having contingency plans. Currently we are in the process of reducing expenses and scrutinizing whole capital expenditures.

However, we will continue to invest in our existing equipment and other critical business processes to maintain a high level of service to our customers. RPC has a diversified customer base and we think the majority of our customers are financially strong enough to whether this difficult period.

I would like to thank you for joining us for RPCs conference call this morning. And at this time we will open up the lines to answer any questions you may have..

Thank you. (Operator Instructions). We’re now going to take our first question from James West, company Evercore ISI. Please go ahead. Your line is open..

Rick, so I know your customers are asking for pricing concessions.

What’s the magnitude of the concessions that we’re seeking right now and what are they achieving?.

We've heard everything from 20% to 25% and we are negotiating something less then to reexamine it in a month or so..

Okay.

And then how are you guys positioned from a backlog standpoint right now? How much of your equipment is locked up for next few quarters?.

James this is Jim. Backlog is not a word that we’re using right now. Utilization and order commitments are very fluid at this point. In December we had visibility through February. Now in January we have much less visibility. So it is extremely hard to say but utilization is lot lower in first quarter than it was in fourth quarter.

And that’s honestly all we know..

A lot of discussions with customers taking place right now, coordinating with them and planning, what their plans are and what their expectations are and what our expectations are. So that’s a lot of what’s going on right now. And so as Jim said it’s very cool..

We’re now going to take our next question from Rob MacKenzie, Company IBERIA Capital. Please go ahead your line is open..

So I guess my question kind of builds on James' a little bit. As operators seek to reduce their well costs, clearly pricing is a component. But what about job redesign? We’ve been hearing from a number of folks that we’re seeing big slick water jobs, site down into hybrid jobs, cutting same concentrations.

Are you seeing much of that in terms of -- as operators try and cut their well costs?.

Rob. This is Jim. We now have some input here, but yes. And thanks for the question, when customers say they want price concessions, price cuts, we come back and say well you’re looking for cost reductions and there are other things in our price book.

And so results of this in the fourth quarter in fact you can see in the income statement we began using different job designs, different kinds of proppant, cheaper proppant, we got people and in cooperation with our customers we’re able to use some cheaper proppant which is helpful.

I think at this point we haven’t yet seen less proppant per stage, although some of our peers have talked around that. So that maybe a trend that you see in 2015. But in general job design has helped our customers achieve some cost reductions and keep looking..

And any guidance you can give us? We’ve had a slew of E&P budget cuts announced, including some from some of your larger customers.

How do you guys think about your existing fleets going idle and potentially how you find new homes for them?.

Well, that's a great question. I stated earlier there is lots of discussions going on right now and lot of people are hustling and fleets will be moving. There will be a lot of volatility going forward but quite honestly it’s a little bit early to predict where it’s going to be and exactly what’s going to happen. But I think that will be the case.

There will be fleets moving around between customers and being idle for some period of time and just working to keep them as busy as we can. Reasonable question, but difficult to say at this point in time..

Fortunately or unfortunately we have seen these cycles in the past, and so we are well equipped to handle them..

And Jim if you wouldn’t mind, could you give us the revenue breakdown as sub segments of [indiscernible] services..

Sure, absolutely. This is fourth quarter, and the percentages I'm about to give are percentages of RPCs consolidated revenue, not by our segments. The largest segment is pressure pumping or [indiscernible] service line, pressure pumping at about 57% of revenue. Second is ThruTubing solutions, which is our downhole motors and tools service line.

That’s about 15.5%, coil tubing a little over 9%, rental tools about 4%, nitrogen was similar, 4% as a percentage of total. .

We are now going to take our next question from Marc Bianchi, Cowen & Company. Please go ahead, your line is open..

I was hoping we could talk through the margin progression.

I know visibility isn’t great, but just sort of thinking about the moving parts and what you’re trying to do on the cost management side? How should we think about the decrements to margins here for $1 revenue decline as we start to decline in the first quarter, maybe relative to prior periods or any help you can offer?.

Marc this is Jim, great question. We are trying to look at this downturn and trying to compare it to ‘08-‘09 or ‘01-‘02. As Rick says we've been [indiscernible] for a long time. It’s hard to offer much guidance. A positive about RPC’s metrics are that SG&A is now a much lower percentage of our revenue than it has been in the past.

So there’s that positive. But of course the main thing has to do with utilization pricing. Pricing is clearly going to decline. We have -- some expenses are going to decline naturally, but will focus they’ll decline a lot better.

And so I'm talking about things like over time for labor, proppant and our long running discussion, we believe the price of proppant is going to decline. We’re going to continue to say that the price of [indiscernible] had declined and probably will continue to.

Diesel fuel, it goes without saying, the price of diesel fuel is falling [indiscernible] and its happening and we use a lot of diesel fuel. We also bill our customers for diesel fuel. So that helps as well.

One question is the nature of this downturn is the work that remains for everyone going to be more service intensive and there are probably some puts and takes on that one as well. But margin decrements are going to be maybe similar to ‘08-‘09 although, we sort of lost money in ‘09, but we had an outflow SG&A as a percentage of revenue.

So that’s kind of what we’re modeling at this point and we should get more specifics early..

Sure, yet it’s tough to have a lot of visibility with the pricing discussion being so fluid. Maybe just -- thinking through the other businesses, besides pressure pumping, we get a lot of commentary about pressure pumping, but here it’s only 57% of your business.

Can you talk about the other business lines and how those maybe behave differently than pressure pumping as your customers curtail your activity from both a revenue and margin perspective?.

Sure, sure. Yes and it’s slightly helpful. It's certainly something that we look at and think about internally. We’ve seen our rental tool service line be impacted first by this downturn and then maybe sand [ph] starting, since that’s drilling related.

Pressure pumping is coming next as completions slowdown and then declines in our coiled tubing and ThruTubing service lines are probably trailing the pressure pumping decline because it clearly fit in the well's lifecycle. We had a good fourth quarter in coiled tubing, as customers work to have wells completed and that’s carrying over into 2015.

So nothing is insulated from this downturn, but there is some progression through the cycle, but I think some of these service lines behave a bit differently..

Is there any argument that the margins for those businesses should be less volatile than pressure pumping or would they be pretty similar?.

Pretty similar with the exception of rental tools. Rental tools is a high fixed cost low variable cost business. So those margins could actually decline a bit more. The others have a high variable cost component, but again margin declines are coming in all these service lines..

We’re now taking our next question from Chase Mulvehill from the company SunTrust. Please go ahead..

A quick question on sand prices.

What are you seeing for leading edge pricing for sand?.

Chase this is Jim, I’ll try to answer that question best we can. There’s so many different kinds of sand and variables that go on and we follow those caveats in mind and everyone on this call understands. We saw our cost for raw -- for natural sand decline about 5% in the fourth quarter compared to the third quarter.

Based on indication that we have including from our own internal sourcing we think those declines are going to continue. So we’re going to see sequential declines of mid-single digits in the first quarter. I think that’s very reasonable. I don’t know if it will be more than that or not, but I think that’s a reasonable way to look at it. .

And we all know there’s a lot of different components for the cost of the sand that ultimately delivered to the region where the work is being performed and ultimately to the well site.

With fuel prices coming down hopefully we will have -- be able to realize the benefit of lower fuel surcharges from the rails that hasn’t happened yet but hopefully that will be coming and also on the trucking side as well, and all that’s very difficult to formulate exactly but we're working on and trying to realize those benefits as soon as we can.

.

Okay, so the 20% to 25% price reduction that your customers are going for, that includes consumables, right? You're just basically talking a dollar per stage if we're thinking about completions?.

Yes that goes into the matrix. That's right. .

Okay. And so one more quick follow-up.

How much of your fourth quarter horsepower was doing horizontal completions versus vertical? And what is required to increase -- other than increasing the horsepower to convert more fleets to horizontal from vertical?.

Let's see. 24 hour work was in the 45% range for fourth quarter. I know that’s not answering your question, but is an answer. In terms of horizontal versus vertical, it was probably and this is a guess. We don’t have it in front of us. But probably 70% of our work was unconventional during the fourth quarter.

I think in general Chase, the idea is that if you are doing unconventional work, the fleet size itself does not have to be bigger because it’s on site longer. That's effectively increasing the utilization requirements. .

And we are taking our next question from John Daniel. The company is Simmons & Company. Please go ahead, your line is open. .

I understand you're reluctance to not give financial guidance. I'm going to try to get some out of you anyways. Most people are modeling something like rig count down call it 15% in Q1 in that vicinity. You noted that Q1 utilization is already a lot lower.

Assuming that rig count expectation is reasonable and given your commend on utilization as well as pricing, I know the concession requests 20% to 25% but let’s say you meet them half way, would you expect your revenues from the technical services to be down in excess of 25% in Q1?.

Not in access of 25% John, but 20% is very, very possible. .

We exit at that level but I think we will be better off than [indiscernible] for the fourth [ph] quarter. .

And then as we think not the pricing, the timing of pricing concessions being implemented, it feels like it's going to be a more dramatic impact on your Q2 results than Q1.

Is that a safe assumption?.

That's probably what we're assuming but it's difficult..

I understand. Yet based off what you see today. .

Right now with customers in the field conversations are going late into the night with our people trying to help them keep working while still maintaining our profitability and returns or preserving to the extent that we can. So it’s a very dynamic situation. And pricing is declining in the first quarter, no doubt about it, as well as utilization.

Utilization is going -- it seems to be going first. There's some customers who are saying we want to wait and see what the bottom looks like before we back to work. It doesn’t mean we are not going to work at $46 oil. We just want to see where bottoms out for us. So utilization is a larger driver perhaps first quarter. That's the way it looks right now..

Just two quick ones and then I will jump back in the queue. First, what are you seeing right now in terms of customers deferring well completions? And then second, following on Jason's line of questions, what’s your expectation for total sand volumes pumped in Q1 versus Q4.

Do you see your sand volumes pumped being lower, sort of what I'm driving that? And that’s it for me. .

In Q4 we saw a lot of completions and some of our -- a lot of completion work and some of the reports from the field were people realizing they're getting a slowdown. So they want to do all the work they can do in fourth quarter. I think that’s one reason the holiday impact was not as pronounced as one would expect. .

You're asking about the volume of sand per stage. Well I think it's certainly the volume of sand we're going to pump in the first quarter is going to be less..

I am sorry. The well completion question Jim was just our people in Q1 -- are jobs been pulled off before.

Are you seeing the signs that people are deferring to completions in the Permian?.

So it’s not a drill but not completed question. .

Sorry about that..

Yes, I think that’s fair. .

We are now taking our next question from Klayton Kovac, company Tudor, Pickering, Holt. Please go ahead. Your line is open. .

So you guys delivered the 47,000 over 170 new horsepower in Q4. Should we expect that estimate to be delivered in Q1 here or is this going to be kind of slowly delivered and what’s the likelihood of going to work -- just go straight to the yard or try to work out..

Well we indicated that we’re seeing the remainder of the equipment during the fourth quarter. So that will be at the 920,000 horsepower by the end of the first quarter. And with respect to whether we think incremental equipment will go to work, that’s hard to say at this point in time.

Obviously we’re working hard to keep all or as much as our equipment working as possible. But at this very time there is not a lot of indication like we were able to successfully put the new equipment that we received in the fourth quarter. We’re just in a different environment at this point in time.

So unfortunately I don’t have a lot of guidance for it..

Understood. Then just on the loss this quarter.

So it wasn’t as big as Q3 but what comprised that? Was it similar issue? Was it fluidounce?.

Yes just the lower volume. Third quarter was just particularly larger. Fourth quarter was slightly smaller and that’s why the number was a bit smaller. And going into the next year just it will depend on the level of activity and the intensity that we experienced..

And third quarter we suffered through a really bad job design and job mix and that job mix has changed. We’re not doing the kind of work anymore that caused such difficulty in third quarter..

We’re now taking our next question from Ken Sill, Company Global Hunter. Please go ahead..

There's some question several time in this kind of environment. First of all do you have an opinion on where activity might hold up better in this of a price environment for oil on the vertical versus horizontal? I know on Permian the vertical has just kind of gone on and on and one and the horizontal has grown.

But do you guys see which one would be likely to hold up better in this kind of commodity price environment?.

Reasonable question. I’d say there are a lot of things that go into the economics of wells including the acreage cost and things like that. But to answer your question, I'm not sure..

You could argue it either way. We won’t try to argue it either way. One idea there was that if customers are going to go through all the work -- if a well-capitalized customer wants to do, it’s going to get through all the work to drill and complete a well. It might as well be a good long-term productive one.

So that says that there might be more unconventional work going on. And you didn’t ask this question, but during times like this when there is not drilling going on, there might be some good re-fracking, re-simulation in places like the Permian.

That’s how we got started in that basin 15 years ago before all this advent of unconventional pressure pumping, and that can be a good solution for a customer even at $50 oil $46 oil. But we don’t have any empirical data right now on which is going to hold up better or which is going to decline by less. So sorry, we [indiscernible]..

That means you’re pulling out a loan on that but I was curious as to what you've seen. And that leads to another question. So you brought up the point that if you're going to go ahead and drill and complete a well, you might do as good a well as you can, given the upfront cost.

So what we’ve seen historically going on in the Marcellus and Utica and the gas downturn was actually frac stages, you started downsizing, you started doing more frac stages per well, not less, because you already have the well, in which you could improve productivity.

Have you seen any change before this downturn in terms of number of frac stages per well and are customers talking about doing this reduced cluster spacing in the Permian like they’ve done for the northeast..

Previous to the downturn, yes. We’ve seen a lot of reduced cluster spacing and more service intensity, more proppant per stage. And I'm not a technical expert but the ideas that the customers have diagnostics now that let them see better areas in the rock.

So instead of doing a 200 or 300 foot spacing just uniformly across the completion they can see where it’s better or not as good. And if they have confidence that they in a better section of the rock when they’re doing a frac, they’re going to invest more in it. That means more proppant.

So that is definitely a trend that we’ve seen particularly in the Permian Basin. But that’s prior to the down turn. So again I don’t have any empirical data right now as how to that’s going to look in the coming six months or so..

We’re kind of working on uncharted territory with [indiscernible] on this.

So my last question, given the fixed cost structure, obviously the highest margin work you can do is the 24 hour work, but conversely that’s the place where if you convince your customer to do it, you can get more better price because of the absorption you get out of utilization.

So if there are change in -- it’s kind of early, but have you seen a change in the kind of customers that are actually really continuing to spend? And would that lead to you think more 24 hour work as a percentage of what’s going on or less?.

Great question. Important question. We’ve just done a whole lot of reviews with our agents and nothing emerged as an answer to that..

Great question. Reasonable question, but things are moving very quickly and we’ll get further updates in the coming weeks but at this point we don’t really have any more color on that. Sorry..

We now are taking our next question from Scott Gruber, company Citigroup. Please go ahead..

I know we talked a lot about cost, but just trying to get a better understanding of how the total cost face could move as some of the other components to fleet.

Can you provide a rough breakdown of how the cost split between pumping for you -- between the major components like proppant, chemicals, labor, et cetera?.

Scott, yes this is Jim. Happy to talk about that. Our largest single direct cost component in pressure pumping is what we call materials and supplies. That's sand, guar, ceramic proppant, acid, many of the things you can think of and that’s probably -- I need your estimates here, but 35% to 45% of the total cost.

The second largest one is labor, which is about half of that materials and supplies cost. Then after that pretty evenly split is fuel and other associated vehicle cost and then maintenance and repair. And so when we talk about cost reductions, we talked a lot about proppant and there are couple of ways that you reduce cost there.

One is the cost of the proppant goes down, the other is that you have a different job design. On payroll related -- or payroll kinds of things, the royalty [ph] workforce is geared to work on overtime. It’s an overtime workforce. So as volume declines, that marginal hour of labor that goes down is an overtime, hour time and a half.

So that’s one thing you get. I think we moved earlier to diesel fuel going down. So there’s a cost component there that goes down as well. But the biggest lever to push is materials and supplies and labor for pressure pumping..

And how will you address the ability to eliminate some of the non-productive time in the pumping workflow? Is this something you can attract in earnest during the slowdown? And how much faster you think you can possibly do a frac, if you’re going to have success?.

Continue to be more efficient when you’re busy. Rick alluded to this, but our maintenance program and everything, we are known for a reliable fleet of equipment. So one way to get a frac done quickly is to not have equipment failures and the associated downtimes. So that’s one thing.

The rest of that, I guess we and rest of the industry are constantly trying to look at continuations of equipment and workforce and logistics management. I guess logistics might be one the bigger ones..

I think those changes take time, and I think as Jim said that’s true [indiscernible] when we’re really busy.

So I think on the flip side of that I think we’re going to have to work hard to make sure that we remain efficient and not rely on the fact that we have maybe extra time to complete particular jobs and make sure that we’re pushing ourselves and remain as efficient as possible.

It helps us and helps the customer and we need to keep pushing on lid on that..

So it sounds like overall the -- you’ll continue to push on efficiency with probably marginal gains in here rather than anything step function type changes in the future..

That’s true. I think that’s a correct statement..

Yes Scott. That’s right..

We’re now taking our next question from Waqar Sayed from the company Goldman Sachs. Please go ahead..

Couple of questions here.

First of all in terms of margins between vertical wells and horizontal wells, could you give us a breakdown, how do they compare for you guys when you’re doing work on vertical versus horizontal?.

Waqar, this is Jim. In general margins, meaning the operating margin, little number by the big number are higher on unconventional work. You're just on site longer, Equipment utilization is higher and it's just a correlation but proppant per stage is a lot higher. So definitely better margins on horizontal unconventional work. .

And then secondly on your DD&A, could you give us a breakdown between technical services and support services?.

We have a follow-up later on today perhaps we might get to you then..

Okay, no problem that’s fine.

Could you also describe how much ceramics did you use or what proportion of your proppant was ceramics and how did that compare to third quarter volumes?.

Sure. During the fourth quarter, and I don’t know -- we always disclose this in really precise numbers, but during the fourth quarter ceramic proppant usage declined in terms of volume compared to third quarter, and it declined by not a whole lot but it's small percentage of our total proppant usage anyway.

So it declined by maybe 50 or 100 basis points, but that’s on a small number. .

So is only 5% to 10% of your proppant use is ceramic right now, 5% or so?.

Yes. The lower end of that range. That’s right. .

We are now taking our next question from David [indiscernible] company JMP Securities. Please go ahead. .

Just wanted to follow-up on an earlier question. Looking at 1Q, you guys have given a roughly 20% down range for revenue technical services.

I just want to clarify, that actual revenue is inclusive of 120,000 horsepower coming online or is that a pricing target we're talking about?.

That is revenue. .

Okay. And then just a follow-up, 4Q margins of technical services came in certainly better than expected and probably better than most did.

How much of that was just better utilization and some pricing that you guys got in 3Q and how much of that was a loosening of the supply chain by potentially more sustainable, as you move through ’15 in that environment?.

I think more of ladder -- I think it was more materials cost and logistics. I think it was more just sort being able to work through some vendor negotiations and things like that. So I think there is that opportunity to preserve that somewhat. But again that a huge needle pusher, having [indiscernible] or margin improve and think it will.

I'm sure it’s going to difficult for that to specifically show up in the numbers. Obviously there is again a lot of moving parts going forward, but I think we put some things in place that I think we can preserve some of those benefits going forward, to answer your questions. .

Sounds good.

And as you guys talk to your vendors, is everyone pretty much on board with the fact that everyone is going to have to give up some pricing in this downturn or there is still some hold out who think that their somewhat immune to this?.

David, if you look at the chronology so far, this downturn officially started on Thanksgiving Day and then everybody waited for a December. And so it’s sort of -- let's call it a rolling awareness and I just invented that term. I feel like some people -- some groups of people knew it earlier.

I feel like definitely some of the suppliers, some of our good friends in the proppant business probably are coming to that realization a little bit later than those of us who are talking to customers every day. .

We are taking our next question from [indiscernible], company Credit Suisse. Please go ahead. .

Jim Wicklund here sorry. One very general question if I could ask. In terms of the whole drilling and completion operation, because you guys are in a position everything that's done, what are the two or three things in drilling and completion overall that we will see the most pricing pressure? Industry question, not RPC. .

We've seen historically and I'm sure it will continue, with pressure pumping being the largest component of the cost, it will get a focus and a lot of attention. I think that’s probably number one.

And then I think then the other completion services, quarter being and some of the other specialty services around is probably up there on the top as well and I think just dollars are the things that people are going to focus on the most. Whether that’s the one that can get the most concessions or that’s the one that our customers really focus on.

I don’t know if that would be….

Couple of land rigs.

Would land rigs be on your list and close to the top?.

We’re not in that business Jim. I'd just be repeating rumors that land rig [indiscernible] are going to be. Service rigs, we always hear would get hurt a lot. Again I hate to even say that because we’re not in that business..

The lack of visibility across the Broad, you guys and all the companies that reported is really stunning. Everybody is saying they’re taking one quarter at a time. But that sounds much more ominous to me than optimistic.

Do you guys think investors understand how ugly and how long this could last? You're talking about some people just coming around to the industry.

Do you think investors understand how ugly this is going to be?.

You asked about ugly and long. Nobody knows how long it’s going to last. The last downturn lasted 39 weeks and we are 16 weeks into a downturn. So are we close to half way to the bottom? Don’t know. It kind of looks that way..

And what’s amazing, again we’re coming off of, in many ways a record fourth quarter and of course we know our stock price, which is what investors determine is down significantly and was during the fourth quarter when we were having a record fourth quarter.

So whether investors figured that out -- obviously there is a lot of discussion about people kind of price based on asset values and things like that. Obviously we don’t make calls -- directly on calls like this talk about whether we think our stock's undervalued or overvalued, but stock prices have pulled back tremendously..

So you think this is going to be closer to ’08 and ’09 than the 1980s, right?.

Well we sure hope so..

No kidding. But I'm just curious to know, when we went into the ’08, ’09 downturn, where the retail down 50 some odd percent, the company’s weren’t nearly as reluctant to give guidance or outlook, or they seemed much more confident in where it was going. This time they just complete abject -- we have no clue. It concerns me. That’s my only question.

And if this is going to be not nearly as bad as I think, that’s great. But I keep listening to people who were sitting there with pocket full of money ready to jump into this business, it's gotten so ugly, and I just -- the picture you guys are painting, it’s not terribly positive..

Well I think some of it is. Today I think there is a lot of information available. People know more about what other companies are doing. Competitors have lot more data available. There is lot more sophistication and discussions. So I think all of those things are positive.

I think, in general the industry has been more disciplined in terms of its addition to equipment and things like that, certainly in the mid-80s it was $200 oil. [indiscernible] back then but it was $200 oil people were talking about, not being able to maintain $100 oil. So it was just absolutely crazy back then. So like Rick said, and we said.

So we’re hoping it's more like ’08 and ’09. If I had that debt, I think that’s what I would say. But we are also trying to prepare for the worst where we’re all internally talking about and certainly concerned about the current environment, and we’re getting geared up and competitive and ready to take it on.

We don’t view it as we’re not [indiscernible]. We’re going to get after and focus on what needs to be focused on. And we know at some point it will come back. So we’re just preparing for the worst..

[Indiscernible].

Some of us remember the 80s, and I hate that, it was terrible ’86 and ’87. It was just terrible, terrible times but I think we’re better prepared for it today than we were then..

And I think the well answer is….

And you were an engineer at Shell back then I think no reserves. One thing, the institutional investors that we talk to everyday and who are also your clients I guess, or I know, they don’t think this is ’80s, so they also think they’re not in a hurry to buy either -- to put money to work here. So that’s a pretty common theme among people we talk to.

We know this is coming back but we don’t know when and we don’t have to make it today to get answer [indiscernible]. Downturns are always unexpected and we always think every three years there is a downturn it only happens every 20 years it seems like.

This time people might be ignoring the fact the we’re not that out of balance on the world supply demand picture. We're what, 2% or 3% oversupplied. That seems like a strange reason for oil to [indiscernible]..

It’s the growth in the production not the absolute balance but the second derivative growth of our production growth..

We’re now going to take our next question from Chase Mulvehill from the company SunTrust..

Just a quick follow up, and probably I guess kind of following up on Wicklund's bearish various outlook.

If we kind of roll forward to the fourth quarter and we're still in this $50 oil price environment, how does RPC’s strategy change on a go forward basis?.

Well Chase, if we are in the position -- if fourth quarter looks a lot like what we’re talking about first quarter looking like today, a lot of our aggressively capitalized competitors are going to be out of business and their equipment will succumb to the cutting torch.

So the supply-demand dynamic for our equipment and our services will be different. So we’ve got a balance sheet. We may be looking at strategic opportunities, that kind of thing. We’ll certainly keep an eye on the commodities markets.

If fourth quarter is bad because natural gas is at $1.50 and oil is at $1.40 then who knows at that point, but like Rick says, we’ve seen a whole lot of these cycles, including our operations guys. Many crewmen spend their entire careers in the oil field.

So we do what we can when times are difficult, but we always try to be prepared for the upswing, which will come and we continue to maintain our equipment. We keep talking about that theme and it would take a lot to give us a change, that strategy of maintaining our equipment and trying to be the best service provider we can be..

Along those lines, is there anything absolute [ph] in your tool chest that you would potentially add in the downturn or would you look at international moving thing or doing something international, or are you just going to stick with kind of the bread and butter pumping and ThruTubing, coiled tubing, things like that?.

I think at this point, in in past cycles we’ve always said this will be a great opportunity to build time to a good acquisition target, but we always have seen that has seemed to happen in the past. The targets, if they’re going bankrupt, usually they’re bankrupt for a reason and may not be something that we’re interested in.

If they’re a well-run company they’re going to say well I remember how well I was able to do six, nine months ago and I want to be paid on that basis and we’re generally not interested in that kind of situation. But we’re always looking and prepared if the right opportunity comes along.

But to answer your question specifically, there’s nothing in particular that we’re looking for at this point in time.

As things are progressing right now, again we’re focused on hunkering down and reevaluating ourselves and repositioning our business to move forward with what we have, but as opportunities perhaps come along, we’ll certainly take a look at it and we’re not afraid of doing that and certainly expect we’ll have the capacity -- borrowing capacity otherwise to effect a transaction that really makes sense for us..

And all we know in the past, every downturn when it's ended and we’ve come back, we’ve always come back stronger..

And we’re taking our next question from John Daniel, company Simmons & Company. Please go ahead..

Jim first, can you give us color on Q1 depreciation, given the big CapEx in Q4 and what’s likely a big slide in Q1?.

Sure. It's probably in the $65 million to $70 million range for D&A..

Would it then start to decline as you get to end of the year, just as the CapEx?.

Gradually, but yes. We’ve got the sweet spot of diversify our equipment coming and then we’re thinking about maintenance capital expenditure through just the rest of the year and you know the age of our fleet. So there’s going to be some depreciation regarding all..

In the relation to your comment about continuing on with the maintenance programs, if I’m not mistaken I think you guys had planned on rebuilding something like 50 pumps in 2014.

Did that trend [ph] be right the number and if so what would be an expectation for pump rebuilds this year?.

That's a good question. I think for ‘14 yes, we were close to that target and for ‘15 that’s something we’ll reevaluate. We’re certainly not going to stop those rebuild programs.

Certainly [indiscernible] we’re not going to accelerate it, but it may slow down a bit because if there’s not much activity, there won’t be as many pumps in the near-term that become available that may be called based on our criteria to go through the process.

So I expect it will trend down from what we were thinking just a few weeks, certainly months ago but there’s no expectation or discussion right now of postponing that activity..

And so you won’t take the call it 110,000 horsepower that’s coming in Q1 to swap out the older stuff or in the short-term could you do that to watch costs?.

We could, but that’s certainly not something we’re talking about strategically..

That’s fine. Okay. And then last one from me, in the U.S. we have cash from working capital here in Q1 and Q2.

At this point is it an expectation to pay down the revolver or would you be willing allocate more capital to share repurchases?.

Yes. Bits of both..

We are taking our next question from Ken Sill, company Global Hunter. Please go ahead. .

Thanks for let me back in. That brings up one question.

How much you have left on the share repurchase authorization?.

Its little over 2 million shares currently, but our taxes are [indiscernible] increase that maybe. .

Okay, and then on the maintenance CapEx, I know on last quarter’s conference call there was talk of kind of evaluating and this was -- and it's a struggle, right. Fluid ends, if you are run in your fleet, you can replace two or three of those a year.

So are those still going into maintenance CapEx? And have you seen any change in the price or expected life of those as you move through 2014?.

As we move through ’14 or into ’15?.

Through now. .

Good question. Actually, we're still evaluating. I think we're on the line about whether we continue to capitalize those as maintenance capital expenditures or whether we expense those. I think whether we do or not, in 2015 I don’t think we will have a big impact. It certainly can change the geography on the income statement.

That will have a dramatic impact on our results. And with respect to are we seeing any improvement, it’s something that we are looking at and focusing on. We are looking at some different fluid ends, looking at maybe some other configurations that might improve things but there is no [indiscernible] at this point in time..

Just doing pump rate, we have seen some improvement in some of the bad proppants not being pumped as much. So…..

Right. So we're doing everything we can..

(Operator Instructions)..

We have heard that we are about out of people asking questions. So if there is nothing further, I don’t think there is. Operator, we'll just go ahead and close now if we can. .

I don’t have further question, would you like to add any closing remarks?.

Well we appreciate everybody calling in today. It’s good to speak to everyone. We appreciate your interest. We look forward to seeing everybody soon. And take care. Have a good day. .

That will conclude today’s conference call. Thank you for your participation. Ladies and gentlemen you may now disconnect..