Jim Landers - Vice President of Corporate Finance Rick Hubbell - President and Chief Executive Officer Ben Palmer - Chief Financial Officer.

Chase Mulvehill - Wolfe Research James Wicklund - Credit Suisse Tommy Moll - Stephens Inc. George O'Leary - Tudor, Pickering, Holt & Company Bill Thompson - Barclays John Daniel - Simmons & Company Thomas Curran - B. Riley FBR Kenneth Sill - SunTrust Robinson Humphrey Praveen Narra - Raymond James John Hunter - Cowen.

Good morning and thank you for joining us for RPC, Inc.'s Fourth Quarter 2017 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 2016 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 two non-GAAP measure of operating performance. The first is EBITDA.

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. And the second set of non-GAAP financial measures are net income and diluted earnings per share excluding the impact of the implementation of tax reform.

Management believes that presenting the operating results without the impact of implementation of tax reform enables us to compare RPC's operating performance consistently over various time periods.

Our press release issued today and our website contain reconciliations of these non-GAAP financial measures to net income which is the nearest GAAP financial measure. Please review that disclosure if you're interested in seeing how these things are 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 2017. The average U.S. domestic recount during the fourth quarter of 2017 was 921, an increase of 56.4% compared to the same period in 2016, but a decrease of 2.6% compared to the third quarter of 2017.

RPC's revenues decreased by 9.3% sequentially due to higher than expected seasonal slowdowns including customer budget constraints.

We finish the fourth quarter with $91 million in cash based or financial results, strong balance sheet and lower corporate tax rates in 2018 our Board of Directors has increased our regular quarterly cash dividends and $0.10 per share.

Our CFO, Ben Palmer will review our financial results in more detail, after which I will have a few closing comments..

Thank you, Rick. For the fourth quarter revenues increased to $427.3 million, compared to $221 in the prior year. Revenues increased compared to the prior year due to higher activity levels and pricing for our services, higher service intensity and a larger fleet active revenue-producing equipment.

EBITDA for the fourth quarter increased to $101.1 million compared to $15.7 million for the same period last year. Operating profit for the quarter increased to $60.3 million compared to an operating loss of $32.2 million in the prior year.

During the fourth quarter of 2017, RPC recorded the nets free tax benefit of $19.3 million as a result of the tax reform enacted during the quarter. The benefit was primarily due to the revaluation of deferred tax items using the lower corporate tax rates effective in 2018, partially offset by adjustments related to permanent tax law changes.

Excluding the $19.3 million or $0.09 diluted earnings per share, benefit of tax reform, net income for the fourth quarter of 2017 was $38.4 million or $0.18 diluted earnings per share compared to a net loss of $21.1 million or $0.10 loss per share last year.

Cost of revenues during in the fourth quarter was $285.7 million or 66.9% of revenues compared to $173 million or 78.3% during the same period last year. Cost of revenues increase primarily due to higher employment cost and materials and supplies expenses both of which were driven by higher activity levels.

As a percentage of revenues, cost of revenues decreased due to leverage higher revenues of direct employment cost and improved pricing for our services. Selling, general and administrative expenses were $42 million in the fourth quarter compared to $35.8 million in the same period last year.

These expenses increased due to higher compensation costs, primarily incentive compensation due to improved profitability. As a percentage of revenues, these costs decreased to 9.2%, compared to 16.2% in the same period last year, due to the leverage of higher revenues over primarily fixed costs.

Depreciation and amortization were $38 million during the fourth quarter of 2017, a decrease of 21.4% as compared to $48.4 million in the prior year. Our Technical Services segment revenue for the core increased 96% compared to the fourth quarter of the prior year due to improved pricing and higher activity levels.

Operating profit increased $67 million compared to an operating loss of $26.2 million in the prior year.

Our Support Services segment revenues for the quarter increased by 43.7% while the operating loss decreased 76% compared to the same period last year, due to improved activity levels and pricing in the rental tool service line which continues to be the largest service longer within the segment. Now discuss our sequential results.

RPC's fourth quarter revenues decrease to $427.3 million from $471 million in the prior quarter. Revenues decrease due to temporary activity declines caused by seasonal slowdowns including year-end customer budget constraints. This was partially offset by improved pricing and a larger fleet of active revenue producing equipment.

RPC's operating profit during the fourth quarter of 2017 was $60.3 million compared to $97.4 million in the prior quarter, a decrease of 38.1%.

Cost of revenues during the fourth quarter decreased by $9.1 million or 3.1% due to lower materials and supplies expenses resulting from lower activity levels partially offset by higher total employment cost due to increased headcount.

As a percentage of revenues, costs or revenues increased from 62.6% in the third quarter to 66.9% in the fourth quarter due to inefficiencies resulting from lower activity levels partially offset by improved pricing. Selling, general and administrate expenses during the fourth quarter of 2017 increase by 5.7% compared to the prior quarter.

Excluding the impact of tax reform as discussed earlier, net income for the fourth quarter of 2017 was $38.4 million or $0.18 diluted earnings per share compared to $57.3 million or $0.26 diluted earnings per share in the prior quarter.

RPC's sequential EBITDA decreased from $137.5 million in the prior quarter to $101.1 million in the fourth quarter and the EBITDA margin decreased from 29.2% to 23.6%. Our Technical Services segment generated revenues of $411 million, 9.8% lower than revenues of $455.7 million in the prior quarter.

Operating profit was $67 million compared to $104.3 million. Our operating margin in this segment decreased from 22.9% to 16.3%. Our Support Services segment generated revenues of $16.3 million or 6.9% higher than revenues of $15.3 million in the prior quarter.

Operating loss decreased to $1.6 million in the fourth quarter compared to $2.1 million in the prior quarter. Our pressure pumping fleet as of the end of the quarter remained unchanged to 925,000 hydraulic horsepower. RPC's total headcount increased 6% during the fourth quarter.

Fourth quarter 2017 capital expenditures were $42.5 million and the full year 2017 CapEx was $117.5 million. We expect full year 2018 capital expenditures to be approximately $265 million which will be directed towards those maintenance of our equipment and new revenue producing equipment.

A portion of this will be directed towards completing the purchase of 127,000 hydraulic horsepower that we ordered in 2017. At the end of 2017, our cash balance was $91 million with no outstanding debt.

Since the majority of RPC's business is domestic, we expect the recently enacted tax reform to have a meaningful positive impact on our financial results through increased earnings and operating cash flow in 2018 and beyond. We currently estimate our annual effective tax rate in 2018 will be in the range of 20% to 25%.

I'll now turn it back over to Rick for some closing remarks..

Thanks Ben. We recognize our RPC's fourth quarter results interrupted the positive trends of the past several quarters however we are pleased with the full year 2017 results. Higher oil and natural gas prices along with improving industry trends are indications that demand for services will remain strong.

The plan additions to our pressure pumping fleet are insisted to be placed in service during the second quarter. In addition, during the fourth quarter of 2017, we continue to recruit and train employees to staff the additional equipment and meet market demands. Thank you for joining us for RPC's conference call this morning.

At this time, we will open up the lines for your questions..

Thank you. [Operator Instructions] We'll take our first question from Chase Mulvehill with Wolfe Research..

Hey, good morning..

Hey Chase..

Hey, Jim, and so I guess the first question is maybe can you talk about kind of the impact in 4Q kind of the moving parts that you talked about budget exhaustion, so I don't know if maybe you can maybe talk about fleet utilization where that was in 4Q and then kind of as we look into the first quarter, do you expect kind of that utilization to snap back in the first quarter?.

Chase, this is Jim. Utilization - fleet utilization in pressure pumping was the main catalyst for the sequential revenue decline.

Pricing actually improved a little bit and from that revenue not profitability at this point, pricing actually improved a bit, but there was extreme seasonality, December as you might expect was the worst month of a of an otherwise good quarter. We had some customers who told us in late November that they were running out of their budget.

And then we're giving people the month off we did have some weather impact in North Dakota. But the majority of it was just people saying we're out of our budget for right now and we're just really slowing down during December. We chose not to fill up the calendar with lower margin work because that would make 2018 a little bit harder.

We've been trying to educate customers about higher pricing for us to provide a good service to them and just felt that trying to fill up the calendar with lower margin work was not the right long term decision. So it really was utilization. Utilization absolutely fell off..

And Chase, this is Ben. I would say that with our business model and with our customer base that there is a lot of movement that goes on and so it happens that customers slowdown and start up and part of our focus is to try to get aligned with our very our portfolio customers to get us as fully utilized as possible.

And as you can imagine given late in the fourth quarter, given seasonal holidays whether all those other things, it was much more of a challenge to try to fill the calendar up. And as Jim said we didn't want to we were going to run out and offer large discounts to get to work. We thought that over the long term would be detrimental.

So we were impacted the way we were impacted and yes question about how is the calendar looking at this point and it is filling back up nicely, certainly it's always when there are seasonal impacts, there will be a ramp-up, but we're very comfortable with 2018 and several the comments we made earlier about our higher oil prices and strong customer demand and all those other things, we are very we're still very optimistic about 2018.

And what we're focused on is how we perform overtime, we all know and we understand that people are shocked about the way the quarter is. But we look back over the last certainly the last three quarters and even the full year of 2017 and we feel really good the way 2017 turned out.

And we think once results are posted we think our results will match up favorably over that time period and we feel good about 2018 and we feel good about the first quarter, so we're not worried about it, didn't turn out exactly like we have it would we're not overly concerned about it..

Okay. So when we think about the first quarter and we think about all your fleets, I think you exited the year guess maybe it was around 20-21 fleets, but we think about the utilization of those fleets in the first quarter, do you think you'll be fully utilized or still going to be some gaps kind of unitization as you look to fill out the calendar..

I think as I just indicated that if there be a ramp-up there it can go from the slower and immediately ramp back up. So for the full quarter will have a ramp-up where it was a little bit slow but the calendar is filling up, I think will be back. At end of the third quarter will be back and levels that look very similar to third quarter..

Okay.

And then the incremental is on that activity ramps through the first quarter, is it fair to kind of, if we kind of book in the on the low end to 30% incremental to the high end of 40%?.

Chase, this is Jim. There are actually a few more wiggle there if you think about incrementals. One reason for the margin decline in fourth quarter was that we've hired and trained a lot of people.

Ben just mentioned I think that our employee headcount can increase by 6%, so we're actually looking for higher incrementals that's your question in Q4 to Q1 incrementals, we look we look for them to be higher than in the 40% range, don't know how much higher right now depends on the ramp-up as Ben mentioned but we anticipate nice incrementals in the first quarter..

Okay. That's great color. Appreciate it. Thanks Jim, thanks Ben and more you go..

Thanks..

Next we'll go to James Wicklund with Credit Suisse..

Good morning, guys..

Hey, Jim..

Can you reminded us you're not percentages are who's the top but who are some of your top three customers in the Permian in no particular order?.

Jim, this is Jim. We actually don't disclose that we haven't had to disclose a customer that was over 10% for quite some time and I can - it's a forward looking statement, but we're not going to disclosing one in our 2017 10-K either. But let me answer your question or try to answer without naming names.

Our customers tend to be the independents in the Permian, the larger players in the Permian. In general, there is a waiting towards private companies versus mid-cap or small cap public companies and if we can show you the names that's kind of what you'd see..

Okay. That's helpful. I appreciate that. And however you had noted that costs had been an issue and they called our regional sand as a positive for people hydraulic fracturing business in the Permian later this year is that sand comes on.

Can you can talk about what your sand business is doing and what you're seeing in the sand business, did you did you make more money than you thought or not make as much money as you thought in the sand, can you talk about how that impacted Q4?.

Sure. Just to level set a couple things, we have not used any regional sand in the Permian yet. We've talked to our suppliers and they are lining up to provide us with regional sand if that's what our customers want and we are willing to willing and happy to do that if that's where we go. So there's no regional sand in any of our answer.

We're aware of what other people talk about in terms of cost inflation. We have not seen that in trucking specifically in fact the expense is minimal and even declined in the fourth quarter even as a percentage of revenue or as a percentage of total cost.

Sand did not really increase much during the quarter, so it's probably if you think about the regional sand..

Delta quarter-over-quarter then attribute the sand at all..

Yeah, it was it was really a nonevent for us. We are trying to change..

Excuse me. Okay, guys, only that, thank you. I'll let somebody else..

Thanks..

Next over to Tommy Moll with Stephens Inc..

Good morning. Thanks for taking my question..

Sure Tommy..

On frac pricing, do you have any sense of how much room there may be to run as we start the new year and do you have any sense on timing of any price increases, is there a bit of a low as we wait for CapEx budgets to be set or do you think it's still just run rating up what's no pause even as the year begins here?.

Tommy, this is Jim. That's a great question but a very difficult question. Our most recent field intelligence is that customer budgets probably aren't going to be set until February of this year, as article in Wall Street Journal yesterday I'm sure you've seen talking about how customers are acting right now.

But commodity prices are strong and as Ben said a couple times, we think activity is going to be really good in 2018, so there's clearly a bias for pricing increases. I think that first quarter as people ramp-up and everything else, the cadence of pricing increases will be muted in first quarter although we think it will be there.

We see pricing acceleration given everything we know now more in the second and third quarter, but again that's a difficult one to call..

Okay. Thanks.

And then if I could just ask one follow-up, at risk of putting the cart in front of horse, I'll ask it anyway, you're in an enviable position given the clean balance sheet and the reduced tax bill after the recent reform, that combined with the significant free cash flow you should be able to generate even after the increased dividend which was good to see this morning.

Can you help us think about say when we get toward the end of the year, what the priorities would be for the cash on the balance sheet, would you would you still look at new build opportunities at this point in the cycle or would you squint a little harder maybe on the shareholder return side? Thank you..

This is Ben. Good question. We've not made those decisions at this one time.

I think that the past the ads that we have on order now equate to about a 15% increase in our capacity and we expect though from our actual capacity increase in terms of fleets, we're probably looking at something more like in the mid-single-digits and maybe some more like 5% growth, 15% improvement in our past the, it will allow us to more consistently work on larger and more intense jobs which is a net positive but it won't result in a 15% increase in our number of fleets.

That's also to say that I would not be surprised for us at the end of 2018 that we maybe have not read purpose retired and or repurposed some of our frac pumps into some of our less intensive service lines which would then say that we that we look to maybe placing some more orders, we don't we don't have any commitments at this point in time for any capacity beyond what we've already announced.

But I expect there will be - that will be a serious consideration for us in the coming months to be looking at that.

So from that perspective, we're always looking for a healthy balance and I think that's what we'll actually do, but I expect there will be continued investment in our pressure pumping fleet and question whether they'll be a net increase in our capacity with whatever additional ordering room we do over the next several quarters but I expect there will be some orders placed..

Great. Thank you. That's all from me..

Next question comes from George O'Leary with Tudor, Pickering, Holt & Company..

Good morning, guys..

Hey, George..

In looking at the Technical Services segment and follow-on the some of the prior segments and just trying to think through your comments around the budget exhausting Q4 maybe not quite would you give a snap back as we entered Q1, 2018, I guess relative to maybe third quarter expectation that you'll be running a little bit more horsepower and pricing of the same even though utilization might not be as good as it was in the third quarter.

Is there a shot at getting back from a top line perspective to those Q3 levels or is there even a possibility that you guys could be better than that in the first quarter?.

George, this is Jim. We talked about the ramp in Q1, but we really think serving our pressure pumping business, we can be back to Q3 revenue levels certainly in sort of an existing run rate of Q2 and that's kind of the best information we can give you right now, I know that's full quarter but certainly exiting run rate for Q2..

That's super helpful.

And maybe could you just backup the breakdown revenue kind of by business line you guys often given on the call?.

Sure. Absolutely, and I want to amend the answer I just gave, we're thinking more like end of Q1 could be that third quarter 2017 run rate..

Another, the frac calendar will be we think pull by the end of the first quarter so it will be exciting the first quarter that looks more like Q3..

And then George answer to your second question about our major service lines.

So for the fourth quarter on the consolidated basis, pressure pumping accounted for 59.2% of RPC revenue, through Tubing Solutions accounted for 20.8% of consolidated revenue, coiling tubing accounted pour for 7.0% of RPC revenue, rental tools was 2.3% revenue, and nitrogen was 2.0% of consolidate RPC's revenues and that's for the fourth quarter 2017..

Thanks..

Next will go to Bill Thompson with Barclays..

Hey, good morning.

I think Jim, you've highlighted before that kind of the recount is a pretty good representation of your customer mix, a number of your competitors have highlighted their preference to work on a dedicated basis with more efficient E&Ps, do you maybe help us understand the pros and cons to be able to detain maybe higher spot pricing with small E&Ps versus gaining maybe more efficiencies with some the more efficient larger big E&Ps?.

Yeah, sure that's certainly the debate in our space right now. We understand that continues. On the positive side, if you have contracts with highly efficient big E&Ps, you get to plan your work really well and you get to line out your logistics which is increasingly important.

You know where you're going to be over the next few months and that's all helpful. We continue to talk to our field guys about contracts and what we think the contracts are, what sort of contractual agreements people are getting into.

And we honestly believe at this time that they aren't that helpful for kind of the following reason, which is that in a time where we have a fairly full calendar and people are doing big jobs and the big discussion now is ever frac work which is a growing part of our work.

The discussion is that you have those operational efficiencies anyway even if you're in the spot market. So a lot of the contractual agreements that we understand are being inked today are ones in which the customer promises a percentage of their work or when they work you will get, you will do this kind of pricing this sort of thing.

But it's not the true take or pay economics that we saw back in the 2013 time period.

Now, if you look at our fourth quarter of 2017, a reasonable question would be if RPC have had contracts with the revenue would revenue have declined the way that it was, we don't know, we might have been a little bit insulated from the downturn with people who were working the whole time.

But we might know, we've seen these contract relationships in the oilfield be such that when the customer decides they're going to slow down, you slow down too, so..

Yeah, there is a few other follow-up comments on that not alluded to this earlier a little bit that we have a list of customers, we don't work for all of our customers every month, we were able to move them around that's our business model is to be flexible and manage to frac calendar and manage slots that are available with the customer and that's our approach and that's our focus.

Some people's business model may be we're not set up to do that we would rather have a limited number of customer relationships and have some degree of certainty if you will of about where the work's going to come from, we are model as more of but be prepared to move quickly from customer-to-customer, opportunity-to-opportunity.

And I think what we've seen in the last two quarters perhaps and I think the fourth quarter again as I point out is unusual and it didn't have the holidays and also with the potential for budget constraint issues. But I think the third quarter is an illustration of where it can work really, really well.

The fourth quarter is an illustration of where it can be negative exacerbated by the fact that it is the fourth quarter. But I think if you were to go back and see how we perform certainly over the last three quarters and over the full year 2017, I'll say again that I think our performance and returns will match up favorably within the industry..

That's helpful..

And couple that with the fact again our frac calendar is going back up, there will be ramp, ramp-up during the first quarter but the first quarter is going to be good and we feel super strong about the rest of 2018 and we will bounce back.

And fourth quarter is one what we wanted to be but not really all that unexpected and if and if our customers are becoming more capital disciplined, I think maybe we're a little bit of with that purchase a little bit in the fourth quarter with the long term is going to be a good thing..

And then in terms of the 265 million of 2018 CapEx, can you just maybe help quantify how much of that is it should be allocated to the new build versus maintenance?.

Probably $70 million or $80 million to new build and the remainder to maintenance..

Okay. Thanks again..

Thanks..

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

Thanks guys.

Just a couple here, one I think and your response to one of the questions as it relates to new capacity, you made a statement that you do expect to place orders from more equipment, can you elaborate on that?.

John, this is Ben. Do expect, I think if sometime in the future we will place an order for new equipment..

Okay..

We have no plans now, we are in active discussions or negotiations, but it's something we'll look at this year whether we place an order this year or not, I don't know, wouldn't be surprised but I don't I don't know, there's no plans at this point in time we know their lead times on equipment and things like that, so we have to figure out where we have to kind of read the future and where we think things are going and when we think we'll have in the because of increased demand and or because of equipment attrition.

So I think we will place an order for new equipment at some time in the future but we don't know when at this point in time..

Fair enough. Okay. You also said in response to a comment a question that you did not make any large discounts on price to get work when things slow down.

Did you see your competition to this?.

John, this is Ben. We don't we don't really know exactly what our competition..

In the fourth quarter….

That would be our response, we don't know..

Yeah. Don't know. Yeah..

I guess the concern would be there's a lot of capacity coming to market including a number and I'm just curious if you tend to work in the spot market and not have dedicated fleets, are you more susceptible to the risk that one of these emerging companies could be a bit more assertive on price concessions to win that work.

I mean is there any evidence that you lost work to a customer to someone else or perhaps you lost a frac crew, there's somebody to push your crew.

I mean that's we're hearing this stuff from some of these emerging companies and I just like you to address that sort of given how you characterize your customer base?.

John. This is Ben. And you said post crew, you don't know taking work away because pricing or post crew..

Either really two things honestly I mean it could be that somebody who's a new player give a better price to win some more or some of these startup companies you guys I'm sure know that they don't have training programs right, they look at you or your competitors as their training program.

But you need people stealing your crews and I know headcount was up for you which would say that make that didn't happen but just thoughts on that?.

Well thought, I mean that is a characteristic of our industry and fracturing as well, it's happened in the past will be something we'll have to continue to combat, didn't happen in the fourth quarter I think there probably are some examples we could point to.

We don't we don't rarely do we know exactly where our customers coming from in the reasons for their deferring work or whatever, do they accept our better not that because somebody offered a lower price or they didn't want to work, we don't always know exactly, but it wouldn't surprise me if some or every quarter is missed because of pricing perhaps.

But again our calendar was very full in the third or last quarter and the fourth quarter for the reasons that we've talked about.

But I think there will continue to be competition for personnel, we hope our customers this is always the case they're going to be people that go out and try to and work with super low pricing, there are samples where their work aren't.

It isn't always up to you know the quality standards and often not always but often times customers that we may have lost because of that super low pricing they end up coming back to us just the nature of the industry and that will continue to be the case and we always hope the quality of service will matter more and more and we think that will be a net benefit to us, but those same characteristics exist in the oilfield today..

That's fine. Look I'm not trying to beat you guys up, this is my first company reporting so that's why..

Right, we know. I'm not trying to sound, sometimes I'm not trying to sound too defensive either but those things still exists..

Yeah, I've only got two final quick ones. One margins, you guys said that revenue should be back to that Q3 run rate by end the Q2 or end of Q1.

Do you in your scenario that you believe pricing will go higher in Q2, Q3, is it therefore safe for us to assume you expect margins and Q2, Q3 to be in excess of what you where you were in Q3 2017?.

Well, there's a lot of move to understand, I think there's potential for that we were certainly were, we were pleased with the results in the third quarter and it's logical to say to obviously that made the fourth quarter of a difficult to compare.

But I think absolutely we would be pleased that they got back up to our third quarter levels and I think there's certainly a high probability that that would be the case..

Okay. Thanks guys..

John, the device is definitely towards us reaching third quarter margins and third quarters 2017 margins this year..

Okay. I appreciate it..

Sure. Thanks, John..

Next over to Thomas Curran with B. Riley FBR..

Good morning, guys..

Hey, Tom..

Jim, I know that you diligently maintain your own proprietary ensure level supply demand model for frac horsepower, from year-end to year-end, so from the exit of 2017 through the end of this year, how much do you have total marketed industry capacity increasing at this point and how has that changed from the 3Q call, so if you guys are currently set to increase your total fleet by net 15%, how much in your model do you have the total industry market fleet increasing?.

Tom, I really appreciate the question especially about the proprietary nature of my intellectual property. I've not updated yet and we just said year-end and that sort of thing.

We still believe we have believed and still do that demand is greater than supply and we also think that there's hidden attrition or whatever attrition that people don't really understand that well because of the sort of componentize nature of pressure pumping equipment.

We think people got in a lot of orders before the Tier 4 regulations came into an effect in that people are kind of standing back maybe waiting for other people to test the new equipment that's we've heard in the channel checks. I don't know how much credibility there is to that.

So we think that demand for pressure pumping capacity will remain higher and I appreciate the reminder for my do list for my analysis coming up, I'll be happy to talk about that once we get it together, I just don't have it right now..

And I will add I mean this might be logical or obvious but from our illustration, we're adding 15% of our capacity but we think it's really only going to add in that 5% from a fleet perspective.

So if we're an illustration, I don't know everybody else would be the same as us or not probably not some might be higher some would be lower with whatever capacity adds they're bringing on board whatever capacity the people put out there and say capacity is going to go from whatever the numbers are 14 to 18 or whatever the numbers are that doesn't equate to percentage wise that much more capacity.

But it takes a lot more capacity to fill in. Attrition is unknown, it's difficult to quantify, I think the amount of horsepower on these larger jobs is continues to increase and so the math works out that again the frac pass is going to remain tight I think..

And just to clarify when you talk about, Jim foreseen demand surpassing supply still and then it remaining tight.

Are you saying that in your model even after you've add it all of the new build orders that you're aware of out there market wide that as you look to the end of 2018, you would still see demand exceeding supply that point or at least the tight market..

Yes, Tom. Based on what we know now we would agree with that. Also remember that we define a fleet that is workable as one that is well maintained has capacity to support it and has a symbol and train crew ready to work the equipment.

So it's not just buying equipment from suppliers, it's - and logistical constrained seem to be lower than they were in previous up cycles but the employment, the personal issues are probably higher at this point. So yeah recruiting screening, hiring and training employees is as big a deal as buying engines and transmissions at this point.

So yes, we've got all that in there we think the market remains under supply..

And that's roughly consistent with how I would define market capacity which is why specifically use that modifier of market.

And then I'm sorry if I missed this in your exchange but have you shared how your frac sand intensity changed in 4Q and if not could you provide us with that?.

We'd be happy to, we did not in the discussion with Jim go over that, our sand per stage is downs slightly. Our frac for well is up very slightly about 2% to 3% which the matter of a line but frac sand intensity is down just a bit, it's down in mid-single-digits sand per stage..

Right.

Which is the metric keep consistently used for measuring intensity correct?.

Yes. That is correct..

Okay. Last one for me which is also a follow-up to that exchange with Jim. When it comes to however big or largest customer currently is whether I know it's sub 10%, whether it's 8% or 5%.

Has that single largest customer changed from mid-2017 through end 2017?.

I don't believe so. I don't believe so..

Okay. Thanks for your answers, guys..

Sure. Thank you..

Next question comes from Kenneth Sill with SunTrust Robinson Humphrey..

Hey, good morning, guys. I hope you're sandbagging a little bit on the rebound in Q1 but no reason to push things.

Kind of following up on the sand topic a little bit, are you seeing you're your customers looking at self-sources sand that seems to be a conversation for with all this ground out of Permian is the operators think they could save a lot of money itself sourcing?.

Okay. Certainly, Ken, that's another big topic in our space right now. There's always that pressure and intended from a number of customers, we choose customers who are willing to look to us to provide that service.

So actually the percentage of sand we pumped in the fourth quarter that was ours either from our mine or sand that we procured and delivered was actually a few basis points from third quarter.

So it's something we when we're - so I think customers and they're selecting us we always tell them that we need to and very much want to be responsible for the sand and there are there are a lot of reasons why that's a good thing for us and we think for the customers well as we've all discussed.

So we don't think it that we don't think it's a huge trend or it didn't impact fourth quarter results negative way..

I think in certain scale to want to take on a sand contract as an E&P guy. And I know companies they would be happy to let them take that risk..

Right, it works about third of the time..

It was interesting to hear you guys says logistics hasn't been an issue yet.

How you guys moving sand and I would think that given trucker shortages the cost to move in sand for load would be going up but sounds like you're not really see or is it just not as bad as last cycle?.

Ken, the answer is both. I mean we - majority of our sand come from the transport facility in the last up cycle we really worked on it with that to capacity and our relationships with our vendors.

It may sound tried a year or so into the upturn, but we paid our bills during the downturn and our suppliers remember that and they really want to work with us. So I mentioned earlier that demurrage which to me is a good measure of certain dynamics was actually down in fourth quarter from third quarter.

So it has to do with just managing the vendor relationships, trying to be a big customer to them and thus far knock on wood, we haven't had the logistical issues with railroads that we had in say 2013, 2014 in the last step cycle, so..

Okay, great. And then last question. Last question kind of it's more than one question I'll just ask the one.

So 127,000 new horsepower if that's kind of 5%, is that imply that's can be one new fleet, one new fleet and then the rest of horsepower is going to be allocated out to other fleets or am I doing that math correct?.

Yes, that's what that implies..

Yeah and the other horse power can go the older the older pumps that have lower pumping capacity can go to our vertical and asset locations of which we have to in the Permian and then also pump down.

You've seen jobs where you've got wire line in these unconventional completions and you use two or three lower rated pressure pumping trucks to do pump down between stages. So that is a business line a small one but one that we think we can grow by repurchasing this older equipment..

And then have you guys seen a change in the number of your crews were gone single versus multi well pads and trends in pad sizes in the Permian and I'll stop there?.

That is moving incrementally higher. The amount of our revenue, the percentage of revenue for example that was pad work - I'm sorry zipper frac work in the fourth quarter was incrementally a little bit higher than it was in third quarter so that's inching higher for us..

Thank you..

Sure. Thanks, Ken..

Now we'll go to [indiscernible] with Citigroup..

Good morning, guys.

How it's going?.

Good.

How are you doing?.

Doing well. Just a quick question.

Can you just comment on how much of your work is refractory now and where you got to expect I think go over the next year or so?.

I believe that was 47% in fourth quarter. We do expect it to go incrementally higher as we said and I'm sorry it was that actually down a little bit between third quarter and fourth quarter but it's still in the mid 40's as a percentage of total.

We've expected it to go higher, it can never be 100% because it's certainly not a 100% in the Permian, we think it's more like 70% or 75% and we have a couple of crews that do vertical and asset work and that by definition is not a zipper work.

So just to clarify third quarter, 47% of our pressure pumping work was at stage were zipper and it was 43% in fourth quarter that's actually a decline, I apologize for that. And we think we can go higher and that's a good thing. We don't think it's going to be a 100% and we and we think it's going to move very slowly higher but will continue to..

Got it. Thanks..

Now, we'll go to Praveen Narra with Raymond James..

Hi, good morning, guys. If I may just ask, if I could evolve question to John's question that I understand it correctly.

In terms of - it sounded like to me that the success rate didn't have any material change quarter-on-quarter, did I read that correctly?.

Excess rate for what I'm sorry?.

Yeah, I guess a number of bids you point out then the number of those bids that were accepted by the customer didn't seem to have, it didn't sound like it changed all that much?.

No, that was not a dynamic that drove our results one way or the other. So yeah there is no change there..

Okay. Perfect.

And then I guess given the additional downtime us all in the fourth quarter, did we see the R&M percentage pick up just taking advantage of that idle time?.

Good question. And answer is almost there. It actually did tick up a little bit. As a percentage of revenues and just to clarify everybody for Praveen's question, maintenance and repair expenses as a percentage of revenue did increase in fourth quarter partially because revenue was down and partially because we took the time for maintenance.

Exactly, good question..

Okay.

And I guess as you kind of look at the incremental Tier 4 build costs from your first wash, what kind of increase in cost that you guys expecting that to take on?.

If you think about it, if you think about the cost, cost per horsepower, we think it's going to be about 15% higher cost per horsepower.

The engines cost more and there's some ancillary equipment relating to emissions on Tier 4 step and I think that's, I don't want to give a number, I've shuffled the number but we think that Tier 4 equipment will cost 10% to 15% more than the Tier 2 equipment that we are in it..

Just to be sure that's across the entire fleet or the entire cost of the fleet not just the engine channel, all the engine transmission et cetera?.

Yes, that would be a completely outfitted fully with the LAS units and hydration units and crew supervisor pickups and all that sort of fully kitted out fleet I think would be 10% to 15% higher if you're doing Tier 4 rather than Tier 2 equipment..

Okay. Perfect. Thank you very much guys..

Sure, Praveen. Thanks..

[Operator Instructions] Well next go to John Hunter with Cowen..

Good morning, guys. Thanks for taking my question..

Sure, John..

So first off trying to get a feel for the revenue progression through the fourth quarter, assuming October and November were pretty strong, how much lower was December revenue versus November?.

We don't give intra quarter information but aside to say I think we said this earlier December obviously was the weakest month..

Right. Okay.

And then on pricing, you said pricing was up in the fourth quarter, you expect another increase in the first assuming and correct me if I'm wrong, pricing was up say mid-single digits in the fourth would you expect a similar increase in the first quarter or perhaps a little bit more?.

Pricing was only slightly up in the fourth quarter and we expect that it will probably low single-digits and again I think like everybody was probably impacted some of by seasonal factors and so there will be a little bit of a ramp-up, so I would say that it's going to be again probably up single - low single-digits..

Okay. That's helpful. I guess the last one for me is on the horsepower, you have coming in the second quarter of 2018.

Do you have customer commitments for that horsepower yet?.

Because we don't have contracts, we don't have any firm customer commitments, but we're going through the process as we always do coordinating with our customers and the frac calendar even in the second quarter is being discussed.

So we said another way we are confident that we will get good utilization out of that additional fleet during the second quarter..

Okay. Thank you for taking my questions..

Sure..

It looks like there are no further questions at this time, so I like to turn the call back over to Mr. Jim Landers for any additional or closing remarks..

Okay, well thank you. We appreciate everyone calling into listen, we appreciate the questions, look forward to seeing everybody and talking soon during the first quarter. Take care..

That does conclude today's call. We thank everyone for their participation. Let's remind you that this conference call will be replayed on www.rpc.net within two hours of this time. Once again we thank you for your patience. You may now disconnect..