James C. Landers - Vice President Finance and Investor Relations Richard A. Hubbell - President and Chief Executive Officer Ben M. Palmer - Vice President, Chief Financial Officer and Treasurer.

James Wicklund - Credit Suisse Chase Mulvehill - Wolfe Research Marc Bianchi - Cowen Securities James West - Evercore ISI Ole Slorer - Morgan Stanley Research Rob MacKenzie - Iberia Capital Ken Sill - SunTrust John Daniel - Simmons & Company Praveen Narra - Raymond James Michael LaMotte - Guggenheim Matthew Johnston - Nomura Mark Brown - Seaport Global Securities Andrew Cosgrove - Bloomberg Intelligence.

Good morning, and thank you for joining us for RPC Inc.'s Fourth Quarter 2016 Financial Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO; and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Finance. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to advise everyone that this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer..

Thank you, and good morning. Before we begin our call today, I want to remind you that in order to talk about our company, we're 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 2015 10-K, and other public filings that outline those risks all of which can be found on RPC's website, at www.rpc.net. In today's earnings release and 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're also required to use EBITDA to report compliance with financial covenants under our credit facility.

Our press release today and our website provide a reconciliation of EBITDA to net income, the nearest GAAP financial measure. Please review that disclosure, if you're interested in seeing how it's calculated. If you've not received our press release for any reason and would like one, please visit our website at www.rpc.net for a copy.

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

Thank you, Jim. This morning, we issued our earnings press release for RPC's fourth quarter of 2016. While 2016 was a historically bad year, we saw continued signs of industry improvement during the fourth quarter. RPC achieved improved financial results due to increasing activity and slightly pricing.

We benefited from our well maintained and staffed equipment which was positioned to meet the increased demand. Our CFO, Ben Palmer will review our financial results in more detail after which I will have a few closing comments..

Thank you, Rick. Our fourth quarter revenues decreased to $221 million compared to $268.1 million in the prior year. Revenues decreased due to lower industry activity levels equipment utilization and pricing for our services.

EBITDA for the fourth quarter increased $15.7 million compared to $9 million for the same period last year due in part to a gain on asset sale in the fourth quarter $2016 which I will discuss in more detail a bit later. Operating loss for the quarter decreased to $32.2 million compared to $57.4 million in the prior year.

Our loss per share was $0.10 compared to $0.18 loss per share in the prior year. Cost of revenues decreased from $217.4 million in the fourth quarter of the prior year to $173 million in the current year due primarily to lower activity. Cost of revenues as a percentage of revenues decreased from 81.1% in the prior year to 78.3%.

Selling, general and administrative expenses decreased from $36.6 million in the fourth quarter of the prior year to $35.8 million this year. SG&A expenses, as a percentage of revenues, increased from 13.7% last year to 16.2% this year due to lower revenues in the current year.

Depreciation and amortization was $48.4 million during the fourth quarter of 2016, a decrease of 26.9% compared to $66.2 million in the prior year. This was due to minimal capital expenditures.

Net gain on disposition of assets was $4 million in the fourth quarter of 2016 resulting primarily from the sale of operating equipment related to our oil field pipe inspection business. Contracts and [indiscernible] on disposition of assets of $5.3 million in the fourth quarter of the prior year.

Our Technical Services segment revenue for the quarter decreased 16.2% compared to the fourth quarter of the prior year. Operating loss decreased to $26.2 million compared to $45.4 million in the prior year. This was primarily due to cost reduction efforts.

RPC Support Services segment revenues for the quarter decreased 37% and operating loss increased to $6.7 million compared to $3 million in the fourth quarter of the prior year. And now I'll review some of our sequential results. RPC's fourth quarter revenues increased 25.6% to $221 million from $175.9 million in the prior quarter.

Cost of revenues during the fourth quarter of 2016 increased by $26.4 million or 18% due to higher activity levels. Cost of revenues as a percentage of revenues improved from 83.4% in the prior quarter to 78.3% this quarter due to operational leverage from higher activity levels coupled with modest improvement in pricing for our services.

Selling, general and administrative expenses during the fourth quarter of the current year increased by 968,000 or 2.8% compared to the third quarter primarily due to higher bad debt expense. SG&A expense as a percentage of revenues decreased from 19.8% in the prior quarter to 16.2% in this quarter due to higher revenues over relatively fixed costs.

RPC's consolidated operating loss of $32.2 million in the fourth quarter was a $24.2 million improvement over the $56.4 million operating loss in the prior quarter. Our sequential EBITDA improved $20.1 million from a negative $4.4 million to a positive $15.7 million in the fourth quarter.

Our Technical Services segment generated revenues of $209.6 million, 28.3% higher than revenues of $163.3 million in the prior quarter. This was due to increases in many of our major service lines in this segment. Operating loss was $26.2 million a 46% improvement in the fourth quarter compared to a loss of $48.6 million in the prior quarter.

Revenues in our Support Services segment decreased 9.5% and incurred an operating loss of $6.7 million compared to a loss of $5.5 in the third quarter. As of the end of the fourth quarter our pressure pumping fleet still totaled 927,000 hydraulic horsepower, of which approximately half is unmanned, but available to work on relatively short notice.

The amount of manned and active equipment has remained unchanged. As of December 31, RPC's total head count was 4.5% higher than at the end of the third quarter which has allowed us to perform more 24-hour work.

RPC's total 2016 capital expenditures were 33.9 million and we expect 2017 expenditures to be primarily maintenance related and subject to activity levels. With that, I'll now turn it back over to Rick for closing remarks..

Thank you, Ben. Industry conditions continued to improve during the fourth quarter of 2016. Despite the recent severe downturn we are well-positioned with our people, equipment and capital structure to meet customer demands for service. Recent activity levels have increased and we've been able to obtain some pricing improvements.

We expect this trend to continue. While there are many positive developments we remain cautiously optimistic about our future results. Thank you for joining us for RPC's conference call this morning and at this time we will open up the lines for your questions..

Thank you. [Operator Instructions] We'll take our first question from Jim Wicklund with Credit Suisse..

Good morning guys. Their version of impressive is hell I have to tell you..

I wholly appreciate that..

Well, considering that several other people have reported that they've decided not to pursue market share, but to pursue margins and it seemed that you pursued both better than any of them..

You are very kind..

No, no, that’s impressive. Let me ask you, you talk about how you've got about half your horsepower ready to go to work on short notice but unmanned.

There has been a question as to how much it cost to reactivate a crew since it's unmanned, but ready to go to work on short notice one would assume that your reactivation costs for incremental spreads would be de minimis, can you talk a little bit about that?.

Hey Jim, this is Jim Landers. Sure, happy to talk about it. There's maybe the best way to phrase it is has to do with capital expenditures and then operating expenses.

We believe based on the state of readiness of our equipment and our having maintained it most of it maintained in a central location with people whose sole job is to maintain it, keep the warranties in place, make sure everything is running, et cetera. We believe that capital expenditures to reactivate the idle fleet would be minimal.

So we're calling it less than $10 million. The operating expenses to move it from a maintenance facility in Arkansas to West Texas would involve fuel and personnel to drive it and it would not take that long, so we think that would be minimal as well. We are in the process of hiring. We've been recruiting fairly actively since late August.

That's going fairly well, it's not a question you asked but you get into kind of a cost per hire for new employees and then that training time. So that will cost something, but that's just sort of in the normal course of business for us, the whole recruiting, screening, hiring, training process takes a number of months but we're working on it now.

As Ben mentioned, we've hired some employees, many of whom have oilfield experience during the fourth quarter. So we're moving ahead with that, but we don’t think it's going to negatively impact operations if we continue to do or if we do a good job, or continue to do a good job with our recruiting efforts..

Okay and looking at equipment I know that Gardner, Denver, and SPM have both come out with their QM and QEM 3000 heavy-duty continuous operations as part of the – makes it equivalent Halliburton's Q10 pump. And we know that they kind of sold out in December.

Are you guys upgrading the pumps on your frac fleets, are we going with the equipment that you had before and can you talk about the pros and cons of the re-equipping of equipment with modern pumps, with higher horsepower pumps?.

This is Ben. There has been very little discussion about plans to upgrade our equipment. Much of what is currently unmanned is very new or brand-new, so there has not been a discussion for us thus far. Clearly the equipment we have is generating very nice results right now. We expect it will be able to continue to do that.

Decisions to upgrade will be based on analysis in the future when we feel like we need more capacity and we don't think we're - so that has not been a discussion yet because we're nowhere near that point in this cycle. So reasonable question, but it is something we're not discussing it right now..

It looks like you're doing just fine with what you've got there's no question there. You've mentioned slightly higher pricing.

Are we correct in thinking that pricing for pressure pumping should continue to move up through the course of at least the first half of this year?.

Jim, that's what we anticipate. We have gotten some pricing improvements in the fourth quarter but they've been minimal and so as a blind man gets into balance or comes being into balance we anticipate and certainly hope for pricing improvements in the near-term. The economics of this business are still not self sustaining.

So we have a long way to go before we can continue to provide more services and quality services and increasingly service in terms of environment. So yes, we think pricing is going to continue to rise..

Okay gentlemen, impressive quarter. Thank you very much..

Thank you..

Thank you, Jim..

Thank you, Jim..

We'll go next to Chase Mulvehill with Wolfe Research..

Hey, good morning fellows..

Hey Chase..

Hey, so I'm going to ask a question about 1Q so can we talk about the progression of 1Q from the topline and maybe an incrementals perspective? You know the last couple of quarters you've been growing topline at plus or minus 25%.

Do you think you can kind of continue with that pace given the increases that Rick we've seen so far this year? And then can we sustain 30% above incremental?.

Yes Chase it is Jim. We think incrementals I'll start these your answer, we think incrementals will continue to be strong given everything we know right now and we think we'll probably be with the rig count in terms of sequential increases in the first quarter, but it's just hard to say right now. It's a very dynamic situation, hard to say..

Okay, oh go ahead..

Go ahead Chase..

Oh, no, go ahead, go ahead..

Oh I was just going to say I was going to comment on the earlier comment about market share. You know, market share is not something that we are strategically trying to just drive forward it is just a result of our efforts. So we are going to continue to try to seek pricing improvements we think we will be successful in that regard.

We will continue to hire employees and so the results will be what they are historically and our revenue growth has correlated very closely to the rig counts I expect that there won't be any significant deviation from that, but that is all I have to say on that..

So given what you've seen so far how confident are you that you'd be able to generate double-digit EBITDA margins in the first quarter?.

Double-digit as a percentage of revenue?.

Yes..

It's certainly possible, don’t understand, but….

Okay, okay, all right. And I guess a question on capital allocation.

How are you guys thinking about acquisitions and then when would you start thinking about reinstating the dividends?.

That's I'll say it's not, this is Ben. I would not say that's an ongoing discussion, but that obviously we're feeling good about the direction of things. We have plenty of cash on the balance sheet, so it is something that we'll continue to discuss, but timing at this point is uncertain.

I think we're going to see some additional improvement and forward momentum before we do that, but the exact timing of that is I can't tell you at this point..

Okay and then you tell us on acquisitions?.

Yes, Chase it is the same story we've told throughout the downturn and we're certainly willing to look, but worn out equipment is almost by definition the cost to repair it is worth more than its ultimate value and we look at the company that's not in operation, the crew has left so employees are important and so there's not lot of value there for us..

Okay, last one is easy and I'll turn it back over.

So the pipeline services asset sale, what kind of impact did that have in the fourth quarter the support services revenue?.

It happened to be around $4 million..

So it impacted revenues by $4 million for support services in the…?.

No, actually it is down again, so it did not impact revenues it was just recorded as gain on disposition so it's not a impact..

Okay, so when did you sell the business, did it generate revenue?.

Well, it was just some equipment that's utilized in that service line. It is kind of a contractual arrangement with the customer. They had an option to buy the equipment and so they exercised that option..

Okay, well then I guess help me understand what happened in support services and why it was down 10% quarter-over-quarter?.

Chase, unrelated to the sale of the equipment you and Ben were just discussing, we had a major customer in the pipeline handling business support services that was just slow during the quarter. That business sometimes works in fits and starts and so the weakness in support services was at in tubular services business.

It is just large customer not working that during the quarter..

And it's related to offshore work and the tubular business actually has been a real strong performer over time and this was we hope an aberration we expect to understand that there will be getting back to work again and some of it is also comes through.

We had particularly strong results in technical services, but we didn’t see as much growth in revenue and very, very little pricing improvement in the support services, service lines such as rentals. So that's more drilling related than production related.

And so that hasn’t yet seen the same sort of improvement that we've experienced on the completion..

Okay, awesome. I'll turn it back over, thank you..

We'll go next to Marc Bianchi with Cowen..

Thank you. Good morning. I wanted to clarify a couple of things that came out in the Q&A so far.

First on the reactivation cost of less than $10 million is that per crew or is that for your whole idle fleet?.

That is for the whole idle fleet Marc..

Yes, okay, thanks for that Jim. And then as we think about the rig count for the first quarter, I guess there's different rig counts you can look at, there's different ways you can think about the comparison.

Right now we show the Baker Hughes rig count tracking to be up about 18% for the first quarter if nothing changes from here, is that how you guys are thinking about it or is there a different number in mind?.

This is Ben. You know, we're going to get what we get. We did well in the first quarter, we think that will continue, but again historically if you look back we typically track pretty close to that or done a little bit better. So that's probably as good as it gets as any..

Okay, thanks for that.

The fleet that's active, how highly utilized is it? And I think before you talked about I would assume that if everything goes as planned in the, you tracked the rig count that utilization will get pretty tight and you will need to bring some equipment back how close are you to being able to reactivate equipment at the prices that you like?.

Marc, we are still a ways away from that. Pricing needs to improve by a fairly healthy amount before we can do that. And you know the story well, but service intensity is high were until only equipment is high. We want to be fully utilized with the equipment that we have in the field and start to generate nicer margins than we are now..

Hey this is Ben. So we will remain very disciplined about that. Our operational folks are in no hurry to kind of bring that other equipment out. They are committed and they are ideal to make sure that we get the existing fleet that again is working that's there in the field and available to work.

We want to fully utilize that and we have some additional upside there. A lot of the hiring we've been doing has allowed us to do more 24-hour work. Obviously that, and so utilization you are talking about you know is how you utilize, are we on a 12-hour basis versus utilized on a 24-hour basis.

So there's a fair amount of room for again additional utilization on the existing equipment and that's what we're focused on for the time being and for the foreseeable future..

Okay is there a utilization number you can speak to, is it about 75% or any way to give us some help on that?.

Marc it is so hard to measure, it is about 50%..

Yes, we look at it, we're a little reluctant to give percentages because there are plenty measures of it. Measures it in so many different ways, but I agree with Jim if it is certainly anyway you look at it, it is north of 50%..

Okay, well thanks a lot great quarter. I'll turn it back..

Thank you..

Thanks..

We'll go next to James West with Evercore ISI..

Hey good morning gentlemen..

Hey, James..

Very good, Jim.

Are you – in the market now are you starting to see customers trying to lock you into long-term, longer-term contracts and if so are they willing to give you acceptable premium over kind of current spot market rates?.

Jim, this is Ben. Certainly people are asking and asking frequently and they certainly have not offered anything near what we would be willing to commit to. So we are not committing, have not had any commitments on a long-term basis contractual basis with any customers at this point..

Okay, that's helpful.

And then if we think about when you would decide to reactive equipment clearly one metric is pricing which is not there yet as you indicated earlier, is another metric to having visibility on certain time period of work, is it a six months of work or series of wells, how are you guys thinking about the pricing versus visibility to it?.

James, this is Jim. So certainly what you are alluding to is a revenue stream that has less risk to it, visibility. So in an isolated sense we'd say that yes guaranteed work from a great customer we would do for lower pricing.

But let's not get ahead of ourselves, job delays happen and various things, so it is hard to count on a "guarantee," so kind of back to Ben's answer. Those are kind of hollow promises sometimes without some real financial guarantees which we haven't seen yet. So we are not looking seriously at any long term contractual rates difference..

Okay and then maybe just a last one for me. Some of the equipment that's coming back in other market I mean, your competitors are suggesting that the pricing for them is enough to incentivize them reactivating equipment.

Are they, is there some disparity in terms of what price now you are able to get versus which you are able to get or are you guys just don't see that pricing as advantageous to you given just the wear and tear in the equipment?.

James, this is Ben. The decision about when to reactivate and all that, I mean you had some very worthwhile observations or considerations when we work through that and situations will change and again it's a constant discussion.

So we haven’t established any specific metrics saying if this, if that, if this, because so many things can happen as Jim talked about, you can have somebody customer schedule you out and jobs get pushed and everything else and we're aware of that. So it is more of a gut feel.

We think again it will be - there have been no intense discussions internally here about trying to bring out equipment in the short term.

And what is the other part of his question?.

I think, I mean I got everything. That's very helpful, Ben. I appreciate it. Thanks guys..

Sure..

Thank you..

We'll go next to Ole Slorer with Morgan Stanley.

Yes, thanks a lot and again congratulations with some very strong results here..

Thank you, Ole..

Managing sand and supply chain is probably going to be important quickly as the market tightens up again.

So can you talk a little bit about how you are thinking about that or would you see that as a relative tailwind for you or challenge?.

Ole, this is Ben. It's always a challenge, but it is something that we have had to deal with in the past. We have relationships in place.

We have some enrolment of the physical capabilities, but we have relationships in place that we feel good about, but they will continue to be challenges and we do agree and believe that it will become more difficult, but we believe we will be able to overcome those as we have in the past.

But again working out is something we have to remain focused on..

Is it there enough of a challenge right now to may be pose some real challenges for the smaller companies that might not have their house in the order or is that yet to come you think?.

Ole this is Jim Landers. Right now, right at this movement we don’t believe that it’s enough of a challenge for people who have reasonable logistical capabilities in place, relationships with their vendors, et cetera, right at this movement we don’t.

But back to your earlier comment, most reasonable people think that there is going to be a lot of propane used in the next year or so, so it will pose challenges for them and for us as well. It’s just another cycle, it's just another up cycle..

Yes, and there are some winners and losers for maybe cycle and I was impressed with your reactivation and costs.

What do you think is the main difference that the company that cited much higher costs as far as if they are even new to the game or anything like that, what do you think is the real reason for these, the huge differences in cost estimates, are they apples-to-apples or are they apples and oranges when they’re talking about these numbers?.

Perhaps yes, this is Ben, perhaps apples and oranges. I believe that harkens back to the fact that we never have, I mean not never, but we don’t defer maintenance.

So even through the cycle we kept our equipment maintained and keep in mind that much of the pressure pumping fleet that is back and not currently working is almost and in many cases is brand new. So, that’s why the CapEx is so low because all the equipment is in, it's in a ready-state.

Its ready to work other than probably send [indiscernible] given it a good bath and driving it to where we decide to put it into operations. So that's why the capital cost is minimum..

When it comes to the training and hiring, you said you started this process last August.

Have you been stepping this effort up lately or has it been at a steady pace?.

Ole, it's Jim again. We’ve - again this isn’t our first rodeo. We've seen up cycles before. So we've taken a fairly measured steady pace. We haven’t tried to accelerate it recently, but we were working hard at it back in September. So it's just a process, it's not a fire drill at this point.

We're just going through our process, doing what we were going to do in the past..

Okay, so you started hiring back in September and you kept it at a sort of steady monthly pace since then?.

The efforts have been in the steady monthly pace. The successful hiring is kind of it's not always at a steady pace. We've actually done pretty well recently given some peers who have exited the business. It's always a challenge, but we’re working through it right now..

If we look at the remaining unmanned capacity that you have very most 350,000 to 400,000 horsepower may be something in the neighbourhood. Will that all have the same reactivation costs but it will come into the process that at some point it kind of gets higher.

You say so, but does that go for the whole idled name plate capacity or is it some point that we should expect refurbishment of pumps or the bigger capital items?.

All the major costs, whether capital or operating expenses are behind us. Not all of the fleet is new. Not all of the idle capacity which run 450,000 idyllic horsepower is new and never having been used probably 130,000 or so is new, never haven’t been used.

But just have to repeat we’ve got a good group of people who have been maintaining it and we’ve the financial wherewithal to do it during this downturn so this has been probably the capital that and we've not done a lot of work on this yet, but the equipment is going to need to be have CapEx spend on this equipment that we're working right now..

Yes..

Great one, so and the CapEx that we talked about in the notes CapEx for 2017 is going to depend on how utilized we are on the equipment that is currently being utilized. So, the CapEx will not be spent on the equipment that we bring out of stacks status any CapEx that we see at this point is going to be on the fleet that is working right now.

And we do not anticipate having to do any major rebuilds of that particular equipment.

We at this point for the next few quarters we think that will, that equipment should be able to continue to be operated, will have ongoing normal type of maintenance that we will provide on that equipment, but no current plans to do any significant upgrade as we talked about earlier or even significant rebuilds of demand equipment that we have today..

Okay, that’s thanks for clarifying and just finally, do you see any changes in the pricing strategy at the movement where the, are there any disruptive players who are, buying market share or have everybody now sort of taking - leading back licking their wounds and behaving more rationally, we know your, all the competitors are the sort to still and [indiscernible] we have been tend into are just getting release here, but how do you say it?.

Nothing out of the ordinary right now. I mean people are acting more rational. Supply and demand is coming closer into balance we think.

We're actually hopeful that some of the newly public companies who are now going to be subject to the same scrutiny that RPC is under will have more incentive to behave rationally in a different capital environment and a different scrutiny kind of environment..

How long before the animal sprit sort of take over and you actually lean back and feel quite comfortable about losing jobs because you know there will be somebody right behind that like to bid higher?.

Ole, we are coming off the worst oil field downturn in American history, I can't see that far..

After every reverse downturn there is also always a pretty good upturn, but anyway I'll hand it back, thank you..

Thanks..

We'll go next to Rob MacKenzie with Iberia Capital..

Thanks guys. Jim, I wanted to ask another question in a different way. I guess I’m a little bit surprised that you guys aren’t reactivating equipment yet in the context of some recent anecdotes we’ve heard about there not being enough active equipment frac them in the Permian to even frac all the wells that are being drilled today.

Is there a fair characterization of the market and if so, when should we expect to see you guys reactive equipment?.

Rob, I might want that information you got I might want to clarify is it cruise or equipment that is not available..

It is active frac spreads is what we heard..

Then pricing has to get higher and for us yes. This industry had money in a long time. The reason we're here today is we've had a little more pricing discipline. If the answer is more complex we'd give it to you, but it isn’t..

But I guess with such low reactivation costs for essentially a large chunk of your equipment being brand new, you’re talking about high single digit, low double digit EBITDA margins what kind of pricing would you look for before you would reactivate here?.

It's just hard to say, but higher than today..

We've got – it's fourth quarter was nice and strong. We’ve got a nice full calendar at this point, but we want to see higher pricing and be as it is sustainable again. We don’t want to fall a victim. We're going to remain disciplined. We don’t want to fall a victim of getting ahead of ourselves or the industry getting ahead of themselves.

There has been lot of discussions about some of our competitors. They will be reactivating sooner than they should. We certainly don’t want into that trap. We're going to remain disciplined..

Yes, and just to catch the spot market job your hotshot equipment around, you move employees and pay for their travel and their accommodations and things that might have been raised within profitability price perfection become negatively profitable or losing money, so we just don’t see it..

Okay, thanks I want to follow up on the comments about some of the newly public companies are Keen, AK and/or new BJ Services, how have you seen them affect the market so far, how has their behaviour in your mind affected the market and do you expect that to change in the next quarter or two?.

Rob, we haven’t seen anything yet, it is too new to tell..

[Indiscernible]?.

I’m sorry?.

From either BJ or….

Yes..

Okay and Jim would you mind going through the percentage revenue for Technical Services?.

Rob, more than happy to. So, the percentages I'm about to give are percentages of consolidated RPC revenue for the fourth quarter of 2016. Our larger service line is pressure pumping which generated 49.2% of revenue. Our second largest service line is ThruTubing Solutions which generated 22.5% of revenues.

Third largest is coil tubing which generated 11.1% revenues and our fourth largest is nitrogen which generated 3.9% of revenues. Rental tools which is in support services generated 2.5% of consolidated RPC revenues for the fourth quarter..

Great. Thank you, Jim. I’ll turn it back..

Yes, thanks..

We’ll go next to Ken Sill with SunTrust..

Yes, hi guys great quarter. You guys are always good competitors. The contract everybody would like to have, I would hope. Jim just one more question so tubular services dropped off pretty big sequentially.

Do you have what they were as a percentage of revenue so we can kind gauge if that's going to kind of rebound where we would or what we might be able to expect there?.

Sure. That business that service line was 2.0% of revenue in the fourth quarter..

Okay, great.

And kind of getting back to the whole utilization question, I find it interesting that you have increased headcount to do more 24-hour work, how much, how many or what percentage of your fleets are working on 24-hours today versus three months ago?.

80% today versus about 70% three months ago..

And so in theory that means you've got 20% of your capacity that could go to 24-hours, I don’t think if you'll ever get to 100%, but once you get those guys to 90% on 24-hours work is that kind of a litmus test or is it more of a backlog? I guess asking two questions is, what percentage that you get to on 24-hours and then how far out is your book, your calendar, booked right now?.

We're booked up to March, so we have visibility through March right now. The question about 24-hour work also relates to the customs in the market and some markets tend to be 24-hour, the Permian where we have a big presence was among the later markets to become 24-hour and that’s just the way, that's just what the traditions in that market.

Some of the others have had more 24-hour work. There are some areas that they weren’t doing well when they become 24-hour, when we get to 90% 24-hour work that will be interesting, not sure when it’s coming..

If you are booked through March and we see some more rig count increases like we had last week which is a pretty steady number, I mean, I guess the issue is at some point somebody comes to you with a question, okay if I can't get your accrual until March, how do I – list, but you are not really having those conversations yet?.

Most recent updates we have are no, I mean we've told some people we can't work for them until April, but my understanding is that they haven’t come back and said well at what price can you work for me in February? So I just don’t think that is happened yet..

Yes, we’re going to enjoy when it happens actually a lot of people will.

One last question, sand capacity if you kind of look at the leading edge where people are testing the Permian for sand its huge, how much more work do you think you guys could do before running up against any kind of logistical issues in sand and where do you think logistics are going to come first is it going to be in rails, mines or last mile? That’s a tough question sorry..

I wish we knew the answer. Probably may be one way to answer just an easy one is that last mile is probably going to be an issue sooner, but that’s also a little more fixable. That’s the word. Rail is going to be an issue and that’s really very hard to fix.

But we don’t think mine capacity is a huge issue based on what we, what we know about being in the sand mine business as well. So….

And your sand mine is not open yet right, is that correct?.

It is operating, but anyway near full capacity, so we’re looking at various options there to utilize it is to get as much efficiency out of that as we can. That's going to be a nice help to us. Let me, now this is Ben.

Now that I'm on let me point out that somebody may end up seeing or asking the question about Nitrogen, Nitrogen did have a decline from third quarter to fourth quarter and there was no particular issue that we just did some turnaround work for nitrogen in the third quarter that’s sort of the seasonal period, back type of work.

So, you made, I can see in your analysis that Nitrogen was down, but there is no particular large issue there, just third quarter was pretty nice for them..

Yes and my last question here then is, do you guys actually, I mean how do you guys handle the railcar issues, do you lease railcars or do you let the – talk to the sand producers on the railcars?.

We do have a fleet of railcars it's not tremendous I was going to say huge, but that's probably, sorry, and we those are used almost exclusively for our mine and in our activities there we don’t tried to send our cars to other suppliers..

Okay, alright thank you guys..

Thanks Ken..

We’ll go next to John Daniel with Simmons & Company. .

Hi guy’s good quarter. Jim, I think if I heard it correctly you are not looking to reactivate frac equipment yet. Frac now represents close to half of your overall revenue.

You also believe that revenue for the company should be up in line with the rig counts so that would suggest you are not reactivating equipment and most of the growth is coming from pricing is that fair or are we about to see a step change improvement in your other segments?.

Great way of looking at that. There will be some pricing improvement in the first quarter we believe. There will also be some utilization improvement. We also see that our tubular business we've been talking about this morning will do better and I just mentioned Nitrogen so….

And there is some utilization improvement opportunity to with the frac that is not fully utilized at this point..

Right. .

Okay, but 80% of those fleets are on 24/7, so you had then holes in the calendar in Q4 which you fill in Q1?.

Well, we are capable of working 24 hours..

Yes, so utilization on the 24-hour fleet is not a 100%. It is just kind of capable yes, configure capable, yes..

Okay, fair enough.

If you know, you didn’t provide yet also is in the Q but that depreciation by segment, but humour me as I do some math and as I just look quickly at technical services as to assume that it was the same depreciation as last quarter, your EBITDA margins that segment would be call it 9%? I would suggest may be the segment EBITDA margins are high single digits and your fleet level EBITDA margins are probably mid teens is that fair?.

Fleet level I guess you are talking about like before field probably ever heard, it’s a little bit, that’s a little bit high John. Just for everyone's information, during the fourth quarter technical services depreciation was $41,889,000 million and support was $5,999,000. If that helps math a little bit.

We've always tried to price even though in this downturn at least EBITDA breakeven at the field level..

Thanks. I just hit, not this is do often it feels like you did, the EBITDA generation per fleet is no disrespect sufficient to justify reactivating all of that equipment..

Okay, well if you could snap a finger and in the future that was going to happen I would say yes, but, and if we had 450 employees who had been recruited, screened, hired, trained and ready to go, with grey hat instead of green that would work and if we had all the sand we needed that would work too..

So, never say never..

Never say never..

So two more from me and I'll turn it back over.

Are utilizing any of the container sand solutions today and if so how much of your fleet uses them and how do you see the use of those systems evolving this year?.

We have used those on a trial basis in tenderness midcontinent. We are not now..

Okay interesting and then just G&A or depreciation guidance for 2017 would be appreciated..

Well, that assumes we know what our CapEx is going to be..

How about a guess?.

With zero CapEx it will go down $3.5 million a quarter..

Yes, tell me it sounds like the reactivation costs are de minimis for you guys.

So where then would the CapEx come from? What would it be used for?.

To maintain our fleet..

Just the maintenance. Okay, fair enough. Thank you, gentlemen. Good quarter..

Thanks John. See you soon..

We’ll go next to Praveen Narra with Raymond James..

Good morning guys..

Hey, Praveen..

I just wanted to follow up on the reactivation discussion, in terms of the time to reactivate if you were to start today and you’re going to through the hiring process at what point could you put a fleet out there?.

A single fleet..

Yes, it could happen pretty quickly Praveen within a month..

I was going to say a month or six weeks..

Yes..

Okay, so if we have an outlook to March even if that starts to fill up we get to April, you did stil have time to before the end of the quarter..

Yes, okay. Absolutely. .

In terms of the customer disparity of small versus large, can you give us kind of an idea of how the larger customers are looking at the quality versus price aspect on bidding for jobs versus the smaller customers?.

I think we don’t have any useful information in that area Praveen to be honest..

Okay, fair enough.

If I could ask one more, in terms of when your customers are willing to start locking in work not a certain length of time but you mentioned being fall through March or some willing to schedule into April and May or does it kind of stop there given how far out it is?.

We think there is still kind of work in the phones trying to find a crew who can accommodate them earlier as we think I'm not sure that seems to be the case right now..

Okay. Thank you very much guys..

We’ll go next to Michael LaMotte with Guggenheim..

Thanks guys and I’m trying to hone in I guess on the stability to flex up and wanted to follow up on the issue of 24 hours and availability and may be ask you within the context of efficiency, can you give us any metrics in terms of or at least some ranges in terms of which all are doing in stages per fleet per month and what do you think the max rate of working crew, could look like where do you think over the next six to 12 months you could see improvements and efficiency..

Michael, this is Jim Landers. Those kinds of data w that, those kinds of data in terms of stage counts and stages per fleet and that’s the thing we just simply don’t disclose it. We appreciate the question and I understand where you are trying to go and I think what you're trying to get to is how much more can we work than we are working today.

And the nature of the work is so different. I know you understand this, but we’re still doing some, a few single stage vertical jobs in the Permian and then as everyone on this call knows service intensity is increasing tremendously.

Laterals are getting longer and technology is allowing people to understand better parts of the rock to frac which requires more, more service, more profit in each of those tracs and so, it's rude to answer a question with a question, but if you ask how much more we could work our question back would be what kind of work are we talking about..

This is Ben, let me add.

I mean I think again appropriate question and there is a lot of dynamics in there, but I would say that we feel fortunate with many of our customer relationships that we can and we have some ability to pick and choose and a good customer is not only somebody who give you decent pricing and gives you opportunities to work, but they are customers that allow you to be efficient.

They allow you to get the number of stages you hope and expect to get in a particular day so, we’re fortunate to be in a position to be able to somewhat pick and choose in that regards. And that really helps and something we hope to continued to take advantage of..

I understand, I appreciate the color, I know it's difficult when you look at a business with just a laundry list of variables and we try to ask you to sew it down to one. Thank you.

But if I could ask a couple of sort of related follow ups to the recovery, may be Jim, you mentioned, coming off of the worst downturn in the history of the history are there just kind of system wide efficiencies within your organization or certainly within the supply chain that you see us as the wheel is getting green so to speak over the next six to 12 months as we do start to recover and get the sand out of the gears..

Are you telling me I like inefficiencies that occurred because….

As a consequence of the low level of activity, yes that are more cyclical in nature as opposed to the structural improvements and inefficiency..

Nothing comes to mind other than the fact just the financial metric that when utilization is low your return on your assets where you are looking at income statement or some other metric is not high. I mean, certainly higher utilization equipment and personnel. It does more for the bottom-line.

I mean there is just no doubt about that also with higher activity levels you there are some forced multipliers in being able to get proppant because when you have high volumes going you’re able to accept proppant that’s a good price and is good availability and use it where as with lower activity levels, you may not have that opportunity because you’re in the place to store it..

And let me, again this is Ben, add a little more color, I guess kind of indirectly to your comment. I think something that we are pleased with and feel like whether it's moving from the slow times in the downturn or whether it's compared to previous up cycles.

We are much more comfortable with our ability to price our jobs, estimate our costs and as much as estimate cost we were talking about being able to estimate your cost, you have to estimate the assumptions on the level of activity is going to able to capture which kind gets back again to the efficiency and things like that.

So we are much more comfortable today with our processes and our people to be able to more accurately price our jobs. So, that’s going to be a net positive overtime for us..

Yes, so thank you about this contractual execution as well as field level execution?.

Well, but again your financials now how did you priced the jobs on how did you price the job of what do you assume stages per day, what that sort of thing.

You can get yourself caught up, if the customer and the admin of horizontal drilling and completions, horizontal completions is at this point is few years old, but as all of that was increasing you have customers there you go, we'll count on five stages a day. And then you get out there and you only do one and a half or two and you get creamed.

So we worked real hard with our engineers and our operational personnel and our financial modelling to make sure that we are more comfortable than we, overall than we, today, than we have been in the past with that process and that exercise and that’s going to play a lot of dividends..

And then last one, somewhat related to that is, the idea around adding customers, adding clients is cyclically low activity or even operators with no activity or late start to come back into the market, what are the kind of strategic alignment, elements that you look for in that customer relationship..

Michael this is Jim. We’ve made a living over the years serving all kinds of customers and we don’t want to say we’re only going to do one type of well or one type of application. So that’s how we made our living. We certainly look at profitability and financial returns.

For each kind of relationships we look at credit quality and we look at the endurance of customers and also in the oil field on the customer side, you never know when somebody who is only doing a couple wells a year all of a sudden becomes a really big player.

So we try to have as many friends in the oilfield as we can, it's no more strategic than that, although maybe that is strategic than us..

Yes, but it sounds like it's clearly more focused on term and utilization as opposed to spot or giving somebody accrue to chime out for a while..

Yes that is right. As you pointed out, I mean every job has or every, the work has a whole lot of different elements to it, a whole lot of different metrics and as Ben pointed out, we analyze all of those. So it's a complicated answer to a simple question, but there are a lot of things to look at..

Great. Well, thanks for the time guys. I will turn it back..

Michael thanks..

We will go next to Matthew Johnston with Nomura..

Hey, good morning guys..

Hi Matt..

So you mentioned some competitor attrition in the press release this morning, can you talk about where you are seeing that materialize, is that in the Permian, is it other basins, is it just generally occurring throughout the Lower 48?.

Matt this is Jim. I guess the showcase has been in the Bakken in North Dakota where we as we noted last quarter, we did some work and did pretty well and also in the fourth quarter as well and somehow it's was just because we were last man standing not that the market got great.

And I think we are seeing that in other areas too and it is not something that maybe makes headlines, but you hear about our company that couldn’t get a fleet out or didn’t have accrued to do a job and it's probably in a small way across all the regions where we work..

Got it.

Did that include the Permian as well?.

Yes some of that to this, some of that is occurring in the Permian, but actually there is plenty of other competition out there, so it is little harder to actually see it happen, see it manifest itself but it is happening everywhere..

Got it. Okay.

And then next question from me, I just wanted to ask about pricing outlook for some of the other product lines within technical services as we look beyond 1Q, how should we think about pricing for products like ThruTubing NCT?.

Well, coiled tubing pricing is improving especially on the higher coiled tubing units, again muted at this point. It is not huge, ThruTubing Solutions has high utilization and their results are improving. They haven’t quite seen the pricing yet, we think that will come..

Got it, thanks guys. I appreciate it..

Thanks Matt..

We will go next to Mark Brown with Seaport Global Securities..

I guess, I was curious about one of the questions on the Permian seeing diminished level of availability there, are you finding that it is driving more of your competitors to bring their equipment into that region?.

Yes Mark, certainly that has happened over the past eight months, we have seen a little bit of that..

But, you expect that to be continuing or kind of petering out going forward?.

It is logical to assume, yes I mean it is a strong region and I wouldn't be at all surprised if some of that does continue. But hopefully we will see additional pick up in other basins and maybe that will lessen the probability or the magnitude but I would not be surprised if it continues..

Okay.

And curious about what are your thoughts on attrition going forward obviously you have kept your fleet in very good condition, the stack fleet, but many of your competitors have not and it appears to be a time where we are seeing a significant pick-up in activity, at what point do you think that new fleets will be ordered and what would be the lead time if that is the case?.

Mark we don’t know of any new fleets being ordered because there is so much existing equipment out there and so much that can be refurbished if you have the money to do it. So since we're not ordering new equipment we don’t know what the lead time will be. We really don’t know..

We have not tested that market. Not tested that..

Okay, fair enough and I guess just finally within coiled tubing any commentary on, you spoke a little bit about prices but just what type of work you're seeing and what the trends are completions, maintenance work, that sort of thing..

Coiled tubing has evolved to a completion service. We have some small [indiscernible] work and work in the market but in general that's more of a completion service but has been for a long time..

All right, thank you. I appreciate it..

Thanks Mark..

And our last question today comes from Andrew Cosgrove with Bloomberg Intelligence..

Hi gentlemen, thanks for taking my call..

Sure Andrew. Just a quick question with respect to some of the lines that you mentioned in the third quarter with respect to sand pumps, you guys have mentioned 25% quarter-over-quarter in 3Q.

I was curious if 4Q saw something similar?.

In terms of amount of sand pumps?.

That's your question, volume of sand pumps?.

Yes, or even any or even with respect to intensity or anything along those lines?.

Well, I think probably the best thing to say is that service intensity did continue to grow a little bit. So total proppant pump is kind of in line with our sequential revenue increases, probably the best precision we can give right now..

Okay, and one more along the lines is last quarter you had also mentioned that you are competing with some of the more challenged competitors out there.

Did that trend somewhat diminished last quarter or was that competition still there?.

I think it's still there, but again, we did see some attrition I think it sort of speaks to that point. So I guess perhaps on a net-net basis it is likely less than it had been..

Okay, and last one with respect to the fleet, so it was $10 million to activate the rest of the idle fleet.

How many fleets are idle at the moment right now?.

In very round, well we have about 450,000 horsepower that is idle in very round numbers our fleet is about 45,000 horsepower, so that is 10..

Okay. Good that's it from me. Thank you..

Thank you..

And I'd like to turn the conference back to Jim Landers for closing remarks..

Okay, thank you operator, thank you to everyone who called in and questions we enjoyed the dialogue and we look forward to seeing soon. Thank you..

Again that does conclude today's presentation. Today's conference call will be replayed on www.RPC.net within two hours. We thank you for your participation..